1979-11-01

ROUTINE PROCEEDINGS


Mr. Gaston Isabelle (Hull):: Mr. Speaker, I rise under the provisions of Standing Order 43 in connection with a matter of urgent and pressing necessity.

Due to the fact that certain provinces are deliberately misappropriating federal funds allocated for medicare through the block funding system for other provincial purposes or projects, and due to the fact that this situation has created a serious erosion of medicare which may lead to the collapse of this important health program for Canadians, I would move, seconded by the hon. member for Moncton (Mr. McCauley):
That the government cease immediately to make federal funds available for health care through the block funding system and restore the good old 50-50 cost-sharing formula until those provinces honour their obligations.


Some hon. Members:: Hear, hear!
[ Translation]


Mr. Speaker:: The House has heard the motion of the hon. member. 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.



FISHERIES


Mr. Alexandre Cyr (Gaspe):: 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 urgent matter of pressing necessity.
In view of the fact that this morning the Committee on Fisheries and Forestry heard testimonies from representations of fishermen's and producers' associations of eastern Quebec as well as of Prince Edward Island and New Brunswick; considering that the witnesses have stated that the decision taken by the Minister of Fisheries and Oceans (Mr. McGrath) on August 27 would lead the fishing industry in zones 4T and 4Vn to disaster; considering that the fishermen stated that the Nickerson and National Sea Foods companies have reduced their purchase price to fishermen by three cents a pound of cod because warehouses are full, I move, seconded by the hon. member for Bonaventure-Iles-de-Ia-Madeleine (Mr. Bujold):
That the House direct the Minister of Fisheries and Oceans to withdraw his decision of August 27, 1979, and to state that the Gulf of St. Lawrence is restricted to coastal fishermen.


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


Some hon. Members:: Agreed.


Some hon. Members:: No.



AGRICULTURE


Mr. Lome Nystrom (Yorkton-Melville):: Mr. Speaker, as the House knows, the government has virtually sold out chicken producers by negotiating very high levels of chicken imports from the United States. The government has also given its friends at Maple Lodge and Loblaws a virtual monopoly on the import of chickens into this country.
1 move, seconded by the hon. member for Selkirk-Interlake (Mr. Sargeant):
That this House instruct the government to renegotiate the chicken quota with the United States to obtain a lower level of imports, and that the Canadian Chicken Marketing Agency be made the first receiver for chicken imports so that farmers, processors, retailers and consumers will be fairly and equitably treated and provided with chicken from domestic and import sources.

November I, 1979


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


Some hon. Members:: Agreed.


Some hon. Members:: No.



NATIONAL UNITY


Hon. Warren Allmand (Notre-Dame-de-Grace):: Mr. Speaker, I rise, under the provisions of Standing Order 43, to move a motion of urgent and pressing necessity.
Considering the ambiguity of the position of the Conservative government with respect to the Quebec referendum as stated by the Prime Minister (Mr. Clark), the Minister of Supply and Services (Mr. La Salle), and the Senate Minister of State for Cl DA, and considering the critical importance of the referendum results for the continued unity of this country, 1 move, seconded by the hon. member for Sherbrooke (Mr. Pelletier):
That this House confirm its belief that the Canadian Government and Parliament have an important role to play respecting the unity of Canada and consequently involvement in the Quebec referendum and, further, that this House confirm its support for the pro-federalist umbrella committee, the committee campaigning for the "No" option established under the Quebec referendum bill. Bill No. 92.


Mr. Speaker:: Such a motion can be presented for debate at this time only with unanimous consent. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.



NATURAL GAS-CALL FOR BAN ON INCREASES IN EXPORTS UNTIL CANADIAN NEEDS MET-MOTION UNDER S.O. 43

Mr. John Evans (Ottawa Centre):: Mr. Speaker, 1 rise, under the provisions of Standing Order 43, on a matter of urgent and pressing necessity.
in view of the imminent increase in the price of home heating oil as a result of the government's soon-to-be announced oil pricing policy, in view of the government's professed desire to stimulate the conversion of home heating from oil to natural gas, and in view of the deliberations now under way by the National Energy Board with respect to increases in natural gas exports, I move, seconded by the hon. member for Thunder Bay-Atikokan (Mr. McRae):
That the House instruct the government to postpone indefinitely any increases in natural gas export until, first, natural gas distribution systems are provided to

eastern Quebec and the Atlantic provinces; second, the government's natural gas conversion program is substantially completed; and, finally, subsequent investigation has shown that the future natural gas needs of all Canadians are adequately protected.


Mr. Speaker:: The 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.



POLICIES DESIGNED TO MAINTAIN EMPLOYMENT IN REFINERIES-MOTION UNDER S.O. 43

Mr. Bob Corbett (Fundy-Royal):: Mr. Speaker, 1 too, rise under the provisions of Standing Order 43. In view of the government's policy of reducing the export of light crude oil to the United States, 1 move, seconded by the hon. member for Saint John (Mr. Ferguson):
That the Minister of Energy, Mines and Resources be requested to direct his department to continue to ensure that all energy policies be designed to have the least possible impact on refinery jobs, and in particular those in the high unemployment areas of the east coast.


Mr. Speaker:: Such a motion can be presented for discussion at this time only with unanimous consent. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.



CANADIAN INTERNATIONAL DEVELOPMENT AGENCY


Mr. Bob Ogle (Saskatoon East):: Mr. Speaker, I rise, under the provisions of Standing Order 43, on a matter of urgent and pressing necessity.
In view of the recent overthrow of the dictatorship of Somoza in Nicaragua, in view of the great difficulties of reconstruction in Nicaragua and the providing of the minimum necessities for the health and lives of the people, and in view of the fact that the Canadian International Development Agency has refused to provide this assistance at the level needed, I move, seconded by the hon. member for Churchill (Mr. Murphy):
That this House instruct the government to make Nicaragua a country of eligibility for bilateral aid through Cl DA, to review its priorities and to provide the needed assistance to Nicaragua.


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

November 1, 1979


Some hon. Members:: Agreed.


Some hon. Members:: No.



ORAL QUESTION PERIOD


Hon. E. F. Whelan (Essex-Windsor):: Mr. Speaker, recently-on Wednesday, October 24-in the Senate, in answer to a question put to him on Canadian import quotas of chicken, the Minister of Industry, Trade and Commerce said:
I will endeavour to inquire from my colleague, the Minister of Agriculture, the exact reason why the chicken import quota was set where it was.
He also said:
-the actual negotiations of an import quota such as this falls under the responsibility of the Minister of Agriculture.
He also said:
In terms of representations by the producers' group, I would expect, again, that those representations were probably made to the Minister of Agriculture. They were not made to me.
Will the Minister of Agriculture now tell the House if he was present when the Canadian Chicken Marketing Agency presented a brief on the chicken import problem to this government in August and whether he did, in fact, negotiate the entirely unacceptable import quota with the United States, as published in the news release on the 22nd of last month?


Hon. John Wise (Minister of Agriculture):: Mr. Speaker, in response to the former minister's question-and I want to recognize the fact that the former minister is taking on the physical shape of his predecessor, the agricultural spokesman for the former official opposition-I must say that I, personally, was not present when the presentation of the brief was made.
However, in the intervening time 1 have had many opportunities to discuss this matter with the Minister of Industry, Trade and Commerce and, indeed, with other ministers in the cabinet and also with people in the industry. I do not have to go into the problem associated with the negotiations on the level of imports of the commodity between the two countries. No one knows that situation and those discussions any better than the former minister.
I want to say, as well, in response to the former minister's question, that certainly I am not happy, by any stretch of the imagination, with the level of U.S. chicken imports. However, someone has indicated we have sold the Canadian chicken industry to U.S. interests. The House and the country should know that we were sold down the river in 1974, 1975, 1976, 1977 and until we took office on June 4, 1979. Since then we
Oral Questions moved as rapidly as possible, and it is a week ago on Sunday evening that we were able to impose border controls on chicken imports, thus reducing them from about 60 million to 65 million pounds down to 45 million pounds.


Some hon. Members:: Hear, hear!


Eugene Whelan: Mr. Speaker, the minister has not answered the question. He did not say whether he had the authority, which the Minister of Industry, Trade and Commerce in the other place said he had, to do the negotiations. He has not acknowledged this fact. He sounds as though he does have some responsibility in negotiating chicken imports.
In view of the fact that chicken producers have responded to the government's request to increase production in 1978 and 1979, with the result that there are 124 per cent more chickens in storage now than a year ago, will the Minister of Agriculture confirm that, in fact, one Stuart Campbell negotiated the quota as an official of the Department of Industry, Trade and Commerce, and that this same gentleman was accompanied in this task by some functionaries of the Department of Consumer and Corporate Affairs and that no minister took any direct part in these negotiations?


John Wise: 1 am surprised to hear that type of information coming from the former minister, because he knows very well that when you negotiate import levels on any commodity you have, as part of the negotiating team, representation from the Department of Industry, Trade and Commerce, the Department of Consumer and Corporate Affairs, the Department of Agriculture, and also the Department of External Affairs.


Eugene Whelan: Mr. Speaker, again the minister has passed the buck. He is not saying why he did not involve himself in these negotiations which are of the utmost importance to Canadian poultry producers, to Canadian agriculture, in Canadian trade deficits and, indeed, to all Canadians who are subjected to increasing energy costs and interest costs. Can he state why he did not deem it necessary personally to protect the jobs and production capacity of a most important section of our economy at the ministerial level?


John Wise: Talking about passing the buck, may I remind the former minister that he and the former government passed the buck for at least 12 months, and perhaps 24 months, until the time we took office on May 22, and when 1 assumed responsibility as Minister of Agriculture on June 4 we acted properly. We accepted our responsibilities and we placed into effect import controls on chicken.


Some hon. Members:: Hear, hear!


An hon. Member:: Ten o'clock, Mr. Speaker.

November 1, 1979
Oral Questions


REASON QUESTION OF CHICKEN IMPORT QUOTAS WITH U S. NOT SUBMITTED TO GATT
Mr. Denis Ethier (Glengarry-Prescott-Russell):: Mr. Speaker, my question is directed to the Minister of Agriculture. The predecessor of the Minister of Agriculture concluded an egg import quota with the United States that is far more favourable to Canada than the United States chicken import quota accepted by this government.
Can the Minister of Agriculture tell the House why he did not refuse the Americans, in view of the fact the Americans knew a national agency would be established sooner or later on the basis of the principle that a national chicken marketing agency was accepted in May of 1974? Can he state why he did not submit the United States demand for this destructively large quota to GATT arbitration on the basis of pre-1974-figures? His predecessor submitted the Canadian case for the egg importation quota to GATT against the wish of his officials and the Americans, and won.


John Wise: Mr. Speaker, the hon. member might not be aware of the fact that it is clearly stated that the national agency must be in place and operating for one to keep in line with international trading laws and to negotiate a level of imports of chicken or any other commodity.
We did not have National Farm Products Marketing Council certification for the national board until about August 27, 1979. Therefore, it would have been simply impossible to negotiate a level prior to that time. In fact, we were communicating with our United States counterparts in Washington prior to the national board receiving its certification from the National Farm Products Marketing Council.


REQUEST FOR ONE PER CENT LIMITATION ON CHICKEN IMPORT QUOTAS
Denis Éthier: Mr. Speaker, a question was put in the standing committee of the House about the unacceptable import quota and the minister answered, and 1 paraphrase, that he had acted according to the best advice received and that he did not want to risk American reprisals. Does the minister have so little faith in the stance adopted by the Canadian government as to refuse to ask a limit of 1 per cent on import quotas? Is he also supposing that GATT would not decide equitably on a justified Canadian request?


John Wise: Mr. Speaker, 1 have a great deal of faith in the advice I have received from the officials within my department. I have a great deal of faith in the officials of the Department of Industry, Trade and Commerce, the Department of Consumer and Corporate Affairs, and also the Department of External Affairs- because they were all involved in that particular question. The best advice I received from these officials was the fact that we
should negotiate in good faith. We have done that. That is the only information I can supply to the hon. member.


PROFITS OF SHELL CANADA-ALSANDS PROJECT
Mr. Edward Broadbent (Oshawa):: Mr. Speaker, I have a question for the Minister of Energy, Mines and Resources. Mr. William Daniel, president of Shell Canada, is reported in today's press to want a guarantee of up to 20 per cent profit if it is to proceed with the very important Alsands project in the north. He also said that an agreement is very close to being reached with the federal government.
Considering that this company made $150 million in profits last year without paying one cent in federal taxes, and has just reported a third quarter profit increase of 110 per cent, will the minister assure the House that the federal government will not give one penny in further handouts to this company for this project?


Some hon. Members:: Hear, hear!


Hon. Ray Hnatyshyn (Minister of Energy, Mines and Resources):: Mr. Speaker, I can assure the hon. member that we are not in the process of giving handouts at all. We are in the process of discussing with a consortium of companies interested in developing this very important heavy oil sands development the appropriate arrangements by which this particular project would be viable.
The fact of the matter is that it involves many, many aspects. But it is a very important development for the purposes of ensuring supplies for Canadians in the years ahead, one which I am sure will receive the support of the New Democratic Party, rather than the negative approach it has taken to all development in Canada up to this point.


John Edward Broadbent: Mr. Speaker, the minister talks patent nonsense, and I think he knows that. Considering that Petro-Canada has experience in tar sands work through Syncrude and can get the required equipment, the capital for financing and can do the Alsands project work without any need for profits in that part of its activity, because it is a Crown corporation, will the minister explain to the House why the government does not use Petro-Canada for this fundamentally important development project-and I agree with the minister in that regard-at virtually no cost to the Canadian taxpayer?


Some hon. Members:: Oh, oh!


John Edward Broadbent: Instead, he is embarking upon paying corporations billions of dollars in handouts to do it. Can he answer that question?


Ramon John Hnatyshyn: Mr. Speaker, I find it difficult to answer questions by the Leader of the New Democratic Party because

November 1, 1979

his premises are usually false and wrong. What 1 am saying is that there is a very substantial cost involved in this particular project. It does involve a consortium. Discussions have taken place with respect to this matter, by myself with representatives of Alsands. One of the points I have been making to them is that we are very much interested in increasing Canadian participation in this project.
That is the objective to which this government is dedicated. The purpose of this government is to increase Canadian participation, and I can assure the hon. member that is a purpose I will undertake with a great amount of effort and endeavour.


John Edward Broadbent: Mr. Speaker, I want to be factual in my questions and I hope the minister will be frank in his answers. No one is denying that there are important developmental costs; that is agreed. Since the minister has at his disposal a Crown corporation with experience in tar sands work and is not under an obligation to make profits, like a private company would be if it were to do the development work there, why does he not use the Crown corporations, and get a little tough in terms of tax policies with the multinationals in the way the United States government recognized was necessary in the United States?


Ramon John Hnatyshyn: Mr. Speaker, all I can say to that particular proposition is that there is now at hand a consortium, and in respect of the holdings and the development of particular oil sands in Alberta we are anxious to go ahead at the earliest possible time.
I simply say that in terms of profits, and so on, the hon. Leader of the New Democratic Party is always complaining, suggesting that Petro-Canada should in fact somehow keep profitable areas of development, but is not interested in Petro-Canada making a profit. I do not understand the logic of his argument. The fact of the matter is that we are going to develop this project to the benefit of all Canadians by ensuring our supply, by ensuring a fair and reasonable transaction, and by ensuring that there is Canadian participation in this. I assure the hon. member that this will, in fact, take place.


PRIVY COUNCIL
Mr. Fabien Roy (Beauce):: Mr. Speaker, my question is directed to the President of the Privy Council.
In view of the information we get regularly from the media, can the President of the Privy Council, whose members number in the hundreds, tell the House that no Privy Councillor was aware, before, during or after, or was an accomplice before, during or after illegal or criminal acts such as breaking in, kidnapping, theft or malicious destruction of property?
Oral Questions


Hon. Walter Baker (President of the Privy Council and Minister of National Revenue):: Mr. Speaker, after looking at Privy Councillors on both sides of the House, I would say, not as far as I am aware.


INQUIRY WHETHER PRESIDENT OF PRIVY COUNCIL INTENDS TO COUNSEL GOVERNOR GENERAL
Fabien Roy: Mr. Speaker, my question is for the President of the Privy Council, whose answer, in my opinion, is not a certainty. I would therefore like to know, since there seem to be doubts and since it is the Governor General's exclusive and rightful prerogative to be advised, to advise and to counsel, does the President of the Privy Council intend to advise the Governor General?


Walter David Baker: Mr. Speaker, I want to thank the hon. member for his question. I will give it every consideration.


INTERNATIONAL TRADE
Mr. Marcel Ostiguy (Saint-Hyacinthe):: Mr. Speaker, I would like to ask the Minister of State for International Trade if he can tell the House why this government is imposing on chicken producers an import quota of 48.5 million pounds for next year, which will be raised to 62.5 million pounds for 1982, an increase of 14 million pounds? This represents a tremendous 29 per cent increase, while the annual rise in the domestic market is only 5 per cent.
Can the minister advise the House whether he consulted the provincial agriculture departments before imposing this ridiculous import quota for chicken?


Hon. Michael Wilson (Minister of State for International Trade):: Mr. Speaker, there was full consultation on this matter with the provincial governments, and I personally met with one of the provincial representatives. The Minister of Agriculture has discussed other aspects of consultation.
On the question of overcharging, the amount of the quota will be 6.3 per cent in 1982 and the quota will be somewhat lower than that in earlier years. We believe there is a proper balance-taking into account the interests of producers as well as the interests of consumers-to provide a good market environment.

November 1, 1979
Oral Questions


EMPLOYMENT
Marcel Ostiguy: Mr. Speaker, on a supplementary to the Minister of Employment and Immigration.
Can the minister tell us if it is his government's policy to create jobs in the United States at the expense of Canadians? If not, can he explain to the House why his government encourages the establishment of 140 new chicken production units in the U.S.? Has consideration been given to all the resulting job opportunities for Canada?


Hon. Ron Atkey (Minister of Employment and Immigration):: Mr. Speaker, 1 will have to take the question raised by the hon. member under advisement and get back to him with the details when I have the information.


AGRICULTURE
Mr. Robert Bockstael (St. Boniface):: Mr. Speaker, the ministers opposite must have a difficult time answering for the minister responsible for this import quota. Doing another man's work is not the Canadian way.
Can the Prime Minister tell this House why his government did not submit to normal GATT procedure with regard to the U.S. demand to export more chicken to Canada, and negotiate to establish a quota on the basis of a previously representative period; that is, a period prior to the May, 1974, successful application by Canadian producers to establish a Canadian chicken marketing agency?


John Wise: Mr. Speaker, 1 will respond to the question of the hon. member. I believe we have forgotten the facts as to what has happened as a result of the imposition of that import level. What we have done-and hon. members opposite should recognize this-is lower the amount of broiler imports from the United States into Canada from approximately 65 million pounds to 45 million pounds. That move was made in the interests of the domestic poultry industry.


Robert Theodore Bockstael: Mr. Speaker, the minister does not seem to have taken into account the artificial import addition imposed by two companies. Because most poultry products importers have behaved over the years as good corporate citizens- except for two poultry importers who have worked to destroy the Canadian poultry industry over the last four years-will the minister, at the very least, guarantee to the House that the import quota, whatever its size, will be equally available to all poultry importers throughout Canada?


John Wise: Mr. Speaker, one must recognize that there are rules and laws by which we must abide. However, I can give the hon. member the commitment, providing we can still go forward and live within those guidelines, that we will do everything possible to see that equity and equality prevail.


REQUEST THAT CHICKEN IMPORTS BE REDUCED VOLUNTARILY
Hon. Marcel Lessard (Lac-Saint-Jean):: Mr. Speaker, in view of the questions and answers that have just been exchanged, I would like to ask the Minister of Agriculture if he would be prepared to consider making representations to the main chicken importers in Canada who account for nearly 80 per cent of imports and will obtain importation permits for that purpose. Would he be prepared to make representations to these two firms to convince them to reduce their imports voluntarily and get their supplies from Canadian producers?


John Wise: Mr. Speaker, I assure the hon. member that that action has already been taken through representations made by myself to the chairman of the National Farm Products Marketing Council.


INQUIRY WHETHER ACTION WILL BETAKEN TO ENSURE FEDERAL AUTHORITIES INSPECT MEAT IN QUEBEC
Mr. J.-Roland Comtois (Terrebonne):: Mr. Speaker, my question is also addressed to the Minister of Agriculture. Last Thursday instructions were issued by the federal meat inspection service to the effect that any new request for service in Quebec would have to be turned down, given the chronic lack of qualified personnel resulting from budgetary cutbacks. I know that last week the minister helped in solving an urgent case in my riding, but my question is the following: Can the minister tell the House if measures will be taken as soon as possible to meet the requests of numerous businesses in Quebec which would like to have a federal inspection of their meats and meat byproducts?


John Wise: Mr. Speaker, the hon. member is correct in saying that we were able to resolve the difficulty that existed within his own riding. It is true that the restraint program which has been imposed, and which I fully support, has caused some problems. However, we have been able to resolve these problems so far by the transfer of inspectors from one plant to another. We fully recognize that under the law we are obligated to place meat and food inspectors in plants and we intend to honour that obligation.
November 1, 1979


AMALGAMATION OF FEDERAL AND PROVINCIAL INSPECTION SERVICES-GOVERNMENT POSITION
Joseph-Roland Comtois: Mr. Speaker, I wish to ask a supplementary question. Could the minister tell us if discussions are taking place with the government of Quebec for the purpose of integrating the provincial inspection service with the federal service?


John Wise: Mr. Speaker, 1 can assure the hon. member that I am in contact with my provincial counterpart in the province of Quebec on a very regular basis. But with regard to that precise subject we have not had discussions. To my knowledge, there has been no discussion with reference to the almagamation of the two inspection services.


PUBLIC SERVICE
Mr. Ray Skelly (Comox-Powell River):: Mr. Speaker, my question is to the President of the Treasury Board. Could the President of the Treasury Board explain to this House why his negotiators have put forward to the radio operators' union an offer which was previously rejected by the union and which, in fact, represent a decrease for the 920 radio operators, in the settlement proposals put forward in the conciliators' majority report, thereby precipitating a total strike of the radio operators, generating chaos in air and marine transportation and seriously compromising safety standards throughout the entire country?


Hon. Sinclair Stevens (President of the Treasury Board):: Mr. Speaker, the hon. member has been misinformed. The negotiations with respect to the radio operators' strike resumed this morning at 10 a.m. They are presently adjourned, but we are hoping they will resume at 4 p.m. today. I believe that cool heads in this House are required with regard to this matter, as opposed to any provocative statements.


NATIONAL DEFENCE
Hon. George Hees (Northumberland):: Mr. Speaker, I should like to direct a question to the Minister of National Defence.


Some hon. Members:: Hear, hear!


An hon. Member:: Speak loudly.
Oral Questions


George Harris Hees: I would ask when he expects the task force studying unification to make its report. Also, when he is studying this very important matter will he give consideration to bringing in a policy which will retain the unification of our service and administrative forces while permitting our air force, our army and our navy to return to their very distinguished uniforms, which should never have been taken away from them in that ill-considered move of about 12 years ago?


Hon. Allan B. McKinnon (Minister of National Defence and Minister of Veterans Affairs):: Mr. Speaker, I am tempted to ask the hon. member to repeat his question. Mr. Fyffe, the chairman of the task force, has asked me if he can have a further six weeks because of the number of representations made to him. He has had over 500 requests and has accepted some 140 of them. I have granted permission to extend the term until March 15 next year.
As for the representations made by the hon. member, they are well-founded, as usual, and I shall convey them to the chairman of the task force.


HEALTH AND WELFARE
Hon. Monique Begin (Saint-Leonard-Anjou):: Mr. Speaker,
1 have a question for the Minister of National Health and Welfare. 1 hope he will not tell me that the Hall Commission on Health needs four more weeks to report. Since only three provinces have set up premiums for medicare on top of their general taxation-Alberta being one of them-and since the Alberta government made a deal last spring allowing the doctors to overcharge sick people by 50 per cent more than medicare-by the way, one out of three doctors is actually doing it-will the minister either confirm, or deny, that Alberta's share toward hospital insurance and medicare in Alberta has steadily declined, at the very time the oil boom took place, and that the federal government is now paying 61 per cent of all health expenditures in Alberta instead of 50 per cent?


Hon. David Crombie (Minister of National Health and Welfare):: Mr. Speaker, I should like to thank the hon. member for her question. I think the actual figure is close to 61 per cent. Certainly, the shift in federal responsibility for costs have increased, not only in that province but in some others.
Second, I should like to assure the hon. member that the Hall commission report will not need four weeks longer; at least, 1 hope it will not. The hon. member is aware that the Hall commission report will be available by April; at least, that is the intended date. It was following the federal-provincial conference of health ministers that the Hall commission was set up in order to deal with matters of that kind.


Monique Bégin: A supplementary question, Mr. Speaker. Can the minister further confirm that the Tory government of
838

November 1, 1979
Oral Questions
Alberta is continuing to divert from medicare-I guess he will not have any difficulty confirming that, since he accepted the percentage-the enormous sum of $78 million per year? Diverted into what? Paying their provincial debt, or what? Every project? I hope it is not the Heritage Fund. This is an amount equal to the entire national budget for medical research in Canada.


David Edward Crombie: Mr. Speaker, I cannot confirm that figure at all, that is, as to how the Alberta government uses its funds in relation to the block funding. This is a matter which I could have advised the hon. member on if 1 had had notice of the question. I will get that information for her.
As to whether the government is Tory, 1 should like to assure the hon. member that in relation to medicare this government seeks to serve the citizens of every province, no matter what government they choose.


BRIEFS RECEIVED BY HALL COMMISSION-NUMBER OF PROVINCIAL HEALTH MINISTERS CONSULTED
Mr. Gary F. McCauley (Moncton):: Mr. Speaker, my question is for the Minister of National Health and Welfare. Six weeks have elapsed since the appointment of the Hall commission on medicare, and its mandate is to report in six months.
Will the minister report how many briefs have been received by the commission, the number of witnesses heard and, more urgent, how many provincial health ministers has Mr. Justice Hall consulted?


David Edward Crombie: Mr. Speaker, I should like to thank the hon. member for his question. I do not have that information with me, however. 1 might say that Mr. Justice Hall is to be in Ottawa this weekend participating in the meeting of the Canadian Labour Congress, I understand. He will also be talking with certain union representatives and certain medical representatives. I know he has received some briefs. I will provide that information to hon. members as soon as I can.


DOCTORS' FEES UNDER MEDICARE PROGRAM
Joseph Gaston Isabelle: Mr. Speaker, my question is for the Minister of National Health and Welfare. Since this is the first time I have addressed a question to the minister, 1 wish him success in running his department with extreme firmness and determination in order to save the project of the century in North America, namely medicare. I would like to know whether the minister is aware that the Canadian Labour Congress has publicly recognized, in a memorandum presented in September, that doctors also have a right to a good income, that doctors have organized themselves into groups in order to save medicare, that Dr. Woodside of Hamilton has joined a group for that purpose. Could the minister tell the House whether the alarming rate of disaffiliation among doctors, especially in Ontario, is actually due to the fact that provincial Tory

governments use federal funds for medicare to reduce their provincial debt?


David Edward Crombie: Mr. Speaker, I think 1 caught all of the question, but if I did not I would be happy if the hon. member would repeat it. If I understood it correctly, the amount of compensation that doctors receive is, of course, negotiated by provincial governments. Those negotiations over a number of years have had varying degrees of success. In some provinces right now they are undergoing those negotiations with respect to compensation.
We are always concerned about these negotiations, because if they are not successful they will impair service and that, of course, is something with which we concern ourselves very greatly. I can only say that the department will continue to monitor those negotiations as they are going on. We are always, of course, available to provincial governments if they need our assistance.


INSTRUMENT SETTING UP HALL COMMISSION
Hon. John C. Munro (Hamilton East):: Mr. Speaker, my question is also for the Minister of National Health and Welfare. I would inquire about the legal instrument the minister and the government is using to set up the Hall commission of inquiry into medicare. I wonder if he could inform me, since obviously he has not been given power under the Inquiries Act: 1 have not heard that stated by the minister at any time.
1 wonder if there is an order in council empowering Mr. Justice Hall to conduct a proper inquiry and giving him the powers he needs to conduct the type of inquiry the minister has been talking about.


David Edward Crombie: Mr. Speaker, the terms of reference under which Mr. Justice Hall is conducting the study were set after consultation with the Prime Minister and cabinet, and he was appointed under my authority.


John Carr Munro: A supplementary question, Mr. Speaker. I would be interested in hearing from Mr. Justice Hall, who I believe likes to act under some legal instrument, some legal authority if he is to conduct any proper inquiry at all. In any event, I wonder if the minister would advise whether he is prepared to seek advice from the law officers of the Crown to determine whether actions taken by the Newfoundland government and actions taken by the New Brunswick government, such as deterrent fees and admission fees and the like which are now being charged, constitute a contravention under the provisions of block funding as far as the federal government is concerned. If he gets an opinion to that effect while Mr. Justice Hall is conducting his inquiry, is he prepared to withhold the monthly cheques to the provinces until such time as they desist in terms of these contraventions that I believe would be advised by the legal officers of the Crown?
November 1, 1979


David Edward Crombie: Mr. Speaker, 1 should like to advise the hon. member that in my discussions with him, Mr. Justice Hall asked me if I would provide him with whatever instruments he would require in order to carry out his investigations, whether under the Inquiries Act and whether he would have subpoena powers, and so on.
[DOT] (M50)
I indicated to him at that time, with the concurrence of the Prime Minister and the cabinet, that whatever instruments he desired, he would have. At this point he is operating under Treasury Board authority. With respect to whether I ought to seek advice from other people, Mr. Justice Hall is, indeed, carrying out a study. I think that it would be inappropriate. I think all parties agree that Mr. Justice Hall is the person to best carry out that study. What we ought to do is make sure that the advice of Mr. Justice Hall is received, before we ask other people.


REGIONAL ECONOMIC EXPANSION
Mr. John Reimer (Kitchener):: Mr. Speaker, my question is to the Minister of Regional Economic Expansion. In view of the high interest rates for mortgages, will the minister inform the House whether he will change the three-year requirement for the renewal of government-insured mortgages through Canada Mortgage and Housing Corporation to permit renegotiation of these mortgages for a one-year term?


Hon. Elmer M. MacKay (Minister of Regional Economic Expansion):: Mr. Speaker, that is an excellent suggestion. As a matter of fact, we are considering arrangements to vary the regulations under the NHA to make this arrangement possible. I will report to the hon. member as soon as I have checked to see what progress is being made.


HEALTH AND WELFARE
Robert Joseph Ogle: Mr. Speaker, I have a question for the Minister of National Health and Welfare. The questions he has received today indicate that there is deep concern about the whole question of deterioration of medicare.
Is the minister going to put some muscle into the ability that he has to do something now, rather than wait until Mr. Justice Hall has completed a study? To put this off as medicare begins to fall apart is wrong.


David Edward Crombie: Mr. Speaker, my concern is to make sure that when the federal government acts, it first of all does so in relation to
Oral Questions
guidelines that are clearly understood and agreed upon. Those guidelines do not now exist. I wish they did.
Second, I would advise the hon. member that Mr. Justice Hall's credentials are so excellent that the sort of advice he would offer would commend itself to all sides of this House. Third, and this has come up a couple of times, there seem to be some members opposite who suggest that every time there is a concern, the federal government stops the money flowing to the provinces. If they are concerned about eroding medicare, I suggest that is a way of wiping it out.


Some hon. Members:: Hear, hear!


SHIPBUILDING
Mr. Raynald Guay (Levis):: Mr. Speaker, my question is directed to the right hon. Prime Minister. I should like to thank him for the written answer he gave me last week to the question I asked him. I should like to know who are the people concerned in this government because last week, when the unionized workers of Lauzon shipyards came here to meet government officials, they only met civil servants and went back home with very few assurances from them. The workers asked for early decisions on five bids made by Davie Shipbuilding Limited to Lauzon shipyards, a $150 million program concerning the repair and building of ships which had already been announced last February by the former government, that is, by those who now form the official opposition. It is all right for the Prime Minister to tell us very often about a merchant marine, but what is he doing in the short term to secure the uncertain future of shipyards just before winter? What can he do to reassure shipyard workers who are very concerned about the administrative slowness of this government?


Right Hon. Joe Clark (Prime Minister):: Mr. Speaker, following the questions asked by the hon. member and the representations of the workers of Lauzon, I arranged an urgent meeting. It was necessary for us to have a meeting between workers and civil servants. But if the unionized workers think it is important for them to have a meeting at the ministerial level we can arrange this with the Minister of Transport or with one of the ministers of the province of Quebec.


Raynald Joseph Albert Guay: Mr. Speaker, I feel the shipyard workers do not need to come back to Ottawa because they figure it has been a waste of time. They have asked the officials in their telegrams-I see the Minister of Supply and Services is smiling. During the entire electoral campaign he went to the shipyards to flirt with the workers, and the Prime Minister himself went there to promise them all kinds of things. Yesterday the Prime Minister said in answer to a question by the opposition leader

November 1, 1979
Oral Questions
that he had no intention of delaying tough decisions. I think he is delaying the easy ones.


FORESTRY
Mr. Maurice Harquail (Restigouche):: Mr. Speaker, my question relates to the forest industry in Canada. In view of the negligence of the government in not having the Minister of Industry, Trade and Commerce in this House, I will direct my question to the Minister of State for International Trade.
Can the minister inform the House what steps he is taking to protect this important industry? Can he, also, tell the House whether funds will be made available for future expansion of pulp mills in this country?


Michael Holcombe Wilson: Mr. Speaker, I would like to take that question as notice.


REGIONAL ECONOMIC EXPANSION
Mr. Maurice Foster (Algoma):: Mr. Speaker, I have a question for the Minister of Regional Economic Expansion. In view of the long delay in the signing of the rural development agreement between Canada and Ontario, and in recognition of the tremendous need in northern Ontario for the development of our forestry, mineral, agricultural and tourist potential, can the minister say when that agreement will be signed?


Elmer MacIntosh MacKay: Mr. Speaker, I recognize the importance of the question, and remind the hon. member that it was because of an earlier program of restraint by his government that the ARDA program in that area was cancelled.
We are now looking into appropriate ways to help that area. As a matter of fact, following negotiations with Ontario there is a Treasury Board submission that also has an element of aid for some of the native population through the Department of Indian Affairs and Northern Development. Therefore, the matter is under active consideration.


NORTHERN AFFAIRS
Mr. Keith Penner (Cochrane):: Mr. Speaker, my question is to the Minister of Indian Affairs and Northern Development. Last week, exploratory drilling in one of the Beaufort Sea sites was halted due to ice and weather conditions. Later, that decision was reversed by Ottawa and drilling continued for a short period of time.
Questions were raised in the House. I asked officials in northern development, and the minister, to provide certain reports, exchanges and correspondence pertaining to the incident. Will the minister now explain to the House why he has not seen fit to release these documents?


Hon. Jake Epp (Minister of Indian Affairs and Northern Development):: Mr. Speaker, I first want to indicate to the hon. member that he is not correct in stating that drilling was going on in the Nerlerk site, the M-98 site. In fact, what was happening was production testing. The situation was such that last week, when I answered a question in this House, I indicated that we needed two to five days to end the program. That program ended on the 29th of last month. The ships have left the Nerlerk site and the well has been suspended for the rest of the year.


B. Keith Penner: Would the minister be so kind as to confirm that, following the decision of the on-site inspector to shut down drilling, a visit was made by the regional engineer from Yellowknife and he concurred with the decision. Is it also true that the regional engineer was told by Dome Petroleum officials that the company would go over his head and that of the on-site engineer? Is it also true that the regional inspector was soon afterwards directed to modify the shutdown order and to allow drilling to continue for another two to five days?


Arthur Jacob (Jake) Epp: Mr. Speaker, I believe I .answered that question last week as well. I indicated to the House at that time that the indication from the field, through to Yellowknife and on to Ottawa, was that there had been difficulties in terms of communication. That matter has now been taken up by the department in order to improve communication.
I want to indicate to the hon. member that in terms of continuing the production testing, that was done, and that the department has the authority to re-examine the situation. The problem was ice that was forming to six inches, as well as weather conditions. The weather condition abated. That is why the two to five days were needed. That work was completed. In terms of information, I spoke to a colleague of the hon. member today, and 1 am willing to make the information available.
November 1, 1979


LABOUR CONDITIONS
Mr. Terry Sargeant (Selkirk-Interlake):: Mr. Speaker, my question is for the Minister of Labour. Since 1961, not one of the 35,000 people hired by the Stelco plant in Hamilton for plant jobs has been a woman. This is in spite of the fact that during this period Stelco has received 30,000 applications for such jobs from women. Also during that period-


Mr. Speaker:: Does the hon. member have a question?


Terence James (Terry) Sargeant: In the light of this situation, will the minister assure the House that he will meet with the president of Stelco and other company officials to insist that this discriminatory hiring policy should end?


Hon. Lincoln M. Alexander (Minister of Labour):: I want to thank the hon. member for that question. 1 do not know how 1 get involved, except that I come from Hamilton. 1 can tell the hon. member that this government, through the Minister of Employment and Immigration, through the Secretary of State for External Affairs, through the Secretary of State and through my own department, has taken a leading part in seeing to it that women come into their rightful role. Even though the steel company is not within my responsibility, 1 am certainly prepared, because I live in Hamilton and because I am just as concerned as the hon. member is, to give him an undertaking that 1 will contact officials of the steel company and, as well, the unions to see whether they can get together to resolve this serious matter.


PRIVILEGE
Raymond John Skelly: Mr. Speaker, I rise on a question of privilege relating to an answer given me by the President of the Treasury Board (Mr. Stevens). In his answer to my question this afternoon the hon. gentleman suggested I had received misinformation, thus implying I had misinformed the House.
I would point out to him that my information may be more current than his. As at 1.45 p.m., confirmed at 2.05 p.m., bargaining in fact ceased. The reason it has ceased becomes clear from the content of my question. First, Treasury Board has laid conditions upon the union which literally cannot be met because Treasury Board does not appear to be serious about the bargaining. They made an offer which was less than the offer reported by the conciliator in the majority report. Then when the workers were out providing emergency services, Treasury Board was again willing to bargain with them if they
Administration of the House
went back and provided designated services. They did that, Mr. Speaker.
Bargaining then, in theory, commenced. But what the board's negotiations did was put forward an offer which represented a reduction by comparison into previous positions. For 920 people it represented a decrease. Then today, when radio operators were convinced that Treasury Board was not bargaining in good faith-in fact, it appeared that negotiators for Treasury Board did not have the minister's authority to conclude an agreement-they said: "Now we are definitely out". They have left the station. There are no longer emergency services and there are no longer designated services. The minister made the statement that cool heads were required in this House. If it is cool heads that are required, it is not necessary to play the kind of Russian roulette which is being promoted here. Last week-


Mr. Speaker:: Order. Essentially, the hon. member seems to be raising a disagreement with the minister. He will have to persuade me that there is a question of privilege involved.


Raymond John Skelly: The point is that the information I had is current. 1 would like the minister to withdraw the remark he made to me and give the House a straight answer on that particular question.


Sinclair McKnight Stevens: As all hon. members are well aware, it is very difficult for the House to get into a discussion of ongoing negotiations with respect to any labour settlement. What I indicated in reply to the hon. member was that negotiations resumed at 10 a.m. this morning. They resumed partly at our request. We approached the mediator and the union negotiators last evening requesting that negotiations continue. We indicated, as we have done before, that we feel it essential that those who have been given certain specific tasks to perform should perform those tasks to ensure that there is proper safety at all airports in Canada. When negotiations resumed we were told that the union had, in fact, asked that all members who were off the job should return to their work. Discussions continued. Around noon there was an adjournment. We suggested that negotiations should resume at 4 p.m. The hon. member has now told us that the union has decided not to return at 4 p.m.
All 1 can say is that we are earnestly trying to come to a settlement of this important matter and we only hope there is not even the slightest suggestion on the part of the hon. member that he is condoning any illegal activity on the part of these union members.


FIRST INTERIM REPORT ON COMPREHENSIVE AUDIT OF GENERAL AND FINANCIAL ADMINISTRATIVE SYSTEMS
Mr. Speaker:: Order. I should like to take a moment before proceeding to Routine Proceedings to inform the House on a matter which I consider to be of great importance related directly to the administration of the House and indirectly to our spending estimates for future years.

November 1, 1979
Administration of the House
The administrative duties of the Speaker represent an immense but little known aspect of his responsibilities, and when I assumed this office five years ago I am quite certain that my reaction was very much the same as most of my predecessors: first, some surprise at the enormity of the administrative task; second, serious concern about my own qualifications in the administration field, a concern which the House shares, I am sure, since to my knowledge no Speaker has ever been chosen on the basis of administrative expertise- neither has the Clerk of the House nor the Sergeant-at-Arms, with whom the Speaker shares these duties-and yet, we have neither comptroller nor professional administrator within the ranks of the House of Commons staff.
The subject is further complicated by the dramatic and rapid expansion of the operation of Parliament in recent years. For example, 15 years ago the budget was a fraction of its present figure, and telephone privileges, travel privileges, staff, office accommodation, constituency offices and television within the chamber as we now know them virtually all came into existence in that short period without concurrent upgrading in our administrative practices or administrative skills. Members will not be surprised then to learn that the former Clerk, Mr. Alistair Fraser, Sergeant-at-Arms Col. Currie, Director of Administration and Personnel Georges St-Jacques and I were all in agreement that a thorough review of our administration would be of great value.
Against this background, last winter, in keeping with the spirit of spending restraints announced by the government in the summer of 1978, I asked the management and members' services committee to review our estimates in a somewhat different manner than had been previously attempted. We first identified a number of areas in which costs of operations might be reduced, some, but not all, of which would result in reduction of service to members and in turn, through members, to the public.
1 invited the committee to examine our officials on these so that when I presented the estimates for approval in mid-winter, the committee could pass final judgment. Quite appropriately, after taking advantage of the opportunity to examine the officials of the House, the committee concluded that before attempting spending cuts in any major way it, too, would prefer some sort of independent study of our administration. Although we were agreed, neither the committee nor I could begin to formulate terms of reference for such a study, yet we were equally agreed that some start should be made, if possible during the dissolution period.
We agreed to seek advice from the Auditor General and after several consultations with him during which-and I want to underline this to members-his advice was in every sense positive, constructive in its tone and, in my opinion, absolutely invaluable in the steps we are proposing to take. After these consultations, upon which I commend the Auditor General most sincerely, I wrote to invite him formally to begin the process of a comprehensive audit with the hope of identifying administrative weaknesses and recommending solutions, either with or without the help of outside consultants.
[Mr. Speaker.)
The Auditor General very kindly responded to that invitation on my part by putting together a team which started work on the project at once, continued through the dissolution period and, in fact, is still continuing its work. The Auditor General has provided me, under date of October 31, an interim report on that, and 1 propose to table my invitation to the Auditor General of April 4, 1979 and, in turn, the interim report of the Auditor General, his findings on our administrative difficulties and some proposed suggestions for rectifying them, that being his letter of October 31.
In that letter the Auditor General proposes as a long-term solution the addition to our senior staff of a professional administrator and a comptroller. My response has been positive, but I naturally insist on behalf of the House that before any final decision of this sort be taken, ample opportunity be given to members for study and for comment, not only on the exact responsibilities of such an official or officials, but also on their relationship with Parliament, with the Speaker, with the Clerk and with the Sergeant-at-Arms. At the same time, we all feel that an early start on the work of such administrator is highly desirable, since we soon will be asked to approve cost estimates for spending programs of Parliament in the future.
I am therefore pleased to advise the House that the Auditor General and 1 have been able to come to an interim solution which I hope will be seen by all members to accomplish all objectives to the maximum possible extent. The Auditor General has kindly offered, under secondment, the services of the very distinguished Deputy Auditor General, Rheal Chatelain, to serve us as acting or interim administrator, an offer which, after informing House leaders, 1 have readily accepted and for which 1 accept full responsibility.
Mr. Chatelain's duties will be to oversee implementation of administrative programs, and he brings to the position a background which ideally suits him to the task. This interim period will enable us to benefit from his expertise immediately, but also will give to members of the House of Commons the opportunity for study and for comment upon the possible ultimate responsibilities and relationship of this administrator with the other officers I have mentioned.
I want to thank, first of all, the Auditor General for his assistance. He has at all times acted not only as the professional accountant that he is and, of course, the Auditor General of Canada in that immense responsibility to the Canadian people, but he has acted at all times as a servant of Parliament, and his attention to our problems-but, more important than that, his devotion to this institution-has been readily apparent to me throughout all our consultations. I therefore extend on behalf of the House special thanks to him for his counsel and guidance through this period of time.
In addition, I thank the previous officials of the House- Mr. Alistair Fraser, the previous Clerk of the House; Colonel David Currie, our previous Sergeant-at-Arms; Mr. Georges St-Jacques, Director of Administration and Personnel throughout all these discussions; our new Clerk, Dr. Beverley Koester; and General Gus Cloutier, our new Sergeant-at-
November 1, 1979

Arms. All have been most helpful throughout all our consultations.
Lastly, 1 thank the members of the Standing Committee on Management and Members' Services of the last Parliament, and particularly its very distinguished chairman, the hon. member for Cumberland-Colchester (Mr. Coates), for their wise assistance and counsel during all the preparatory steps which led to the initiation of this interim solution and interim experience for us, with the assistance of the Auditor General and now with Mr. Chatelain.
1 am sure I speak on behalf of all hon. members in expressing hope. 1 want to say, having initiated this collaboration with that committee, that I will be appearing before that committee at a meeting scheduled very soon in order to continue discussions and consultations on this in case there are any questions members want to put. I hope they will avail themselves of that opportunity at that time.
I want finally simply to say that I hope that in taking these steps I am expressing the hope of all members of the House of Commons that in this way we will maximize the opportunity for members to participate in this decision and to discuss it before a final implementation is made; and that in the interim we will be working together with Mr. Chatelain to ensure not only the smooth functioning of Parliament in all its responsibilities to the Canadian public, but, above all, that we will be doing that in a manner which remains exemplary to the Canadian public in our accountability for the expenditure of public funds.


Walter David Baker: Mr. Speaker, I want to thank you very much for that extensive and complete statement with respect to the report which has been commissioned. I say on behalf of the government that we think it is appropriate that after receiving that report you have moved immediately with respect to it in terms of establishing interim machinery and putting into place the appropriate personnel, reserving as always, as I know you would, the ultimate right of Parliament through the Standing Committee on Management and Members' Services of this House to look at the final results of the investigation. 1 assume Your Honour will be tabling that report, if that is appropriate, and I think that is wise, but I think it is important that I say on behalf of the government that we support the action you have taken with respect to this matter.


BUSINESS OF THE HOUSE
Mr. MacEachen:: Mr. Speaker, I want to ask the leader of the House the regular Thursday question as to what business he has in mind for the week ahead.
Committee Reports
I would like to draw to his attention that the Minister of Finance (Mr. Crosbie) was good enough to advise me that he would not be in the Committee of the Whole today and that he will be replaced by his parliamentary secretary. 1 do not want to create any fuss about this point today, but I draw to the attention of the leader of the House that we expect that ministers be in their places for major legislation, and particularly when we are in Committee of the Whole we expect the Minister of Finance in the future to be present. I am sure that his presence-because of his customary enlightened replies- would facilitate the passage of the legislation. I draw that to the minister's attention.


Walter David Baker: Mr. Speaker, with respect to the customary House business there will be a House leaders' meeting tomorrow, and we can discuss matters specifically, but for the guidance of the House today we will be continuing Committee of the Whole with respect to the income tax bill, followed by the Customs Tariff bill. 1 hope we will be able to finish the income tax bill relatively soon and that we can get on to the other matter.
As far as the Minister of Finance (Mr. Crosbie) is concerned, the hon. member knows that the minister is an extremely busy man, and I think the House will agree that his parliamentary secretary handled the work of the committee last night admirably. He was very forthcoming, and I think he handled a difficult task very well.


Some hon. Members:: Hear, hear!


Walter David Baker: Mr. Speaker, the Minister of Finance understands his obligations to the House of Commons. I know the hon. member for Cape Breton Highlands-Canso (Mr. MacEachen) understands the varied obligations of the Minister of Finance here and across the country. There are examples we can emulate. There are certain which we will not emulate. I refer to certain examples of former governments in terms of attendance of ministers. However, 1 want to assure the hon. member that we recognize our responsibility and that the Minister of Finance will do his very best to be here as much as possible.


Allan Joseph MacEachen: What about the House business?


Walter David Baker: We are going to have a House leaders' meeting tomorrow.

November 1, 1979
844 __
Business of the House



ROUTINE PROCEEDINGS


[Stage Direction]
First report of Standing Committee on Fisheries and Forestry-Mr. Crouse.
[Editor's Note: For text of above report, see today's Votes and Proceedings.}

[ Translation]

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


Mr. Speaker:: The hon. member for Drummond on a point of order.


Yvon Pinard: Mr. Speaker, I would like the President of the Privy Council (Mr. Baker) to answer the question asked by the hon. member who spoke before me and to tell us clearly what the business of the House will be for the next few days. Traditionally, we ask this question every Thursday. The answer we were given is quite limited. He tells us that we are about to conclude the study of Bill C-17, that we will undertake today to examine Bill C-18, and then he refers us to an eventual meeting of House leaders tomorrow. I would like him to tell us clearly what the House will deal with, what is the legislative menu for the next seven days.


Walter David Baker: Mr. Speaker, 1 did not really want to get into this, but 1 will now that the hon. member insists.
There was a House leaders' meeting earlier in the week on Tuesday, at which time I put to the hon. member who has just spoken certain proposals with respect to House business. The answer that I received was that he would have to consult with his colleagues in caucus and will reply to me. I attempted to establish a House leaders' meeting yesterday-but it proved to be inconvenient for other hon. members-at which time I hoped to have the reply so I could then inform the House how we might proceed, i do not have those replies. A meeting is scheduled for tomorrow, to which I specifically invite hon. members opposite to reply to the questions that they said they were going to take to their caucus on Wednesday. If they reply to me, then I think I will be able to answer quite fully the question on the business of the House on Friday.


Allan Joseph MacEachen: Mr. Speaker, may I say on this point that I want to make it absolutely clear that it is the responsibility of the government to lay out the business of the House for the future, and none of the points raised by the hon. member, to which we will give him answers, should prevent him today from telling us what the business is for the next week. It appears to me that the government really does not know what it can bring forward, and probably it is not prepared.


Walter David Baker: Mr. Speaker, there was a long list of legislation given a week ago with respect to what the government program is for the fall.


Some hon. Members:: Tell us.


Walter David Baker: I really do want to be a consultative House leader and I think it is appropriate that we meet. It is appropriate, from time to time, that we look at the legislation in front of us and agree about how long the legislation should take. I really do invite the hon. gentleman and welcome him cordially. I will even have a pot of tea for him when he comes to give me the information with respect to the intentions of his caucus.


COMMITTEES OF THE HOUSE
[Stage Direction]
First report of Standing Committee on Transport and Communications-Mr. Forrestall.

[Stage Direction]
First report of Standing Committee on National Resources and Public Works-Mr. Neil.
[Editor's Note: For text of above reports, see today's Votes and Proceedings.}

[ Translation}

Hon. Bill Jarvis (Minister of State for Federal-Provincial Relations):: Mr. Speaker, pursuant to Standing Order 41(2), I wish to table, in both official languages, the communique of the federal-provincial conference of ministers responsible for criminal justice.
November 1, 1979


IMMIGRATION
Ronald George Atkey: Mr. Speaker, under the provisions of Standing Order 41(2), I would like to table in both official languages the report to Parliament on immigration levels, in accordance with section 7 of the Immigration Act, 1976.


Mrs. Appolloni:: Mr. Speaker, I wonder if I could address a question to the Minister of Employment and Immigration (Mr. Atkey) on that particular document?


Mr. Speaker:: Not unless the minister makes a statement.


Mr. Kaplan:: On the same point of order, Mr. Speaker, I wonder if the minister would give consideration, in view of the importance of the matter, to making a statement so as to give members the opportunity to ask questions about this very important document.


QUESTIONS ON THE ORDER PAPER
[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 questions will be answered today: Nos. 63, 172, 173, 193, 242 and 303.
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 National Battlefields Commission?
2.	What is the annual salary in each case?


Hon. John A. Fraser (Postmaster General and Minister of the Environment):: 1.	(a) Mr. Fernand Tremblay
(Note: The act respecting the National Battlefields Commission does not call for a president but rather a chairman.)
(b) There is no vice chairman.
2.	The chairman does not receive an annual salary but is entitled to receive his actual disbursements for expenses incurred in the discharge of his powers and duties under the act.
Order Paper Questions


Mr. Herbert: 1.	In the past five years, was approximately $59 million paid to the government of Quebec under the Canada Student Loans Act and, if so, what was the basis upon which the payments were calculated?
2.	What is the approximate loss ratio on loans to students in provinces other than Quebec?
3.	What is the average turnover time for student loans?
4.	What is the estimated percentage of the total amount of loans outstanding, at any one time, that would be necessary as an annual contribution in order to maintain the present level of lending?


Mrs. Diane Stratas (Parliamentary Secretary to Secretary of State):: 1.	Yes. Section 12(2) of the Canada Student Loans Act sets out the method of calculating the amount of alternative payment. In short, the amount paid is the proportion of the costs to the federal government in respect of loans made by participating provinces that the 18-24 year age group in Quebec bears to the same age group in participating provinces.
2.	From August, 1964, to December 31, 1978, the loss ratio on loans to students in provinces other than Quebec was 0.14 per cent.
3.	The maximum repayment period permitted under the act is ten years from the date a borrower ceased to be a full-time student. The Canada Student Loans Act and regulations provide, however, that the minister may extend this period in exceptional circumstances. Within the ten-year maximum the repayment period in each case is determined by the lender (chartered banks and other lending institutions) in consultation with the borrower and is dependent upon the size of the debt and the borrower's ability to make payments. There is provision for a revision of agreed terms where a borrower is unable to continue to meet the payments because of unemployment, ill-health or other temporary situation. The bulk of student loans are repaid within six years.
4.	The Canada Student Loans Act is not a self-financing program so that repayments are not sufficent to cover issue of new loans in any year. The act sets out a specific total loan provision for a base year and provides for escalation of that basic loan provision in subsequent years in accordance with the change in post-secondary full-time enrolment in Canada. Total loans advanced in any year may not exceed the loan provision for that year. The act provides that the federal government shall pay interest charges on all loans advanced so long as the borrower is enrolled in full-time post-secondary education at an eligible institution and for six months after ceasing such studies. The act also provides that the federal government shall guarantee lenders against losses due to default in repaying loans. The cost to the federal government in each year is, therefore, the interest charges on outstanding balances of loans for students still enrolled (and six months thereafter) and the paying of claims for loss submitted under the guarantee in that year.

November 1, 1979
Order Paper Questions


Mr. Herbert: 1.	(a) Did any of the present participating provinces in the Canada Student Loans Program request that the government repeal or revise the Canada Student Loans Act (b) which of the provinces have a comparable program and what is the procedure to avoid duplication or competition?
2.	Can a Quebec student completing education in another province participate in the program?


Diane Rose Stratas: 1.	(a) All participating provinces have requested that the
government revise the Canada Student Loans Act. No province has requested that the government repeal the Canada Student Loans Act.
(b) No participating province has a comparable program which duplicates or is in competition with the Canada Student Loans Program. All participating provinces have provincial programs complementary to the Canada Student Loans Program to assist either by way of grants or loans to those students whose needs are greater than can be satisfied by the loan limits established under the Canada Student Loans Act.
2.	A Quebec resident is not eligible to receive assistance under the Canada Student Loans Program as Quebec does not participate in that program. However, Quebec operates its own program of loans and grants for its residents attending institutions in that province. Residents studying at specified universities and colleges outside the province may receive assistance under the provincial plan. Under the Canada Student Loans Act a province choosing not to participate in the program receives an alternative payment from the federal government. This payment is calculated by applying the ratio of the 18 to 24-year old population in the province concerned to the same age group in participating provinces to the costs incurred by the federal program in operating the Canada plan.


Mr. Herbert: How many (a) permanent (b) term employees were on the Department of Veterans Affairs' payroll on March 31, 1979?


Allan Bruce McKinnon: In so far as the Department of Veterans Affairs and agencies are concerned: (a) 4946 (b) 544.


Mr. Lambert (Bellechasse): What budget was made available to the honourable Robert Stanfield to study the possibility of moving the Canadian Embassy to Jerusalem?


Charles Joseph Clark: It is estimated that $300,000 will be required for transportation and communica-

tions, professional services, printing and distribution of report and material and supplies. Mr. Stanfield was appointed within the DM 1 ($48,500 to $65,500) for a period of 12 months, effective July 12, 1979. The salary is paid by the Department of External Affairs and the Department of External Affairs are also providing officer and support staff assistance.


Mr. Roy (Beauce): Did the government buy land for the Mauricie National Park and, if so, at what cost?


John Allen Fraser: No. The lands comprising La Mauricie National Park were transferred at no cost to Canada pursuant to an agreement between Canada and the province of Quebec dated August 22, 1970.
[ Translation]


Mr. Olivier:: Mr. Speaker, 1 rise on a point of order. I should like to ask what has happened to questions Nos. 140, 150 and 160 which have not been answered yet, although they are very important.


Yvon Pinard: Mr. Speaker, the hon. member for Longueuil has not received any reply to his question. Are we to understand that the parliamentary secretary has taken note of the question and will try to answer it? It seems that the government is making a specialty of not answering the questions which members of the official opposition have submitted over the past few days.


David Kilgour: Mr. Speaker, I am very glad to take note of these questions.


Joseph Mario Jacques Olivier: Mr. Speaker, I rise on a point of order.


Mr. Speaker:: The hon. member for Longueuil on the same point of order.


Joseph Mario Jacques Olivier: I am sorry, Mr. Speaker, but it would seem that since the beginning of the current session, the government has not been paying much attention to the written questions by hon. members. We are under the impression that the government simply refuses to answer our questions. Has it anything to hide? If it has, let it say so. At least it should not promise to table its answers or claim to be an open government. On the contrary, Mr. Speaker, it should table its answers as soon as we submit our written questions. This government is apparently bent on not answering our questions.


Walter David Baker: Mr. Speaker, I do not want to prolong this debate, but if I were to give an example of slowness and laxity and failure to answer questions, I could not think of a better one to follow than that of the former government. But the one thing that I do want to bring to the
November 1, 1979

attention of hon. members-and I am sorry the hon. member did not recognize that yesterday-is the fact that yesterday we made parliamentary history in terms of openness. There were three motions for the production of papers and all three of them were answered in the affirmative, so that papers are going to be produced. I do not recall that ever happening under the former government; never were there three motions in a row accepted.
Hon. members know that we are going to do our very best, having regard for the complexity of the questions, to answer those questions appropriately and as best we can. We may fail from time to time, but all hon. members should know that those are the instructions and suggestions that have gone from me to my colleagues in the ministries.


Mr. Lefebvre:: Mr. Speaker, I rise on a point of order. I should like to point out to the government House leader, with all due respect, that if he would like to check the record he would find that the former parliamentary secretary to the president of the privy council ensured that 90 per cent of the questions which were asked in a session were answered in the same session, and that a much greater volume of these questions was answered on a daily basis than this supposedly open government has done so far.


Some hon. Members:: Hear, hear!


Mr. Speaker:: Order, please. I think we have spent enough time on this. There will be an opportunity to renew the discussion so let us not exhaust it now. Shall the remaining questions be allowed to stand?


Some hon. Members:: Agreed.



GOVERNMENT ORDERS


[Stage Direction]
The House resumed from Wednesday, October 31, consideration in committee of Bill C-17, to amend the statute law relating to income tax and to amend the Canada Pension Plan (Mr. Crosbie)-Mr. Laniel in the chair.
The Chairman:: Order, please, When the committee rose last evening, clause 38 of the bill was under consideration and the hon. member for Broadview-Greenwood had the floor.
On clause 38-Small business deduction


Mr. Rae:: Mr. Chairman, last night we were dealing with the very important clause involving the rights of certain individuals to incorporate themselves and take advantage of the preferential rate which currently exists in the Income Tax Act of
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Canada. I should like to take this opportunity to go through the history of this particular problem in an attempt to get some answers from the parliamentary secretary respecting the changes introduced by the Minister of Finance in the budget of the hon. member for Saint-Maurice.
In 1972 when the so-called tax reforms which provide the basis for our Income Tax Act were introduced, the Income Tax Act provided for a special reduction in the standard corporate rate for small businesses which qualified as being active businesses. That section of the act has been amended to the extent that now a corporation with an income of less than $750,000 a year receives a special corporate rate, a special small business rate for Canadian small business of 25 per cent, as opposed to the standard corporate rate which is now 46 per cent. It introduced an important incentive for which there is justification.
We pointed out that the majority of Canadians are employed in small businesses and the important role played by small businesses in the Canadian economy. We all recognize those factors. Like so many features of the Income Tax Act, individuals took advantage of this clause. They saw the Income Tax Act as an opportunity to avoid taxation where it should be paid, not as setting out principles to be followed.
What happened to the act? The definition of "active business" income was so extended by judicial interpretation that it provided an opportunity for many individuals to take advantage of the act, individuals for whom the advantages originally were not intended. Unfortunately the courts were complicit in this activity.
It is important to realize the advantages of an active business income and being allowed to incorporate. Those advantages are substantial, as are the tax savings engendered by incorporation. One problem was that a large number of doctors, lawyers, dentists, chartered accountants in provinces where they were allowed, athletes, entertainers and many other professionals took advantage of the small business provision in order to lower their effective rate of taxation.
Also it is important to realize that the fairness of the tax system was no longer evident. As I pointed out yesterday, employees bear the substantial burden of the Income Tax Act.
I am referring to those employees who work hard every day, whose income tax is taken away at source, who do not understand the Income Tax Act and who are not in a position to take advantage of the deductions, special incentives and grants given through the tax system to self-employed individuals and corporations, be they public or private.
There were two good features in the budget of the hon. member for Saint-Maurice. One was the closing of the loophole and the other was the belated decision to come to grips with the problem of term preferred shares and the manner in which banks were taking advantage of them to reduce their effective level of taxation to around 10 per cent. As members of Parliament we all know that the decision of the hon. member for Saint-Maurice to define an active business and a business which would qualify for the lower tax rate, the special small business rate, in such a manner as to exclude profession-
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November 1, 1979
als such as athletes, entertainers and others in the management service field, aroused a considerable response from a very well organized lobby. I was on the receiving end of this lobby, as 1 am sure were many other members.
The effect of the change would have been to destroy a haven. It would have required doctors, lawyers, dentists, accountants and others to start paying taxes as if they were not incorporated. It would have changed their effective rate of taxation. It would have increased their effective rate of taxation and made it more comparable to that paid by other non-incorporated individuals, be they self-employed or employees.
I am disturbed, as are many others, that the only change, apart from airport tax, the Minister of Finance has made to the budget of the hon. member for Saint-Maurice is to create a third category of corporation and a third standard rate for a special group of individuals. There were no changes to simplify the act, to make it more comprehensible, to make it more fair and to eliminate some unfair advantage given to one group over another. The service group defined in the budget of the hon. member for Saint-Maurice is now being given a special deduction from the standard corporate rate of 12% per cent; it brings them to an effective taxation rate of 33% per cent. But it still allows that group to take advantage of the dividend tax credit, tax deferrals, build-up of credits in corporations and all advantages given to private Canadian corporations in our Income Tax Act.
I have a very simple question for the parliamentary secretary. Despite the mumbo jumbo in the statements of the minister that this tax has a neutral effect, is it not the case that it still will be to the tax advantage of professionals to incorporate rather than not? If that is the case, what is the social justification for allowing lawyers in Alberta to incorporate themselves while other lawyers cannot? What is the social justification for allowing some self-employed individuals to incorporate themselves and take advantage of this special rate while employees cannot take advantage of these incentives?
In his statements on this act before the House, the Minister of Finance said that there were parts of it he was more enthusiastic about than others. But I assume from his press release that since this is the only change, this is the amendment of which he is particularly enthusiastic and proud.
We are entitled to an explanation when we look at the comparative advantages being given to one group of individuals over another. We are being provided with an additional complexity rather than a simplification of the Income Tax Act.
It gives an advantage to people who have the talent and ability to know how to incorporate themselves, those who have particular skills and to whom such a tax bracket is advantageous.
In view of the fact that it was indicated in the budget of the hon. member for Saint-Maurice that it was never intended that this group would be able or be allowed to take advantage of this measure, and that it was only through a series of interpretations that gave rise to this loophole taht was finally closed by the hon. member for Saint-Maurice, I think we are
(Mr. Rae.]
entitled to a clear explanation from the parliamentary secretary as to why this has been done.
There is one other point I should like to make. We have this phantom opposition over here in the Liberal party. If members of that party really believed in the importance of fairness in the tax system, we would have some Liberals here who would be prepared to defend that budget of the hon. member for Saint-Maurice. That is not the case. Those hon. members have backed off. There is not one measure in this budget they are prepared to defend, talk about or intervene on behalf of, or even make an effort to understand. I can understand the braying and the catcalling by members on the other side because they want to get this bill through quickly. It is not in their interest to try to understand it. They know which group they want to give an advantage to and which group they do not want to have the advantage. I can understand that attitude on the part of Conservatives. However, this pathetic performance on the part of members of the Liberal party has to be seen to be believed. They are not here and they do not care about a measure that has been changed. The hon. member for Saint-Maurice does not even have the presence to speak to a matter which he originally thought about and wanted to present to the House of Commons. He has not made a statement about its being changed. The hon. member for Windsor West did not mention the change once in his speech concerning the Income Tax Act. In fact, he did not mention one provision of this measure.
I think it is important that Canadians know that a particular lobby can be mounted after a budget in the dying days of a Parliament and so influence the Conservative party that it brings about a change in the Income Tax Act to provide a special advantage through a loophole to that group of professionals and others who can take advantage of the laws of incorporation to reduce their effective rates of taxation.
We note how concerned the Liberals are about that. They have not said a word or uttered a peep or mutter about this aspect of the budget or about any other aspect of it. I think it is becoming increasingly clear to Canadians who the real opposition to the new or old Conservative party really is. That opposition certainly is not coming from the Liberal party. I think it is clear it is coming from the New Democratic Party. I would like to hear some explanation from the parliamentary secretary in response to our representations.


Mr. Ritchie (York East):: Mr. Chairman, perhaps I might-


Gérald Laniel: Order, please. The hon. member for Dollard gave me notice that he wanted to ask a question.

Does the hon. member wish to ask a question of the hon. member for Broadview-Greenwood?
{English]


Mr. Desmarais:: Would the hon. member permit a question? During his remarks he intimated that the rate of taxation for banks is somewhere around 10 per cent. Is the hon. member
November 1, 1979

aware that what happens is that the banks pay the same rate as any other corporation? What actually happens is that banks make loans to various individuals at a rate of 7 per cent because these individuals are unable to pay the 14 per cent prime rate. Those individuals cannot afford to pay this high rate for two reasons. They either do not have any taxable income or insufficient income from any source to meet that rate. In these cases the banks allow these borrowers to pay a rate of 7 per cent on preferred shares. In that event the borrower is not allowed to deduct the 7 per cent for tax purposes, and the lender is not taxable in respect of that 7 per cent.
What the hon. member is suggesting is that we should drive the rate up from 10 per cent to 50 per cent for banks. In that case the banks will have to go back to these borrowers and say they cannot charge 7 per cent any longer but will have to charge 14 per cent, with the additional 7 per cent going to the government, thus doubling the rate of interest for a large number of borrowers.


Bob Rae: Mr. Chairman, I shall be very happy to reply to the question asked by my colleague for Dollard. First of all, I must tell him that 1 was not the one to suggest amending the act concerning income bonds and income debentures; it was the former minister of finance, the hon. member for Saint-Maurice. Therefore, if he has a question about the wisdom of amending the act or the means through which banks borrow money from small or large companies, he should ask his colleague in the Liberal party, the hon. member for Saint-Maurice.
If the hon. member is willing to remain in the House, I am certain he will be interested to hear the interventions of the Parliamentary Secretary to Minister of Finance. For my part,
1 shall be interested to hear how income bonds and debentures really work, how they have worked in the past and what would be the economic and fiscal implications of amending the act as proposed by the hon. member for Saint-Maurice. I am very happy to remain in the House, and I am certain the hon. member will be happy to hear the interventions of the parliamentary secretary. Moreover, as I said earlier, it is unfortunate that more members of the Liberal party are not ready to ask interesting and significant questions about income bonds and debentures and the matter of small businesses about which I have just asked the parliamentary secretary.


Gérald Laniel: The hon. member for Spadina.


Louis R. Desmarais: 1 have a supplementary, Mr. Chairman.


Gérald Laniel: The time allotted to the hon. member for Broadview-Greenwood has expired. I can therefore not allow this dialogue, but I shall add the name of the hon. member for Dollard to my list and recognize him in due time, perhaps to allow him to express his opinion instead of simply asking a question.
Income Tax Act


Mr. Stollery:: Mr. Chairman, 1 was surprised by the comments a moment ago of the hon. member for Broadview-Greenwood to the effect that no one in my party was becoming involved in this debate. That is an unusual comment on the part of the hon. member in view of the fact that I indicated to him last night before we adjourned at six o'clock that I intended to speak on this same point. The hon. member knew full well how I felt about the special tax rate that is being maintained, as 1 told the hon. member last night that I would be speaking on this point. In view of that I think it is a little bit ungentlemanly of him to make the kind of comment he made earlier about no member of my party being involved in this debate. 1 also think, as he leaves the room, having just a moment ago commented on the fact that the Liberal finance critic is doing a television interview-


Bob Rae: I am here.


An hon. Member:: Where were you last night?


Peter A. Stollery: I was sitting right here.


An hon. Member:: You did not say a word yesterday.


Peter A. Stollery: I do not think that those kinds of tactics will be very successful, nor are they the sorts of tactics one would expect from a major spokesman of the NDP.


An hon. Member:: They got you up.


Peter A. Stollery: I can assure the hon. member that the spokesman on this bill for my party will return to the House very shortly. He is presently giving a television interview, so I do not think that the hon. member should make such comments.
1, too, would like to question the Parliamentary Secretary to Minister of Finance on this very strange business of creating a special kind of taxpayer, as the hon. member for Broadview-Greenwood describes it. People who have the tax withdrawn at the source, and this includes most people, are the people who pay most of the taxes and who pay them at the very least arguable rates. These people do not get a chance to argue or make claims on expenses. They simply get the pay cheque with the money removed. I am sure that most of these people will resent bitterly a society which gives the guy down the street a special rate because he happens to be a professional or in a tax category which gives him a special tax rate.
It is not the small businessman who is being considered in this clause. The whole purpose of the changes was to give a tax benefit to what all of us understand to be small business, because it is small businesses in Canada which employ the largest number of Canadians. The small business is involved in everything from manufacturing to the retail level. They have felt for a long time that they have been discriminated against in the tax system. They work longer hours, but they always seem to get the short end of the stick when it comes to the tax system.

November 1, 1979
Income Tax Act
There is the belief that it would be advantageous to the country because small businesses employ more people if they expand. I realize that the parliamentary secretary has a background in big business with regard to the oil field. He may not be aware of the plight of the small businessman, and 1 am not saying that in an unpleasant way. Small businesses traditionally have not wanted to get very large. They have enjoyed the kind of activity in which they were involved, but they have always felt that they were being beaten in the tax system.
Over the years the small business tax advantage has been put into the system to create employment. We have found that it is being used by people who are really not small businessmen according to the original concept, but who were, for example, in legal partnerships. As I understand it, and I am not a lawyer, in some provinces the law society will not allow a lawyer to set himself up as an incorporated business. Perhaps the best example is the hockey player who sets himself up as a company and pays his salary into a limited company, thereby paying a smaller amount of income tax. Many people think that this is unfair.
1 recognize that there is a certain amount of tightening up taking place in this clause. I recognize that the hockey player will no longer be able simply to pay his salary into a limited company, but would probably have to claim that he was doing personal appearances or something else besides just putting his salary into a limited company. That represents some small improvement.
I believe that the original changes proposed by the minister of finance in the last government show the direction in which this government should be heading. It should be trying to make income tax payable on a more equal basis and getting away from these special categories. I recognize, and I suppose it will continue to be the situation, that one could have a large income from stocks and other investments which one could pay into a limited company. As 1 understand the proposal, such a company would now be required to employ at least five people. That proposition was proposed by the last minister of finance, and I believe that it is being maintained.
What I do not understand is the way in which the government has caved in to this lobby of people with basically high incomes, in so far as 1 can make out, and who do not want to pay the normal income tax. There are enough schemes already available to these people to divert their incomes. There are special tax rates in this country for the film industry, and for the oil industry particularly with regard to exploration, to mention but two examples. There are a vast number of ways in which a person can get away from paying tax so long as they are interested in creating employment and investing in some sector of the Canadian economy.
1 wonder, Mr. Chairman, whether this proposal has been thought through. As I understand it, if a person puts his money into a company and pays tax at the rate of 33 per cent, that company can accumulate over a period of years a reserve of up to $750,000. I should like to know if it is true that the person who then retires and collects the income from $750,-

000, which could be up to $35,000 a year, would not have to pay any tax on it. As I understand the proposal of the government, it would lead to a situation where people in this country who earn $35,000 per year through income or from dividends or from their company could end up not paying any income tax. That is a pretty serious state of affairs, and I am fairly certain that it is so. I strongly urge the Minister of Finance and his parliamentary secretary to consider that they are creating a potentially new brand of taxpayer.
Every taxpayer in Canada who is paying income tax at the source, and that is most of us-members of the House of Commons have it taken out of their pay cheques like everyone else-anybody who receives a pay cheque, should strongly resent a system which creates a special kind of taxpayer, that is, one who is not paying his taxes.
I then ask why I should pay taxes at pretty high rates. 1 am a single person with no dependants who pays a high rate of tax. Why should 1 pay up to 50 per cent in Ontario? I have the Clarkson Gordon 1979 tax rates here. I have never resented paying income tax, but on behalf of anyone paying their taxes in the normal fashion 1 register the strongest protest against a system which will create a group which does not have to pay or who can avoid paying. 1 would suspect that in the marginal rates there will be many who will not be paying 17 per cent of taxes. That is a disgraceful situation.
It is no wonder that at a time when Canada is getting poorer every year and when the brunt of this economic hardship is being carried by people who do not have any special tax advantages, the individual who has a lot of tax advantages absorbs a lot of the decline in real income in this country, and 1 suspect this is so in most of the world. He absorbs it because he charges it up to the government. The country pays; the other taxpayers pay for him. There could be some person earning $50,000 or $100,000 per year, yet he is being subsidized by someone earning $15,000 per year. That is what is being proposed here. It leads to a situation which I checked today with the Department of Finance. I am not an accountant and my taxes are simple enough that I have never had to understand these various dividends and credits and things that exist for those who can take advantage of the tax system. I never understand them because I can never take advantage of them.
I should like the parliamentary secretary to tell us whether it is true or not true that this can result in an individual having an income up to a maximum of $35,000 per year, so long as it comes in the form of dividends from a dummy company that the person has set up for $200, and not pay any income tax on that amount.


Mr. Ritchie (Dauphin):: Mr. Chairman, I should like to speak for a few moments on this clause. As a member of a profession for whom this legislation was primarily designed, I might say that putting the rate back at 3316 makes it about as neutral as it can be.
November 1, 1979

The hon. member who just sat down pointed out that dummy corporations have people who get money out of them through wages that they basically do not earn. Many small businesses have people on their payroll who, strictly speaking, might not be considered productive. This seems to be one of the disadvantages of tax systems.
One of the problems that has come from this is the high margin of income tax rates that we have. If the marginal income tax rates were not so high, this sort of thing would not occur so much. Without some provision like this, say with limited liability, it would be almost impossible for physicians, for example, to hold property in groups and to have facilities. Most provinces do not allow physicians to incorporate their incomes; certainly Manitoba does not. I realize that Alberta does allow professional people to incorporate their incomes, but it has probably changed the rules to some extent.
I have considered this over many years and have discussed it with my accountant at various times but I could never see where it paid to incorporate a medical practice, except for the limited liability aspect. For instance, if four doctors decided to build a facility for $150,000 or $200,000, they would pretty well need to have a company to do so. It would have to be organized on a partnership basis. In any case, the tax changes of 1972 made partnerships almost impossible to carry on on an income tax basis if there was any complexity. Most accountant firms will advise against partnerships of almost any kind. As I say, the 331/3 is as neutral as can be.
The hon. member who just spoke implied that all physicians and all professionals were pretty well assured of an income. Mr. Chairman, they are no more assured of an income than the corner grocer. Physicians and lawyers who work on a salary for a firm must pay income tax just as we do. It is not necessarily true that many will come in the door demanding to be paid high salaries or be provided with a high income. I might say that in a practical sort of a way the physician in Manitoba makes about $10 or $14 per hour before taxes. Ele makes up for some of this by working 50 to 60 hours a week. Whether that is too much, I do not know.
I would to like to point out there are many professions, such as pharmacy, which are not included in this. In practice, however, pharmacists can incorporate their companies. They have to be able to incorporate because of the large stock they carry and so on. Usually about half of their income can be classified in the same way as incomes of lawyers and physicians.
If everything went very well and circumstances were exceptionally favourable, it might be that a person could use the 331/3 per cent and make considerable money. However, from my discussions with many physicians, I find they have tended to lose on this. By and large their companies have not been around for a long time. They have been holding companies or real estate companies.
It would be almost impossible to get facilities without having some kind of company. Presumably we would not have
Income Tax Act
clinics and this sort of thing where there is a physical facility. Physicians have told me that having a company has not particularly resulted in their making money. In many cases, their income has been less than had they paid the marginal rate.
The limited liability feature, the possibility of bankruptcy, suits for injuries and so on make it necessary for professionals to be able to set up companies of some kind. This may not be the best way to do that. I have gone through the white paper on taxation of 1970 and subsequent legislation. As a professional, I do not particularly ask for favours. However, something has to be set up in order that facilities can be built and manned.
Another problem that remains unsolved is those who have spent long years preparing themselves and do not earn money until they are in their thirties. They presumably then earn a high income and pay a great deal in tax. Obviously that is a difficult problem. While this change may not necessarily be the best, it seems the most neutral we can arrive at for the moment.
I would ask the parliamentary secretary whether this effective 331/3 per cent rate commenced in November of last year, or will it become effective when this bill is passed, or, in fact, is it effective at the present time?


Mr. Marceau:: Mr. Chairman, the question of reducing taxes or customs tariffs is indeed very interesting and leads to heated debates, in this House and elsewhere, the points of view often differing widely. I listened to the former speakers very closely and, though I represent a riding in which the majority of voters are workers, I also represent a number of professionals whose point of view I must also submit to the House and to the parliamentary secretary who is piloting Bill C-17.
I think all we want, we being members of the House, is justice for all taxpayers, a justice which enables governments to collect the money they need to run the country. For this purpose, it is necessary to collect more from those who earn more. But, Mr. Speaker, these laws should not cause injustice under the pretence that everybody should pay income tax. I would like to pass on to the parliamentary secretary some sensible remarks which were written to me by one of my constituents of Jonquiere, Dr. Blais, who states in all deference that in its present form the bill is unfair. In his budget, the hon. member for Saint-Maurice, the former minister of finance, had proposed some amendments which were suspended and which this government now wants to implement. Therefore, I would like him to know the remarks of Dr. Blais, and I quote;
The government and the new Minister of Finance, Mr. John Crosbie, plan to amend the tax laws concerning administrative corporations for professionals and companies affiliated to corporations without legal constitution. These would no longer be entitled to reduced tax rates.
We strongly believe that these amendments are arbitrary and that they discriminate against us professionals for the following reasons:

November 1, 1979
Income Tax Act
1. The government proposes that doctors, dentists, lawyers and accountants not be entitled to the reduced tax rates granted to corporations even if they are incorporated. (At the present time, Alberta is the only province to authorize the professions to incorporate, but it is expected that the other provinces will provide this authorization shortly.)
This clearly discriminatory legislation isolates the members of the four major professions and submits them to an arbritary taxation system. If it is passed, optometrists will pay lower taxes than ophthalmologists, chiropractors will pay less than general practitioners, administrative advisers less than accountants and denture manufacturers less than dentists, to mention but a few examples.
2. Moreover, the government wants to deprive most administrative companies which offer their services to a non-incorporated company of the right to benefit from the reduced tax rates generally granted to small Canadian businesses. In fact, if the administrative company offers its services only to a group of professionals and their associates, it will not have this right.
This other measure will be more unfavourable to the dentist who has a company to take care of the administrative side of his practice than any other businessman who might do the same. The government forgets that the dentist incurs higher costs for his equipment and his office and after has higher financial risks than small businesses in general.
It can perhaps be said that not all incorporated companies should benefit from reduced tax rates. However, we see no reason to deprive of this right the companies which take care of the administration of professional practices, whether for dentists or any other major profession. We also think that those provisions should be looked at again and that the government should postpone their passage until such time as more reasonable solutions have been found.
First of all, I should like to ask the parliamentary secretary why, in paragraph (f), on page 49, the non-qualifying business is being limited to the professional practice of an accountant, dentist, lawyer, medical doctor, veterinarian or chiropractor, and why all professions are not included generally; why is this statute limited in that way? Second, why does he, on behalf of the government, plan to deprive administrative business, that supplies services to companies that are not duly incorporated, of the right to use the reduced rates usually allowed small Canadian businesses? Finally, 1 ask the parliamentary secretary whether he has really looked into all other possible solutions to that important matter, whether the decision of the government is final and whether, if this bill having become law proves to be unfair, he will be willing to suggest to his government that it amend it in order to avoid the injustices pointed out by that voter from my riding?


Mr. Johnston:: My intervention will be brief, Mr. Chairman.
I need some information from the parliamentary secretary in order to fully comprehend the impact of this proposal upon our existing income tax laws. 1 am bothered by what I consider to be a flagrant violation of the principle of tax neutrality. 1 might say I was not very happy with Bill C-37 either, so it is not a question of my supporting one and not supporting another. But are we doing the right thing by providing this new special rate of 33lA per cent for a particular category while excluding others from similar benefits? Are we paying sufficient attention to the position, for example, of wage earners?
In his own press release the Minister of Finance states on page two, in paragraph three, that such corporations which

retain earnings in the business will still enjoy tax deferrals since the rate of 331A per cent is lower than the personal income tax rate on taxable incomes in excess of $15,000 gross. So here we are proposing in the case of, say, two professionals that in one instance a taxpayer will be paying tax on income in excess of $15,000 at a rate which the incorporated professional will not pay until his income reaches $150,000. This does not strike me as being a just situation from the point of view of wage earners. This leads to an underlying problem which I raised the other day with regard to the very tax rates themselves. Something has to be done.
I say, further: why single out these professionals? There is in this House a fairly representative group of the professionals we are talking about. We even have a well known chiropractor on this side of the House. I happen to be a lawyer. What distinguishes these gentlemen, say, from an engineer or an architect in terms of the proposal which is being advanced? In other words, why does one kind of professional income become entitled to an advantage which other kinds of professional incomes do not enjoy?
Turning to another consideration, we have to ask ourselves: what is the tax cost likely to be? Has the Department of Finance calculated what the tax deferment would be if every professional in this country, every professional who is listed, were to incorporate? The list covers accountants, dentists, lawyers, medical doctors, veterinarians and chiropractors. Let us assume that if this law is adopted a great deal of pressure will be placed upon professional organizations in each province to permit the incorporation of professionals for tax purposes, because given current rates of inflation tax deferrals become very significant. Tax deferred for 10 or 20 years is, in fact, tax not paid.
It can be said that in the long run the tax would be the same. The hon. gentleman said it was neutral. It is neutral if the dividends are declared or the salaries are paid out, but I submit this would not happen because these vehicles would become holding companies for all these professionals. Would the tax cost run into the millions? Or billions? I imagine it would be very substantial.
Getting back to the principle of tax neutrality, is it right for us to create a situation where provincial law will determine what the federal tax rate would be? In my own province, Quebec, lawyers cannot incorporate, accountants cannot incorporate, engineers have techniques for incorporation effectively, but professional societies, as hon. members know, have long resisted incorporation in certain jurisdictions because of the so-called client-professional relationship. It bothers me that we could have a professional in one part of the country with an income identical to that of a similar professional in another province, yet one would enjoy a substantial tax advantage over the other because one professional might be able to incorporate while the other could not. That is one departure from tax neutrality. The second departure is that we have singled out specific professions for preferential treatment.
Now let us consider the position of the ordinary wage earner. Why should he not obtain some sort of deferral? Why
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should he be subjected to full tax on his income in excess of $15,000 while other salary earners, other professionals, have this opportunity for substantial benefit through deferral? All this leads me to suggest that the approach being taken to corporations and the use of incorporations in this area is unduly complicating our tax structure and must inevitably lead to situations which are completely unjustified in terms of tax neutrality, a principle with which I am sure we all agree. We may disagree about rates. The hon. member for Broadview-Greenwood, for example, might like to see us all employed by the state or he might like to see rates of 75 per cent or 80 per cent. But 1 know we would agree on one thing at least: everyone in the same circumstances should be paying the same amount of tax. The hon. gentleman is asking us to approve a provision which would make this objective more and more difficult to achieve.


Mr. Brisco:: Mr. Chairman, there are a couple of questions 1 should like to raise on this clause. I must say I found the comments of the hon. member for Saint-Henri-Westmount interesting and informative. The background he enjoys brings to this House an expertise to which 1 think we should pay attention.
There are two matters about which 1 would like to speak, although it was my original intention to address myself to just one. In light of the fact that the particular profession to which I enjoy the privilege of association has been mentioned on numerous occasions today, there are a couple of matters within the ambit of that profession which 1 would like to set straight on the record. I am speaking of my own profession as a chiropractor.
I would like to say that I have been in practice for 25 years.
I have served for two years as the president of the British Columbia Chiropractic Association. I spent nine years on its board, served as a vice president of the Canadian Chiropractic Association and some years on its board, and for some years as a director of the Canadian Memorial Chiropractic College.
Having said that and having indicated my dedication to my profession and to the welfare of Canadians, I would like to point out that in the interval, as a member of Parliament- because 1 was elected as a member, 1 resigned as an officer of the profession to avoid any semblance of conflict of interest-I have no hesitation as a parliamentarian, with a background in that profession, in speaking out at this moment. Because with reference to this bill and to this clause, 1 have received submissions from lawyers, accountants and dentists in my community and, of course, my constituency. I have received submissions from medical doctors, but I have not received any from any chiropractors. Nor, to my knowledge, has there been any organized effort by my profession on a national or provincial level to seek any special or favoured treatment in terms of this bill.
Unlike any of the other recognized healing professions in Canada, the chiropractic profession receives not one dime of federal or provincial tax revenue for any programs. It receives absolutely nothing. It has made requests but been rejected.
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The only area in which there is income accruing from the federal and provincial treasuries is medicare, through insurance programs and through compensation boards. That applies from the province of Prince Edward Island-the maritime provinces with the exception of Newfoundland-right through to British Columbia. We have applied to the Medical Research Foundation for grants for research, and those grants have not been forthcoming.
So what has the profession done? It has raised its own money. It has done so itself to conduct its own research. There is a facility in Toronto which is second to none in the world in terms of educational standards and the quality and calibre of its lecturers. Doctors from Sunnybrook Hospital, lecturers from the University of Toronto and others teach at the CMCC. The profession pays the bills. We pay them to teach our students. Our graduates support that college, and it was only a few months ago that we finally burned the mortgage on that building. That plant is worth some $2 million, and it was paid for by less than 2,000 chiropractors across this nation. So I speak with a degree of pride when I say that we have not come to the public trough except for research, and in that regard we have been denied.
I also want to reiterate the fact that we have not asked for any special privileges whatsoever in terms of this bill.
Having set the record straight on that, there is another matter which 1 find unfortunate. In dealing with the income of corporations for the year under "non-qualifying business , I see listed "prospecting". I see nothing which provides an opportunity for any kind of windfall for the prospector, who is an independent soul. In my mind there are two people with whom I am acquainted who are in the category of a free spirit. One is the trapper and the other is the prospector. I cannot imagine any other occupation in which the individual concerned is more isolated from human contact than those two. Hardships are tougher for them than for anyone else in North America.
The trapper, particularly in the winter months, and the prospector, especially during the summer months, put up with a great deal. Sometimes they are flown in by a company. Sometimes prospectors are paid by a company to prospect in a particular area, but sometimes they have to pay the shot themselves. They are flown to a location and they put on their backpacks. They have their supplies with them and they are in the wilderness for weeks. Wilderness can be pretty tough whether it is in northern Quebec, northern Ontario or anywhere in the mountains of British Columbia. The record shows that most often it is just once in a lifetime that a prospector strikes it rich and makes a windfall discovery. When prospectors do that, those gnarled, hardworking creatures of nature get shafted by the federal government in terms of taxation.
I know a prospector in Nelson right now who is in his seventies. He gets his old age pension; big deal! He is blind in one eye. He walks with a very pronounced limp because one of his legs was shattered as a result of a dynamite explosion in some rock work. He has emphysema because he breathed mine dust in the old days when he was a miner working in areas of

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high silica concentration. This prospector has problems breathing. He has a bad heart and, of course, with his heart and his lungs being in rough shape, this does not make life any easier for him. However, he found his once-in-a-lifetime windfall, and what did the government do?


An hon. Member:: Not this one.


Robert Hylton Brisco: I refer to hon. members opposite when they formed the government. I am not kidding hon. members; this is all on file in my office, if they want to see the records. They taxed this prospector's windfall away. There was not a tear from the then minister. He could not have cared less about the condition this poor old gentleman was in.
Hon. members opposite do not know anything about human factors. They never take them into consideration. They say, "It is here in the book, and that is what we will go by". That is the problem with any big government. There is a total absence of any recognition of any human factor beyond what is in the book. I pray to God that this government will show some sensitivity in these areas.
I can think of all kinds of other examples, and I am sure other hon. members can too. I think of a person with multiple sclerosis three weeks away from qualifying under the Canada Pension Plan. She is to the point where her MS no longer allows her to do any work. It was to hon. members opposite who formed the government that I appealed on four separate occasions. I must ask, will this government recognize the fact that it should be doing something for this woman-after all, she did make her contributions-even though she was only three weeks' short of qualifying, instead of having her on the bread line? I do not think that is really what governments intend in the legislation they draft.
Let me conclude by saying that I feel it is incumbent upon the parliamentary secretary to consider that a prospector who provides opportunities for the mining community to operate in the fashion it operates should be allowed a once-in-a-lifetime windfall profit, because, if not, the next thing we know there will not be any more of these free spirits. If you look at the record and at the statistics, Mr. Chairman, you will find it is not the mining companies which find the gold, the silver, the lead, the zinc, the molybdenum. It is the hard-bitten character who may have a grizzly bear or a black bear out there breathing down his neck when he bends down to check a rock. He is the one who makes the majority of discoveries for mining companies. He is the one guy in the whole industry who has been totally ignored, and it is time he got his fair share.


Some hon. Members:: Hear, hear!


Mr. Haliburton:: Mr. Chairman, my interjection in this debate will, I assure hon. members, be very brief, but I was inspired, shall I say, to speak by what the hon. member for Spadina said this afternoon. I think there are a couple of points that should be made in order to set the record straight. Having listened to that hon. member, I can understand, if his

philosophy is that of the former government's, why the country fell into the economic mess in which indeed it did.
There is no suggestion in this legislation, I submit, that any taxpayer in Canada is going to have a tax free income, at least not if he uses it for his own personal benefit. Under the clause we are discussing there is no such thing as a tax free income in any case. The essence of it is that one of those companies that are incorporated for convenience, as has been suggested, or for the more efficient operation of a professional business, can attract for the chief shareholder a tax which is less than he would have to pay if he were receiving that money as an individual and putting it into his pocket in a form in which he could go out next day and buy a new car or take a holiday or spend it on various consumer products.
The effect of the changes that have been proposed in this clause, as I understand them, is that it would encourage Canadians who earn money to use it as an investment fund. Surely that is what the kind of economy we have, is all about. Unfortunately, the people who have their tax deducted at source are not the entrepreneurs in this country, and it is, after all, entrepreneurs who create jobs and who make work.
What this change in the tax law will permit is that a person who had an income which is larger than he may need to use in that particular year for his own personal comfort may delay paying income tax on that income for some time so that he can use it for other purposes. He may not want to invest his money in a pension fund, which may well have international investments; he may not want to invest his money in exploration; he may prefer to invest his money in his own community, in a local shop, a local enterprise, or a fish processing plant, as he might want to do in my riding, or a fishing vessel.
These provisions establishing this classification within the Income Tax Act will permit the high income doctor, the dentist or the lawyer, to establish such a company and to use that money before paying tax on it to encourage industry and enterprise in his own community. Clearly it gives recognition to the fact that some of these professional people have a shorter earning lifetime than a great many other people in our society. This provision gives them an opportunity to spread their tax. Certainly there is no suggestion, and no wish on my part as one of the members supporting this legislation, that it should provide a free ride for anybody or that it should permit them to permanently avoid paying tax. It would give them an opportunity to spread the tax. It would inspire them to generate jobs and provide opportunities in their communities. That is what I want to see and I would be happy if we would get on with it.


Donald James Johnston: Mr. Chairman, I have a question for the hon. member.


Gérald Laniel: Would the hon. member for South West Nova accept a question from the hon. member for Saint-Henri-Westmount?


Charles E. Haliburton: Yes, Mr. Chairman.
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Donald James Johnston: Mr. Chairman, some of the sentiments the hon. member has expressed are, I think, very desirable, but my question is this: What distinction does he make between a lawyer and an accountant, for example, who is entitled to incorporate his practice and therefore benefit from this substantial deferment, as opposed to an employed lawyer or accountant in the same income range who is not entitled to it and must pay his tax immediately, and therefore does not have the advantage of being able to invest in a shop, a fishing trawler, or what have you, but must immediately turn over his savings, to the revenue authorities? What justification does the hon. member see for that distinction between an employed professional and an independent professional?


Charles E. Haliburton: The hon. member raises a very difficult question. The only real differential, or substantial differential, that I could cite would be that the self-employed individual is, in fact, an entrepreneur. He is the guy who, in a great many cases, I suspect, is operating in rural areas in this country as opposed to metropolitan areas. He is employing people, purchasing office equipment or setting up a practice on his own and taking, perhaps, all the risks that are normally attributed to an entrepreneur, whereas the employed professional is not doing that. However, I would assume under this legislation that when the employed professional becomes a partner in a professional association which is employing him, he would no doubt be able to take advantage of the same provisions.


Donald James Johnston: Mr. Chairman, 1 have another question for the hon. member.


Gérald Laniel: I find it difficult to allow the hon. member to put another question, it would be unfair to other members. The hon. member for Saint-Henri-Westmount will have a chance to come back with questions later.


Mr. Fulton:: Mr. Chairman, 1 have listened with some interest in the last hour or so to comments coming from both sides of the House, particularly to the anecdotes of the hon. member for Kootenay West about prospectors and the difficulties they have. I come from a riding where, as I mulled over in my mind all the different communities, 1 realized there are a number of communities which do not have a doctor, a dentist, a chiropractor or an accountant, communities like Atlin or Port Simpson and other places along the coast. While everyone was talking about people with incomes of $30,000, $40,000, $50,000 or $100,000 a year, we have areas in this country where, in some communities, there is unemployment of 30 per cent or more, and in some cases up to 50 per cent. We have heard talk about communities where part of the taxation base of this country is being set aside in order to make the lives of the well to do somewhat more plush.
When we talk about these individuals and professional groups, we should realize the fact that they are not really creators of capital. What in fact they do is either get capital from the state or get it from individuals within the community, and they get a substantial slice of capital in the communities in which they operate. 1 do not claim that a lot of them do not
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put that money to use within that community, but I think a great deal of that capital is used for investment in order to create more capital for them as individuals, capital which does not go directly to the community.
In looking at the bill in relation to small business, the government in the past six months has given a substantial slap in the face to small business in this country with the ever-increasing interest rates. To date all we have had is a preliminary statement from the hon. member for Capilano, who has said there will be some increase in capital through the Federal Development Business Bank.
The problems created in this country by capital being taken out of the economy and put in the hands of a limited number of individuals who do not put it into small businesses which employ people over a period of time are very extensive. They are problems to which the government does not put its mind. This brings me to the core of my point, that in looking at this very small group we must necessarily take into account other skilled groups. I know the hon. member for Kootenay West indicated that the chiropractors of this country have not lobbied actively to be included in this special taxation, but we must look at it from the point of view of the government dealing with this issue. They have been chosen, for one reason or another, as a lobby group above and beyond steelworkers, paperworkers or fishermen. A lot of individuals who work in our economy certainly deserve some tax break. They carry the real burdens, for example, of the House of Commons and everything else in the country. An ever increasing burden is being placed upon those individuals.
The amount of capital at year end which professional individuals are allowed to retain already is very high. Doctors, dentists and accountants are highly advantaged individuals. What do they do with their capital? What advantages do these individuals have in the community? Generally they own their own homes because they have had enough capital coming in over the years to do so. They are well educated. They are capable of putting their children through university. At a time when there are many unemployed, disadvantaged, handicapped and people living on fixed incomes, why should the government continue to push for the very select high income groups, be they oil company executives, doctors or anything else? The answer is fairly obvious. The government has chosen a specific lobby group for some reason or other. Perhaps there is a likely prospect that they will gain voters or some other thing.
The small business question has not been addressed by this bill in any way. Why is there no attempt to deal actively with interest rates which now affect the cash flow of small businesses and their ability to carry ongoing stock or expand in any way? Yet capital is being given directly into the hands of individuals who will not turn it over into the economy with a domino effect. Making more capital available to entrepreneurs in the forest and mining industries perhaps would be more appropriate if there was a direct tag on it relating to job creation or some affirmative process.

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During the same period of time we are looking at recent cuts in the unemployment insurance program. In my riding individuals involved in fish processing had very limited work opportunity this year. Many of them did not work long enough to be eligible for unemployment insurance. The government seems to sit idly by as if someone who earned $3,000 can make it through the rest of the year, and hands out 10 per cent or 15 per cent to people in the $30,000 to $100,000 bracket. Certainly this is a matter the public should take into account the next time they go to the polls.
1 have one question for the parliamentary secretary. Exactly how many individuals are eligible under this program? The previous speaker wanted to know how much capital was involved, but I should like to know how many individuals are affected by this? 1 am sure that information is readily available.


Mr. McRae:: Mr. Chairman, my remarks will be very short. 1 have just come from a committee meeting where the estimates of the Department of Finance were being discussed. There was no one present at the meeting to give us direction in terms of policy on this matter. I am sitting in the House now and I see that the Parliamentary Secretary to the Minister of Finance is alone. This is no reflection on him as I am sure he is very able, perhaps a good deal more able than the minister, but the minister is not in town when we are considering this very important tax bill, Bill C-17. As a matter of fact, I saw notice of a speech which the Minister of Finance was to release at 1.00 p.m. eastern standard time on November 1, 1979 to the Empire Club of Toronto. When we are in the middle of such an important debate, and the estimates of this particular department are before committee, surely the minister and the parliamentary secretary should be here. The choice should not be between this Parliament-the House of Commons and its committees-and the Empire Club. The choice should be very, very clear: the minister should be here.


Some hon. Members:: Hear, hear!


Ronald Stuart (Ron) Ritchie: Mr. Chairman, earlier this afternoon the hon. member for Cape Breton Highlands-Canso raised the question of the presence or non-presence of the minister in the House for the proceedings of the Committee of the Whole. He received an answer in part from the House leader. If 1 had been provided with an opportunity, my first comments this afternoon would at least have given partial reassurance to the hon. member in that the minister intends, if transportation facilities work effectively, to be here at eight o'clock tonight. It is unfortunate that 1 have to make such a comment so late in the day. I give the hon. member for Thunder Bay-Atikokan that assurance.
A great many questions have been raised to which I should like to respond as fully as 1 can. I should like to begin by dealing with some of the questions of principle and broad dimension raised by the hon. member for Broadview-Green-wood and the hon. member for Spadina. I should like to follow those remarks by responding to specific questions raised by the hon. member for Dauphin, the hon. member for Jonquiere and

the hon. member for Saint-Henri-Westmount, and if 1 can, the hon. member for Skcena. 1 am not sure I will have a number of answers available for the hon. member.
A great many of the comments 1 have heard this afternoon seem to be based upon serious misconceptions, not only regarding what existed but what is proposed by this clause in the bill. Let me review the situation.
Up to the time of the proposals in Bill C-32 of the last session of the last Parliament, the people being dealt with in this bill had the advantage of a small business or Canadian privately controlled corporation tax provision. It was a matter of deliberate policy of the preceding government which was supported on all sides, or at least by most of the members of the preceding House, and perhaps present members. It gave and gives a tax advantage to such corporations, a deliberate tax advantage. The persons who drew that legislation in the first place did not intend that it should apply to the particular persons with whom this present clause deals. Therefore, this present clause does not give an advantage; it takes an advantage away, one which perhaps was given inadvertently.
The proposal in the budget of last November was that particular taxpayers, people providing personal services, if incorporated, could revert to the standard position of a public corporation. In other words, they would be subject to tax approaching 50 per cent depending on the province in which they were resident. This proposal is a modification of that in two ways. It adds two professions, chiropractors and veterinarians, to the list of non-qualifying businesses. It attempts not to make incorporation prohibitive but to make it a neutral act. There are sound reasons for not making corporations prohibitive.
May 1 call it five o'clock, Mr. Chairman?


Gérald Laniel: I am sorry to interrupt the hon. parliamentary secretary but, it being five o'clock p.m., it is my duty to rise, report progress and request leave to consider the bill again later this day.
Progress reported.



PROCEEDINGS ON ADJOURNMENT MOTION


The Acting Speaker (Mr. Scott, Victoria-Haliburton):: Order, please. 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 Outremont (Mr. Lalonde)-Energy-Oil prices-Request government abandon plans for further increases; the hon. member for Ottawa-Vanier (Mr. Gauthier)-National
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Unity-Quebec referendum-Inquiry whether public servants will have free vote; the hon. member for Skeena (Mr. Fulton)-Energy-Tanker transportation of crude oil on west coast.
It being five o'clock p.m., the House will now proceed to the consideration of private members' business as listed on today's order paper, namely, private bills, notices of motions public bills. There being no items on the order paper under the heading of private bills the House will proceed to notices of motions (papers).


PRIVATE MEMBERS' MOTIONS FOR PAPERS
Mr. Hal Herbert (Vaudreuil) moved:: That an order of the House do issue for a copy of the latest report on the feasibility of establishing a Crown corporation or other body to carry out forestry research.
He said: Mr. Speaker, perhaps I should start my remarks by explaining my interest in the subject. One or two people have asked me why I put such a motion on the order paper. It relates, of course, to the presence in my constituency of Macdonald College, which is the agricultural college of McGill University. In that college there is an active forestry division. Having explained that, let me speak to the subject.
I requested the production of documents following remarks made in the Standing Committee on Fisheries and Forestry on February 22 of this year by the then minister of the environment, Mr. Marchand, who was discussing the Forestry Development and Research Act and emphasizing the need for a national forestry policy. He stated that a "study will be completed and presented to the Canadian Council of Resource Environment Ministers in June", which was June of this year. He then went on to say that changes will be made as necessary and that the previous government was working toward a national forestry policy.
From the remarks of the opposition representative at that time, the hon. member for Richmond-South Delta (Mr. Siddon), now in the government benches, the impression was left that he was interested from a national point of view. He stated soon after the remarks of the minister that this was a significant federal concern.
Having said that, Mr. Speaker, 1 should like to say a few introductory words about the forest industry in Canada. A monthly letter of the Royal Bank of Canada came to my attention just today, as a matter of fact it was in the mail, the heading of which is quite appropriate. Under the heading of "The Forest and the Trees" it states:
Forestry Research
Canada's forest is by far its greatest source of national wealth. But we have been using it up faster than it can grow back into good shape.
Certainly the Canadian forest products industry has grown into Canada's largest industry by far. Its total shipments are now in the order of $13 billion a year. Mills producing pulp, paper, veneer, plywood, box boards and other wood-based products have proliferated across the country. All Canadians have a share in this industry since over 90 per cent of our forests are owned either by the federal or various provincial governments. This can be estimated as something in the order of more than 20 acres of productive forest land for every man, woman and child. Some 800 million acres are classified in Canada as productive forests.
Though there are many square miles of forest, much are too far north to be economically usable. Though there are also numerous stretches of forest in the south, they are in hopelessly substandard shape. There is some desire expressed, often enough by the Canadian Forestry Association, to improve the situation. The association has stated:
Inadequate attention to forest regeneration is responsible for restricting expansion possibilities in some regions, has reduced unemployment in others, and will result in a continuing decline in future forest-based jobs and revenues.
Our forest industry in Canada employs some 300,000 persons directly, and probably more than twice that number in associated work. The salaries of those 300,000 directly employed exceed some $4 billion per year. While Canada's share of the world's export market has been falling and is now less than 20 per cent, forest products still count for well over $8 billion per annum of our export market; in fact, far more than fishing, agriculture, mining and fuels. About two million acres of forest land are cut in Canada every year, but not a single province is able to claim an adequate regeneration of these areas that have been cut, plus those areas being lost to natural disasters. In fact, the backlog of forest regeneration attributable to all causes such as harvest, natural catastrophe and human activity is now in excess of 60 million acres.
Mr. F. L. C. Reed, one of the nation's leading forestry consultants, stated in a recent report for the Canadian Pulp and Paper Association:
A more intensive program of forest management is imperative if market opportunities are to be realized and emerging timber deficits offset.
Certainly every province has its tree nurseries and its reforestation programs. Canada ranks high among the nations of the world in forestry research. The problem is not one of the lack of technology or good intentions, it is simply that not enough is being done. It will take a deliberate commitment on the part of government, industry and, indeed, the public at large to ensure that our forests meet our future needs. One in ten Canadian workers directly or indirectly owes his livelihood to the forestry industry.
This is why 1 asked for these documents, and I have been told that they do not exist. I state simply that it is unfortunate the present government has not seen fit either to pursue the direction of the former government in trying to establish a national forestry policy, or to indicate its willingness through forestry research to at least assist in stimulating the provinces

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to ensure that there is adequate regeneration of our forestry industry.
I am well aware that the attitude of the present government is to give more power to the provinces. We have seen what has happened. Not one province is maintaining its position. The situation calls for some leadership at the federal level, and this is the reason I expressed my desire to see these documents. At this point I can only express my disappointment over the government's statement that such documents do not exist.


Mr. Joe Reid (Parliamentary Secretary to Postmaster General and Minister of the Environment):: Mr. Speaker, the hon. member for Vaudreuil (Mr. Herbert) has moved for the production of papers on the privatization of the forestry research industry in Canada or, at least, the feasibility of a study with respect to the incorporation of forestry research under the purview of a Crown corporation. It was earlier thought that the hon. member was referring to studies that were conducted late last year with respect to the privatization of forest products research. However, this afternoon the hon. member has specifically mentioned a report which was concluded in 1979. The minister has stated categorically that he was not aware-nor am I aware, and it is our information that the department is not aware-of such a study being available at this time.
I do not have to elaborate on the privatization of the two laboratories because they were discussed at some length in this House last year. A new corporation was formed to assume the financial management responsibilities for the programs of forest product laboratories. The now non-profit corporation called Forintek, although it is experiencing some of the difficulties inherent in a change such as this, is proving successful in fulfilling its mandate to carry out the forest products research.
As 1 said before, forestry research is much more than research involved in making better forest products. It is much broader and far more complicated. It deals with how trees become established, grow and die. It deals with where they grow, what kills them and even the influence these trees have on the entire ecosystem. This research is undertaken by the federal government, some provincial governments, universities and the private sector. The Canadian forestry service, which is the federal research arm, has research establishments across the country and acts in close concert with the other interested bodies in the forestry sector.
Canada is known the world over as a forest nation. In fact, more than two thirds of our land areas is covered with trees and 84 per cent of the country is forest or wild land. As the hon. member has stated, some 300,000 people are directly employed in our forest industries. Another 700,000 are employed in secondary manufacturing and service industries which also depend on the forests. This adds up to a million people, or 11 per cent of our labour force. Everyone knows that forest products are among our most important exports. In fact, they account for almost 20 per cent of our total export trade.
[Mr. Herbert.)
Last year, the net contribution of the forest industries to Canada's balance of payments was $8.4 billion, $1 billion more than the combined contribution of fisheries, agriculture, mining and fuels.
For a country like Canada which depends so heavily on its export trade, this is a vital contribution to economic survival. And today, especially when we are all so concerned with Canada s economic health, we simply do not dare ignore the importance of our forests. Within 20 years forests will provide not only the traditional lumber, pulp and paper products but a multitude of sophisticated chemicals and up to 8 per cent of Canada s primary energy demand. Conservative estimates suggest that by the year 2000, direct employment in the forest industries will increase by 100,000 people or 25 per cent, the value of wood exports will double, while the total value added in 1978 dollars will rise from $9 billion to $18.7 billion.
The importance of our forests goes far beyond trade balances, or employment and production figures. It goes beyond anything we can measure so conveniently, for besides providing raw material for industry, our forests provide us with many other benefits. For example, they protect our watersheds from erosion. They stabilize stream flow and act as reservoirs for water from snow and rain, thereby reducing the hazards of flooding and drought. They also provide the basic backdrop to a related $3 billion outdoor recreation industry.
In the boreal forest region, which comprises so much of Canada's forest resource, growth rates of natural stands average little more than 21 cubic feet per acre per year. In the more productive coniferous forests of the west coast, growth rates of 80 to 90 cubic feet per acre per year occur. These growth rates, remember, are for natural unmanaged stands. Given simple management these rates could be doubled, and if intensive management is practised in the more productive areas, they could be tripled.
Impressive though these facts may be, the state of the nation's forests is not good. Although Canada is cutting only about 75 per cent of its annual allowable cut, much less than half of the apparent reserve timber is economically accessible. British Columbia has half of Canada's volume of standing timber, but even there the installed capacity of the coastal forest industry could more than utilize its present allowable cut. Most of the reserve timber on the north coast is currently inoperable and similar situations exist in various parts of the interior.
The prairie provinces have a surplus of wood, but much of it is too remote. In Ontario, the productive forest available for wood production has dropped by reason of other demands from 105 to 65 million acres during the past 10 to 15 years. Shortages will occur in the Thunder Bay region and the province will have difficulty in reaching the relatively modest target of nine million cunits annually on its 56 million acres of Crown forest land by the year 2020. Quebec has a theoretical surplus of wood, but much of it is in remote areas where harvesting costs are high. Many local shortages are occurring, especially for sawlogs. In general we are not making the best use of the inherent productivity of Canada's forest resource
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base. Nova Scotia and New Brunswick are actually experiencing deficits in softwood supply. The existing industry in New Brunswick could utilize 25 per cent more wood than can be produced on a sustained yield basis under existing standards of management.
How did we get ourselves into this mess? It is difficult to point the finger of blame at anyone. When North America was first settled, timber was regarded as a stock of wealth to be exploited and transformed into useful and saleable products. It was viewed no differently than were deposits of metals, minerals, coal and oil. Indeed, like these resources, much of the virgin timber was put there by nature over a period of centuries.
Had man been involved in the growing of forests, he would have put a different value on those trees. Society and the industry itself have long thought that, unlike minerals and fossil fuels, the forest resource is renewable. So it is, but there are many degrees of renewability. Left to herself, nature will renew forest crops, but in her own time, with her own choice of species and at her own rate of stocking. That could only be established by nature. If man is not satisfied with this arrangement, he can spend time and money to grow timber crops more to his liking, but these crops are no longer cost-free.
Until recently in Canada we limited our investment in timber crops to paying for protection. The situation facing us now is similar to that which gave rise to agriculture. Nomadic peoples depended on nature to provide game for them and forage for their animals. Such a way of life provided a livelihood for a small population that was forced to harvest nature's bounty over a large area. 'Agricultural practice showed that crops could be grown and harvested at less cost than wild crops could be harvested alone. With hindsight, we could demonstrate that growing and harvesting timberland close to the mills would frequently have been cheaper than harvesting more distant, variable and scattered natural stands of timber.
In the long run, the only answer is more effective forest protection and reforestation, combined with silvicultural treatments to increase the growth rate of the existing forests. More intensive management could double the yield of much of our forest land.
In 1977, spending from all sources was less than $60 million for reforesting and tending our forests. This year it will be some $200 million. Even this amounts to only half what the Canadian Council of Resource and Environment Ministers- CCREM-estimates is needed.
The Canadian Council of Resource and Environment Ministers has been studying forest policy for several years. Last June at Kelowna, ministers reached a broad measure of agreement on a general forest policy statement. This included eleven policy principles, among which are: first, pre-eminent provincial jurisdiction over its own forest land; second, the need for compatible federal and provincial policies affecting the resource industry; third, stability of rural employment and
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communities; fourth, maintenance of the productivity of forest land; fifth, multiple use management of forest land; sixth, environmental protection; and seventh, priority for research.
These may sound like motherhood statements, but they are much more than we have ever had before. The ministers have agreed to meet again in Toronto in January to see what concrete measures we can take to implement the recommendations.
What is largely unappreciated, Mr. Speaker, perhaps because confrontation and conflict get most of the headlines, is the major role that co-operation between government agencies at different levels has long played in the management of our forests. Under the terms of confederation, the provinces own almost all the forest land within their boundaries and are therefore responsible for management of 90 per cent of Canada's productive forest. Nevertheless, the federal government is heavily involved in many policies and activities critical to their wise management. These include monetary policy, regional development, industrial efficiency, research and development, tariffs and trade, transportation and so on.
Progress in achieving greater understanding of the complexities of forest ecology so that improved ways can be found for making the forests more productive and their management more efficient depends on co-operation between the scientists and foresters studying these problems. There are some outstanding examples.
Consider that notorious pest, the spruce budworm. Since 1909 this insect has killed nearly 300 million cunits of timber in eastern Canada and has caused loss in the growth of trees that survived their attacks. The current epidemic covers roughly 150 million acres of spruce fir forest in eastern North America and extends from western Ontario to the Atlantic provinces.
This very serious problem demands a combined effort to solve. In fact, an international effort is required because of an agreement signed in August, 1977, to develop a joint Canada-United States spruce budworm research and development program. The main aim of this co-operation is to find better ways of controlling this major forest pest common to both countries.
The two countries are concentrating their efforts on improvements in such areas as monitoring budworm population levels and the development of better, more environmentally acceptable control techniques. Activities under the agreement include joint publication of results, exchanges of scientists and other specialists in the industry, exchange of biological material and equipment, and the establishment of joint ventures such as data and information pools.
The spruce budworm has been around for a long time. It is native to Canada. There have been at least seven major outbreaks in eastern Canada in the past 200 years, each covering millions of acres. The seriousness of this natural harvest, if one can call letting the budworm eat millions of trees a "natural harvest", has become much more grave in present times. The budworm is now competing with man for trees, trees, I might add, which we need for maintaining the

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economic life of Canada. Even if the budworm does not kill all the trees in a stand, its destructive force greatly increases the cost of using the remaining trees. We simply cannot afford to sit back and let the budworm eat itself out of house, home and trees and then slowly starve to death.
The main control method that has been used since 1952 to contain the budworm has been to spray the infected forests with chemical insecticides. The limitations of this technique are recognized and I would like to say something later about progress in biological controls. But just consider for a moment the economics of this situation.
In New Brunswick the protection program up to 1976 cost about $95 million. But this protection has allowed for a doubling of the forest industry's capacity; it increased the value of shipments by $4.7 billion and added value by $2.7 billion, wages by $889 million. Those are impressive benefits for a small province and the forests of New Brunswick, although not as healthy as all would like to see, are likely to stay green and alive.
It is clear, then, that a serious threat such as the budworm to the forest resource is a potential threat to the economy of this country.
Public reaction to the spraying program has been prominent at all times. Annual spraying of 10 to 20 million acres in eastern North America will probably be necessary during the next few years. However, please remember that the decision to spray or not spray is a provincial decision based on the best facts available. It is interesting to note that forest spray technology has improved tremendously in the last decades. Smaller and smaller dosages are being applied more effectively. Even the small dosages of insecticides of around three ounces per acre represent a total application of 2,000 tons of highly toxic biocide for a 20 million acre spray area. Doubts about hidden environmental effects are bound to trouble many people.
After several years of annual use of insecticides on a large scale, there has been no measured loss of other resources, nor any acceptable reduction in environmental integrity. The problem is still that large scale long-term spraying may have a small influence that could eventually compound into larger environmental results.
In a policy statement last year, the minister said that although some infested areas may require special pest control practices, it is known that pesticides may have long-term effects on other resources in the environment. Therefore, it is federal policy to minimize the use of spraying and actively support research into alternative control strategies, including biological control.
One could go on, Mr. Speaker, and cite other examples which demonstrate that the complexities of modern forest management demand close co-operation between government agencies and industry.


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


Maurice James Harquail: Mr. Speaker, I thank the hon. member for Vaudreuil (Mr. Herbert) for bringing forward this motion this afternoon on the production of papers relating to the forest industry. I appreciate this very much. Not only is it timely, but it gives me an opportunity to underline in the House the importance of the forest industry to the economy and Canadians generally.
During this afternoon's question period, I had a question for the Minister of Industry, Trade and Commerce (Mr. de Cotret). Of course, he does not have the privilege of responding to questions in the House because he is in the other place. Therefore, I asked the Minister of State for International Trade (Mr. Wilson) about the government's position on the importance of planning and the future of the forest industry in Canada. I learned he had nothing to say about this important industry. He responded that he would take it as notice, that he would find out something about the forest industry in Canada and get back to the House. I find it rather strange for a member of the cabinet not to be able to answer on the importance of the forest industry on funds for expansion, and the construction of new pulp and paper mills in Canada. Hon. members will agree on the importance of this subject to Canadians. This is borne out by the fact that over one quarter of our exports is related directly or indirectly to wood products.
As I say, I am pleased the hon. member has brought forward this motion for the production of papers this afternoon. I represent a constituency in New Brunswick. Seventy-five per cent of that province is inundated with forest products.
I think I am making my case as to the importance to my area, the Atlantic region, and indeed to all of Canada of this most important subject.
The government did not consider this matter in its deliberations when preparing the throne speech. There is no mention of or reference to the government's position regarding plans for research and development of the resource industry, its position on exports, or its disposition on financing to assist the pulp and paper industry. The Prime Minister (Mr. Clark) and his advisers will want to look seriously at putting this all important subject under the purview of a specific minister in the cabinet who will answer to this House and ensure that this important industry is protected in the manner it should be. There was no reference to this in the Speech from the Throne.
The Minister of Industry, Trade and Commerce is nowhere near this House. We cannot pose questions to him or receive responses as we should. This minister ran in the last election, and was defeated. He now sits as a Senator and controls this all-important portfolio. Apparently he is the chief adviser to the government on economic development in this country, with specific reference to industry, trade and commerce, which is all encompassing. This brings me to the topic we are discussing today, the forest industry.
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I thought the Minister of State for International Trade would have taken this subject to heart, concerned himself, and been briefed. I thought he would have discussed this with his colleague in the other place, the Minister of Industry, Trade and Commerce. He could have at least apprised himself of the status of this important subject.
1 have already made the case as to the importance of this. 1 do not think much has to be said. It speaks for itself. It involves the economy, employment, and is of importance to Canadians in the process of development of this rich natural resource. What do we have from the government which whiles away its time talking about the past,-what this minister did, what that minister did, and what that minister did not do? We all know that leading up to May 22 they were telling Canadians they were ready and wanted to govern. However, since that time all we have heard is that it is the other fellows' fault, that they did it last year. When is this government going to take a serious look at accepting its responsibility to govern, if that is what it wants to do?
I come to the question before us today with regard to the forest industry in Canada. I make a plea to the Prime Minister and his cabinet colleagues to concern themselves seriously with the development of the forest industry in Canada. How can they justify their position and their operations on a day to day basis while totally ignoring the paper industry?
The hon. member for Davenport (Mr. Caccia) in his committee responsibilities is responsible for the environment. Naturally he is concerned with forestry as well. He debates and discusses with members of that committee what can be done to develop an over-all strategy for the future of the forestry industry in Canada. We will be hearing more from the hon. member for Davenport as he carries out his duties with respect to the environment. He will obviously be concerned with the protection of this all-important resource.
This leads me to the question of reforestation. In recent years many private corporations have taken the positive decision to accept their responsibility and direct funds to reforestation. For years we have been preaching that they cannot continue to rape our forests without giving some thought to the future and the replenishment of this resource.
In the region I represent there are many companies such as the Irving interests, Rosay Pulp and Paper, New Brunswick International Paper, CIP, Fraser companies and Bathurst Consolidated. They have taken this matter seriously in recent years. It is not only a question of discussion. They have put their money where their mouth is, and taken decisions to allot funds, millions of dollars for silva culture, nurseries, and the restoration of this important product.
I fail to understand how a government which has only recently come to office can continue to be as negligent as it is by not specifically identifying a minister as being responsible for this natural resource. I am not talking only about one region of the country. This concerns many regions from coast to coast. We all know the importance of the forest industry to
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British Columbia. We know its importance to Quebec and to the maritime provinces.
The government has talked about a merchant marine fleet, it has referred to a few other pale, weak topics in the document known as the Speech from the Throne. Why did ministers not avail themselves of the opportunity to say something about the forest industry, letting us know what their plans are, what their thinking is on this subject? But, no. They missed this glorious opportunity and now, to add insult to injury, we discover from personal experience that it is very hard to find ministers who are able to reply to our questions on this subject.
The Minister of Industry, Trade and Commerce (Mr. de Cotret) is not in this chamber to answer questions, and when we put questions to the Minister of State for International Trade (Mr. Wilson) we find he is not sure of the position-he has to look into the matter and find out. No one objected to giving members opposite a few months, a honeymoon period, in which they could find out how the system ticks, where their offices are located, and who is responsible for what. But here we are, on November 1, 1979, getting ready to go into the eighties with a minority government which has not yet been able to sort these things out. It is a serious situation, and a serious problem faces all Canadians because every Canadian is affected directly or indirectly by this industry.
I am taking this opportunity to go on record as making a plea to the government to consider this important topic and develop its strategy, and announce whatever plans they may be able to agree upon. I refer particularly to the minister responsible for the environment, the Minister of Finance (Mr. Cros-bie), the President of the Treasury Board (Mr. Stevens), the Minister of State for International Trade, the Minister of Employment and Immigration (Mr. Atkey), and the Minister of Labour (Mr. Alexander). All these ministers have responsibility, directly or indirectly, to Canadians who are affected by this industry whether they work in the forests, in the cutting operation, whether they are employed in the mills or whether they are affected as users or consumers of the finished product.
The government should remember, too, that it is not only the forest product we are talking about. We are talking about people. We say we want to act on the people's behalf and it is people we should primarily be concerned about. Why does the government not express some form of good faith by designating a minister who is to be responsible for forestry? It surprises me that the new government would not seize the opportunity to appoint a minister of state with full responsibility-


An hon. Member:: Why didn't you do it?


Maurice James Harquail: -for a ministry of forestry. Consider that a quarter of everything we export results from forestry. Consider the stagnation of the economy and the excuses the government makes for its failure to address the problems of the day. Its solution is to increase interest rates and reverse its position on the statements and promises which it made on television and in public forums.
They told the Canadian people why they wanted to govern this country, and what they wanted to do. Yet we find that
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within a short period of time it has all been forgotten. It is not a question of members opposite being tired. They are not able to cope with the situation. They are in trouble, and on behalf of my constituents, on behalf of all who live in New Brunswick and Atlantic Canada, and on behalf of all persons connected with the forest industry I express concern because of the urgency of the situation. There is no room for excuses by members of the government who all too often blame their own inaction on what the other fellow is supposed to have done. This attitude will not carry us very far. The situation of the country is serious when an administration runs out of steam so quickly.
If I have accomplished nothing else this afternoon I hope the Minister of the Environment (Mr. Fraser) will at least discuss this matter with his colleagues. They cannot escape coming to grips with this question. As I say, the Minister of Industry, Trade and Commerce is not able to answer in this House because he does not have a seat here. The Prime Minister might suggest to the Minister of State for International Trade that he get a little closer to this topic. I am flabbergasted that the hon. gentleman had nothing to say in reply to the forestry question which was put to him today.
We often hear criticism of different aspects of our procedure and of the limited opportunities given to private members to express themselves in this chamber. But this is one occasion on which I am convinced of the benefits of the private members' hour inasmuch as it afforded the hon. member for Vaudreuil an opportunity to introduce this motion for the production of papers, and has given me an opportunity to speak on the subject as well. This is the first occasion I have had to express my concern as forcefully as possible and to make a plea to the government to take its responsibilities seriously in this area. We shall be following ministers' actions closely to find out exactly what they intend to do. We are anxious to see whether or not there will indeed be meetings between the Minister of Industry, Trade and Commerce and the Minister of State for International Trade and his other colleagues who, I am convinced, have an interest in this field.
I am convinced the Minister of the Environment has an interest. He represents a riding in British Columbia. I would be surprised if he stood in his place and said it was not. I know he is sincere in his concern about forestry, and he has a direct responsibility, as he mentioned to me a few moments ago, as Minister of the Environment, with respect to the whole question of the protection of this important resource, its planning, development, sale and export. He is responsible for reforestation, protection of jobs, and the economy.
I am going to-


Mr. Friesen:: Sit down.


Maurice James Harquail: -suggest to the Minister of the Environment, his backbenchers and some of his colleagues from B.C., who have the audacity to laugh and joke about an important

subject such as the forestry industry, that this is not the way to run a government or a country.
Hon. members opposite are supporting a government which does nothing about the forestry industry. The government said nothing in the throne speech about the forestry industry. Hon. members opposite sit on their hands and laugh. I do not think that is the way to run a government at all. They have a lot to learn, and we are going to be watching. We have been very liberal about allowing them time, but six months is just about enough time in which to get on with the job or at least to be able to identify in this House who is answering for the government on forest development and on the forestry industry nationally and internationally, in terms of the over-all development of this important natural and rich resource.


Mr. Knowles:: Question! Let's have the vote.


Maurice James Harquail: Thank you, Mr. Speaker.


Mr. F. Oberle (Prince George-Peaee River):: Mr. Speaker, I could not begin to tell you how delighted I am with the initiative we have seen taken this afternoon by two of the four members of the official opposition who are in the House who expressed some concern over what is considered to be Canada's most vital and sustaining industry in terms of the economy. Of course we on this side were amused, particularly by the hon. member who has just taken his seat, but the forestry industry is not laughing about the critical situation it is in. We were laughing at the attitude of the two hon. members who have given us their credentials here this afternoon with respect to forests.
The hon. member for Restigouche (Mr. Harquail) contradicted himself three times. He wants a ministry of forestry immediately. Hon. members opposite are terribly impatient, and the House knows how impatient 1 and some of my colleagues have been over the last ten to 15 years with the performance of the former government. The hon. member wanted a ministry this afternoon. Then he said that all ministers, including the Minister of Industry, Trade and Commerce (Mr. de Cotret), the Minister of State for International Trade (Mr. Wilson) and some other ministers who are not even in the House, should be involved in the forest industry. The fact is that the Minister of the Environment (Mr. Fraser) is responsible for forestry. He has inherited a department in which 15 other departments meddle.


Maurice James Harquail: Do something.


Frank Oberle: Hon. members opposite are telling us that in six months we should clean up a mess which took 15 years to make. We had a minister of forestry and a proud Canadian Forestry Service when hon. members opposite took over. They degraded the ministry to some kind of minor department in which ministers, department heads and bureaucrats could walk in at any time of the day and insert their own views and opinions.
Since hon. members opposite took over in 1963 the man-years in the Canadian Forestry Service dropped by 50 per
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cent. There is only half the number now engaged in research and development in the Canadian Forestry Service that there was in 1963 when these great guardians of the green gold took over.
Let me make a few comparisons with what it is like in the United States, and point out how critical the problem is. Federally-funded research and development at forest products laboratories amounts to about $14 million in the United States compared with $7 million in Canada. State expenditure on forest products research provides large-scale facilities in Oregon, California, Michigan and Mississippi, but no provincial counterparts exist in Canada. University expenditure on forest products research is about $6 milion in the United States but a mere $200,000 in Canada.


Eugene Whelan: Who controls it in the United States?


Frank Oberle: A single American company, Weyerhaeuser, spends almost twice as much annually on research and development as the entire Canadian Forestry Service. The hon. member opposite who is now entering the debate should know something about research and development because he did some slashing himself in the Department of Agriculture.


Eugene Whelan: Mr. Speaker, 1 rise on a point of order. The hon. member said 1 did some slashing of research in my department when 1 was minister of agriculture. That is not true. The hon. member did not tell the Flouse that in the United States of America, which he says is doing such a great job, it is the secretary of agriculture who is in charge of the forest industry, not the secretary of the environment.


Mr. Taylor (Bow River):: That is not a point of order.


Frank Oberle: Mr. Speaker, I shudder to think of what would have happened to our forests if they had branched into the hon. member's department. We probably would not have any trees left.


An hon. Member:: We would have a marketing board.


Frank Oberle: We would have a tree marketing board.
The cuts and expenditures to which I referred were made at a time when the federal government realized $1 billion from the forest sector in the form of royalties, taxes, licences and fees from the forest sector. An equal amount of $1 billion accrued to the provinces every year while hon. members opposite were cutting research jobs, expenditures and funds which would have sustained a once proud Canadian Forestry Service.
I do not have very much time to get to the crux of this matter.


Eugene Whelan: Thank God.


Frank Oberle: It made me nervous when an hon. member opposite got up today and suggested yet another takeover or whatever, another Crown corporation. Hon. members opposite are making recommendations as to how some mystical body
Income Tax Act
outside this place can solve the serious crisis in the forest sector. The responsibility lies here, and a very responsible senior minister has taken charge. There is a new air of confidence, enthusiasm, and excitement in the Department of the Environment. Some scientists who have left are thinking of coming back. Perhaps some of the bureaucrats who stayed behind to keep notes on what nobody was doing are reconsidering their positions, and perhaps they will leave.
We on this side are very serious about forestry. 1 agree that there was no mention of forestry in the throne speech, but let me tell those hon. members opposite who have finally shown an interest in forestry that if they practised half of what they preached, the trees would grow tall and green and be converted into gold once again. Our economy would once again smile, and we would all be much happier.


John Allen Fraser: Mr. Speaker, I rise on a point of order. May 1 suggest, with your permission, to the hon. member for Vau-dreuil (Mr. Herbert) who introduced this motion, that it became apparent during the debate over the past hour that the document or the study that the hon. member was requesting is clearly not a feasibility study into establishing a Crown corporation or other body to carry out forestry research. The hon. member has identified, or nearly identified, some study or document. Through you, Mr. Speaker, I would indicate to the hon. member that in the interest of open government 1 will certainly seek to find this document to which the hon. member has referred, if it does exist and, of course, it will be made available to him.


The Acting Speaker (Mr. Scott, Victoria-Haliburton):: The
hour for the consideration of private members' hour having expired, I do now leave the chair until eight o'clock.
At 6.05 p.m. the House took recess.


[Stage Direction]
AFTER RECESS

The House resumed at 8 p.m.


[Stage Direction]
The House resumed consideration in committee of Bill C-17, to amend the statute law relating to income tax and to amend the Canada Pension Plan (Mr. Crosbie)-Mr. Laniel in the chair.
[Stage Direction]
November 1, 1979
Income Tax Act
Gérald Laniel: When the committee rose at five o'clock, p.m., clause 38 of the bill was under consideration and the hon. member for York East had the floor.


Ronald Stuart (Ron) Ritchie: Mr. Chairman, when the committee rose at five o'clock, I was in the midst of beginning a response to some of the comments and questions made by several hon. members on clause 38. In particular I was beginning to respond to some of the points raised by the hon. member for Broadview-Greenwood and the hon. member for Spadina. 1 had suggested that it was possible some of their comments, particularly the ones of the hon. member for Spadina, were based on some misconception as to what this clause was intended to accomplish and what in fact it said.
This clause is to correct an advantage which had been given unexpectedly by the small business preferred tax rate. When the provision was drawn in earlier legislation, I am sure it was not intended to cover what are now proposed to be declared non-qualifying corporations. The special tax privilege which exists and which has widespread support, is designed to encourage small Canadian businesses. It was not designed to encourage the kinds of businesses which quite properly under the law t>egan to take advantage of the preferred rate and which are now removed from that advantage by this proposed legislation.
Hon. members will recall that the treatment to be accorded to these businesses in the budget proposals of the former minister of finance would have placed a penalty on incorporation for personal services covered in this proposal, because it would have found them paying a greater tax under the general public corporation rules than the proposal now before the House.
The hon. member for Broadview-Greenwood asked me yesterday and today what is meant by neutralization. This is what this clause is designed to do. It is designed to ensure that these non-qualifying businesses, by getting a 3316 per cent tax rate and having the normal gross-up and dividend tax credit treatment, will leave their owners in the same position as if they received the income directly in the first place, with one provision, that in fact the income is paid out fully in the form of dividends. If the income is not paid out fully in the form of dividends, as the hon. member for Saint Henri-Westmount has mentioned in particular, there is advantage to be gained by tax deferral. It is a limited advantage because, if the money not so paid out is invested and produces investment income, it incurs the 46 per cent to 50 per cent tax depending on what province one is in and not the 33!6 per cent tax.
While there can be some advantage in the deferral provision, it is likely to be a limited one. In general, moving from the 25 per cent rate accorded under the small business provision which these corporations now enjoy to the 33!6 per cent rate proposed, leaves their owners in exactly the same position as if they had paid themselves salaries directly. This is because by the route concerned they can pay a corporate tax, and then through grossing-up and receiving a dividend tax credit, if they are in a high enough tax bracket, they pay a personal tax. The sum total of the tax paid in the corporation and on the
[The Acting Speaker (Mr. Scott, Victoria-Haliburton).]
dividends received is the same as it would have been on a similar direct income amount.
That being the case, I find it hard to accept the statements suggested by the hon. member for Spadina who seemed to think that this was some kind of giveaway. In fact it is a kind of take-back which is designed to put these taxpayers in a non-privileged position as compared to the position they are in today. It is a take-back which does not impose an extra penalty that would deter such activities from taking place in incorporated form, because often there are very good non-tax reasons for doing so.
I should like to respond to some specific questions raised by hon. members. The hon. member for Dauphin inquired as to the effective date of this proposal. Generally speaking the effective date would be for the taxation year 1980 or one beginning in that year, as I understand it. In other words, the old provisions are in effect up to this moment.
The hon. member for Jonquiere informed us of some of the concerns of one of his constituents, a doctor. I would like to respond to the questions he raised. First of all, if I heard the concerns expressed correctly, his constituent was thinking in terms of what was proposed by the former government, in other words going into the same tax bracket as a public corporation and the positive disadvantage for incorporation that would imply.
His basic question was about these groups of people. I think I can do no better, sir, than to refer to a statement I have here which gives some of the reasons. I would preface this by saying that whatever division is drawn it is somewhat arbitrary. There are always going to be people on one side or other of the line about which one could argue. I think there are some very good reasons for the decision that has been taken.
The first point is that these professional groups by and large do not face the kind of business risks that are common to other businesses, including other areas of the service sector. The demand for services from these professionals is relatively inelastic, for obvious reasons. On the other hand, the demand for services such as those of engineers, architects and consultants, like those in most other businesses, is exceedingly sensitive to cyclical instability.
A second point is that these professional groups, especially doctors, lawyers, dentists and accountants, face much less competitive risk because the supply of their services is rigidly controlled through the existence of professional regulations and standards that make entry into the profession difficult, at least over the short and medium term.
Consultants, retailers, wholesalers, barbers, general insurance agents, manufacturers and so on face strong competition because of the ease with which new businesses can enter the field. In some cases these other concerns face strong competition from large multinational firms. It is no coincidence that bankruptcies among these professional groups are rare, whereas in the other groups they are a continuing conspicuous phenomenon.
November 1, 1979

In short, the mix of a relatively fixed demand for their services and restricted entry into their profession distinguishes these professionals from virtually all other businesses where the forces of competition operate in a way that greatly increases the element of risk.
A third major point is that because of the more limited element of risk, incorporation is not and has not been an essential element for the successful conduct of these professions. In fact, incorporation has been sought largely, if not exclusively, in the past for tax reasons. The' one province that allows professionals to incorporate does not permit limited liability. Other business sectors, including other personal services and other professions, have a history of incorporating which pre-dates the existence of favourable tax treatment, and that is explained by the need to protect shareholders from excessive financial risk.
Another point is that the element of providing special incentives for small businesses so as to permit them to become established, to grow and to eventually turn into large competitive domestic and international corporations and provide large numbers of jobs to Canadians, is not an aspect that applies to the professions mentioned. They will not be a main source of increasing growth in job opportunities. Other business sectors, including services, are where future growth and expansion will occur, either through small businesses growing into large businesses or through an increse in the number of small firms in those sectors.
The hon. member for Jonquiere may consider that some of these are very compelling reasons for the particular division that has been drawn, even though I am sure he and his constituent might argue about some activities at the boundaries.
The hon. member for Saint-Henri-Westmount raised some questions of principle about the tax. I am not sure that they can be fully met by the proposal before us, but I trust he will consider that the merits of this proposal outweigh any of the negatives which he feels may exist.
The hon. member is concerned about the principle of neutrality and equity as I think all of us are, and he raised a question about the value of the deferral privilege. 1 have already commented on that and I hope he considers that the qualification I have suggested as to the importance has some practical significance. He raised also the question of regional equity and pointed to the fact that only in some jurisdictions is incorporation permitted. That is indeed a fact, though it is not a static fact and it may change. I think it is reasonably fair to say that there are other instances where tax burden varies regionally because of legislative actions or regulations by other jurisdictions within the federation. There is no compelling and effective answer to his point, except to say that such imperfections exist, and probably are not too important unless they are major.
The hon. member for Skeena raised the question of how many individuals are affected by this proposal. I am sorry that I have not been able so far to obtain a number. I am told that
Income Tax Act
for the professionals there are very few, but for all categories involved there are a very few thousand entities affected.
I think those are the main questions that called for answers, Mr. Chairman.


Donald James Johnston: Mr. Chairman, the Parliamentary Secretary to the Minister of Finance has done a very credible job of defending the indefensible in terms of some of the points raised. I must say I do not understand the last comment the hon. member made when he suggested very few entities were affected. I am not sure in what context that was made, but perhaps he could clarify that in responding to a couple of points I would like to put to him.
There is some validity to the thesis the hon. member put forward, that what is being done is taking away something which existed rather than creating further tax inequities. The hon. member says we are moving to approximately 33 V5 per cent depending on the provincial jurisdiction and the incidence of tax in that jurisdiction as I read the statute, as opposed to say 25 per cent to which these groups would otherwise be entitled. The hon. member makes the point, as I understand it, that this provision was originally intended to permit the accumulation of capital in industries where future growth and future job expansion is anticipated. I understand all of those points quite well, but what I am troubled by is the fact that this still remains a very arbitrary provision in terms of singling out these particular professions for what the hon. member would now describe as less preferential treatment, if you like. In fact it is not preferential treatment as most of these professions at the moment are accorded no such treatment because they cannot incorporate.
I think I am correct in saying, certainly with regard to accountants and lawyers, that across this country for the most part, with the exception I believe in the case of Alberta, such incorporation is not permitted. Therefore I say the tax neutrality principle is really offended in a very major way because there are other industries today, admittedly growth industries such as management consulting firms, which are placed in exactly the same position, or should be regarded in the same way as law firms and accounting firms. As you know, most of our major management consulting firms in this country, or a large number of them, are affiliated with or are offshoots of our major accounting firms.
I am not really satisfied that we should put this definition in the act as to those specific professions that should benefit, or be prejudiced by, 33 W per cent rate. Talking about the limited advantage, I do not regard that as a limited advantage. When a professional in my jurisdiction is subject to 70 per cent income tax on personal income in excess of $60,000, I believe it is a year, as opposed to a position where he or she is subjected to an immediate 33'A per cent tax with an indefinite deferral until such time as dividends are paid up, particularly in a time of inflation, and it is hardly offset by the fact that the additional revenue which one receives on the tax savings will be taxed at 46 per cent.

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If it were not a very substantial advantage, I suggest that we would not have this legislation before us and the government would have accepted Bill C-37 which was introduced last year. Obviously this bill is not intended to take the entire advantage which the government believes exists with respect to some of these corporations, and I cannot accept that as a valid position.
I am not trying to defend Bill C-37. I did not like its provisions either. I believe that this whole area is fraught with inequity and is basically a real "Rube Goldberg" type of legislation in terms of small business corporations. We now have 25 per cent rates, 33 per cent rates, and 46 per cent rates. We had different provisions with respect to dividend payouts. We have eight pages in the statute to cover this particular amendment.
I for one have always pushed for simplifying these statutes, and I find that this is not only offensive to the principles of tax neutrality but it is also offensive to the principles of tax simplification. Going beyond that, I find myself on the horns of a dilemma because I am really not quite sure what to tell the government to do with this provision. I am not sure basically how we should be looking at it at this stage of the proceedings in terms of how it can be improved. I can think of ways of improving subsection (/)(i) because, as I say, that is too limited. But as long as there is a recitation of people who benefit, somebody is always bound to be left out. That is why that particular kind of legislation is offensive in itself, just as the provision-and hon. members may be familiar with them-with regard to income averaging annuity contracts are limited to certain specific types of beneficiaries.
I have always felt that this is unfair because other people also have fluctuating incomes. Why should they not benefit from income averaging annuity contracts instead of only entertainers, writers, authors, musicians and so on. 1 am very concerned about enumerating this group and putting them into this special category. I also take issue with other arguments, but I do not see much point in doing so when the government is saying that these particular professions are not sensitive to cyclical instabilities. Obviously the government is not familiar with the situation of a lawyer in my province over the past few years whose specialty is seeking financing, or the government would take issue with that statement and say, "Yes, lawyers are subject to cyclical instability." Or if one were a member of the notarial profession, which 1 know is not covered in this list in Quebec, and basically dependent on real estate transactions, one may take the same point of view.
As a general statement, considering the climate in which we live, particularly in my province, I suggest that any of these professions are subject to cyclical instabilities, even in the dental and medical fields. I wonder if it would be possible some time in the course of these discussions to obtain a commitment from the Minister of Finance that he will take it upon himself to study this area in an attempt to come up with some better legislation than we have here and to come up with legislation which rationalizes the entire use of corporations, particularly in the small business sector, and corporations for use by professionals.

We are still subject legitimately to criticism by the whole range of wage earners in this country who receive no deferral. Once they have moved into the $15,000 a year bracket, they become subject to taxes in excess of 3396 per cent. I do not think that this is a fair provision, nor did I think that the original provision was fair. I think that we are grafting another provision onto this Income Tax Act which will result in further inequity and complication. I would very much welcome intervention by the Minister of Finance-perhaps it could be in his budget in November-to improve the Income Tax Act.
Frankly, I would like the improvements to be broader than just this one area, but this one area which has always troubled me, because in a country where there are such different jurisdictions and different vehicles, particularly in the corporate vehicle, it seems dreadfully unfair to me that a person's fundamental income should be subject to such great differences by virtue of a vehicle he selects, to do his business through, and that he is obliged to select, for example, in law, the partnership, where lawyers in Alberta can enjoy the enormous benefits which they already enjoy plus this income tax advantage which, on its face, creates a great disparity between the position of lawyers-and I cite lawyers because I am familiar with the profession-in the east and lawyers in the west.


Bob Rae: Mr. Chairman, I am delighted that my earlier intervention and the interventions of my party have finally prompted the other party to move away from their slumber and attempt to come to grips with a very important provision of this bill. One of the ironic features of this debate is that there is not one member of the Liberal party, with the exception of the hon. member for Spadina who is no longer here, who is attempting to defend or even understand the provisions of Bill C-37. That party is not prepared to stand by a very important amendment to the Income Tax Act which it put forward a short 11 months ago. It is not prepared to indicate their support for it or for any of the arguments which are in writing and which are written at length in the bills which accompany the budget of November, 1978. Where is the Liberal party?

In his remarks, the hon. member for Jonquiere has referred to the problems of professionals without dealing with the fundamental issue, namely, the principles of justice within our tax system, and he has been unable to defend the policy of his colleague, the hon. member for Saint-Maurice, the former minister of finance.

Although I disagree with the implications of many of the things stated by the hon. member for Saint Henri-Westmount,
I learn something every time I listen to him. He too is not prepared to support the fundamental propositions laid out in Bill C-37. The hon. member could give no indication of what those propositions are other than calling virtually for a new Carter commission, a new look at the whole question of corporate income tax and its relationship to personal income
November 1, 1979

tax. I agree that that would be a good idea, but it does not address itself to this particular problem.
The hon. member has said that he does not know what to do about this particular measure, and he cannot give any positive recommendations as to what should be done about this particular provision which is before us. That is no surprise, though, because the hon. member for Saint Henri-Westmount is a Liberal. He cannot make up his mind whether he should support something which comes from the last Parliament or whether he should be against it.


Mr. Crosbie:: He should get cloned like the financial critic.


Bob Rae: 1 would rather be cloned than well honed like the Minister of Finance. I believe that the basic principles which were put forward and which the parliamentary secretary attempted to defend have really not been answered. The first critical question is fairness-what tax lawyers call "equity". That question really has not been addressed. There has been much talk of tax neutrality, yet the minister has said in the statement accompanying this change that the effect of the measure will be to grant an advantage to those who incorporate over those who do not incorporate. I suggest to him that he has given no figures which would indicate the reverse. He has introduced no figures to indicate the contrary. There are no tables accompanying his proposals to indicate that there would not be a significant advantage to incorporating rather than not incorporating.
I suggest to the parliamentary secretary that if there were not this advantage, we would not be having this debate tonight. He knows perfectly well the only reason we are debating this is that those people who were affected by the changes recommended by the hon. member for Saint-Maurice, were going to lose money over the proposition. It would have required them to start paying tax as if they were like other income earners. It is not simply that they would be employees; that is not what is being disputed. What is being disputed is that even those people who are self-employed would be paying tax at a higher rate than if they were allowed to incorporate.
I suggest to the parliamentary secretary that, for all the talk of tax neutrality, he knows perfectly well that were there not a significant advantage to this group of professionals in incorporating, we would not be here tonight debating the measure. It is only because the government proposes to give them that advantage over the measures proposed by the hon. member for Saint-Maurice, that we are here tonight.
The first point the parliamentary secretary made was that nothing is given; something is being taken away. That is only true if you ignore the fact that the budget was presented in which certain propositions were put forward and in which certain facts were revealed to the Canadian public. If we pretend there was no November budget and if we pretend there had not been this powerful lobby mounted by the various professionals on the Parliament of Canada, if we pretend that those things had not taken place, then what the parliamentary
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secretary says might be true. That is not what happened, however. We had a budget which presented a very coherent statement, which attempted to underline something of the clear abuse which had taken place as a result of court decisions and of behaviour in the market place.
Hon. members opposite who are interested in the market place know perfectly well what is going on out there. They know perfectly well that professionals who incorporate have a significant tax advantage over people who do not incorporate. They know perfectly well that people who can declare themselves to be self-employed have a significant tax advantage over people who are not self-employed. I suggest it is not possible for us to wipe away 11 months of history. It is not possible for us to wipe away a fact which has become evident, that there was an abuse in the system.
The government has admitted there was some kind of abuse because it has attempted to respond to the various court decisions outlined in my earlier remarks, by bringing in this new half-baked, hybrid measure. This hybrid measure creates a third category of incorporation, as if the Income Tax Act were not complicated enough and as if we did not have enough difficulty understanding the statute. The Conservative party has introduced yet another measure. The only reason for it must be that it provides a significant advantage to a group of taxpayers who would be adversely affected were we to attempt to introduce an element of equity and fairness into the system.
I should like to point out to the minister and the parliamentary secretary that whatever the half-hearted nature of the Liberal proposal and the Liberal criticisms of this measure, our criticisms of it are quite clear; it is an offence to fairness and it is an offence to the simplicity and comprehensibility of the tax act.
The more we keep adding in every budget with a series of incomprehensible amendments to the Income Tax Act to provide for particular provisions and particular rules relating to particular groups of individuals, the more this Income Tax Act becomes a compendium of abuse, rather than a clear indication to the taxpayer of his rights and obligations under the laws of Canada.
I have suggested to the parliamentary secretary that he can not really defend the anomalies. They are crystal clear. There is not even fairness within professions let alone between professionals-let alone between professionals and employees or professionals and other self-employed individuals who, for various reasons, do not choose to incorporate themselves. There is absolutely no justification for this particular measure other than as a sop to those professionals who manage to mount a successful political lobby on the Government of Canada and the Conservative party of Canada. We know perfectly well that is exactly what happened.
There is no justification in equity; there is no justification to the rationality, and there is no justification in simplicity for the recommendations that have been put before the House by the government. All this simply creates yet a new category. It is an invitation to litigation, an invitation to abuse, an invitation to those individuals seeking to harbour or to hide away or

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to defer taxation which they owe not simply to the Government of Canada, as is so frequently stated by members opposite, but to their fellow Canadians.
The parliamentary secretary is going to have a very hard time convincing this party that there is either logic of fairness in this particular proposal. We know it is a political requirement of the time that the party in power-which is the party of business-be seen as giving in to particular professionals. I suggest to the minister, however, that he has not given us any figures in relation to the numbers of people involved except to say it is "a few thousand", which means nothing. Ele cannot tell us how much it is going to cost or how much is going to be lost to revenue as compared to the standard rate of taxation. I suggest we are entitled to both those figures.
We know that the small business tax credit costs in the area of $900,000 or $1 billion. Surely it is not beyond the power of the government to estimate how much this is going to cost so that the people of Canada can see in dollars and cents how much tribute they are paying to the professionals of Canada in order to allow them to incorporate themselves and take advantage of the other citizens of Canada.
The least we can expect from the parliamentary secretary is more than a vague answer. We want answers to these particular questions: how many individuals are going to be affected, and how much is it going to cost?


Gérald Laniel: Shall clause 38 carry?


Some hon. Members:: Carried.


Bob Rae: On a point of order, and with respect, Mr. Chairman, I asked a particular question.


Gérald Laniel: Order, please. If the parliamentary secretary or the minister did not stand up, I have to put the question. The hon. member has a few minutes to go if he wants to keep on talking.


Bob Rae: Mr. Chairman, I think the people are entitled to know, and it is on the record, that when asked specific questions about how much a particular measure was going to cost-I see his officials kibitzing now-we have not had any particular answer. We have not had-


Some hon. Members:: Oh, oh!


An hon. Member:: Kibitzing?


Some hon. Members:: Withdraw.


Bob Rae: The hon. member for Burlington should learn how to relax. He has done nothing but render abuse since debate on this bill started. He has not contributed a positive or constructive note to the debate.


Mr. Kempling:: Neither have you.


Bob Rae: I do not think that is fair. It is perfectly fair and reasonable for us to ask the Government of Canada to give the figures of how many people are affected by the proposals the

government is making. How much is it going to cost? I do not think that is an unreasonable thing to ask. If they are not prepared to tell us, that should be on the record.


Gérald Laniel: I wish the hon. member would be careful with the expressions he uses toward officials who are in the House to render service.


Some hon. Members:: Hear, hear!


Gérald Laniel: Shall clause 38 carry?


Some hon. Members:: Carried.


Stanley Howard Knowles: Mr. Chairman, this is the 1st of November. This Parliament has not been in session for a month, but already we have this attitude of complete refusal to answer questions. We have a crowd over there just like the Liberals. All they can do is shout "carried". Whether members across the way agree with what my friend for Broadview-Greenwood has said or not, I suggest he deserves an answer to the questions he has put instead of just giving us this "carried" chorus.


Some hon. Members:: Hear, hear!


Some hon. Members:: Carried.


Ronald Stuart (Ron) Ritchie: Mr. Chairman, I can respond to some of the points raised by the hon. member for Broadview-Greenwood. I hesitate to say that I can convince him of the merits of this proposal in all respects. On the number of people affected, I said a short time ago that some few thousand were affected. We have to make an estimate here. We think that something less than 10,000 will be affected. That includes mostly management service and other service organizations associated with professionals and not the professionals themselves because, as has been pointed out, most of them are not free to incorporate.
There is an estimate, not of what this measure will cost us but of what it will save us compared with the present situation. In fact not very many professionals and personal service corporations had been formed to take advantage of the present regulations which allow them to exist under the low small business tax. It is estimated that were this proposal not enacted and the existing rules were to continue, the cost in revenue would be in the area of $150 million.
It might be useful to make one further comment. There has been some valid discussion on the merits and demerits of the deferral aspect of this. There can be no argument about the neutrality aspect for income that is received and paid out in the form of dividends immediately. There can be an argument about the virtues and otherwise of the deferral. 1 suggest the demerits, if any, are at least modified by the higher tax rate which immediately applies to investment income.
There is another point which can be taken into account. While businesses of this kind do not have the same working capital requirements and equipment capital requirements and
November 1, 1979

so on that many other businesses have, they are not without such requirements. There could be a justification for at least some withholding of payout for financing of the enterprise.
I think the hon. member for Saint-Henri-Westmount would agree that in this world there is no such thing as complete tax equity. Every time we try to achieve complete tax equity, we get unintended inequitable consequences. We have tried it for the past decade and a half in this country. 1 think hon. members will agree we are not too much further ahead than before we tried. It may be impossible to get complete equity, because what is equity for one is inequity for another in terms of judgment of equity.
I would not pretend this is a fully equitable provision, but it is a much better provision than the present situation. It is a much better provision than originally proposed in C-37. Therefore, I believe it is a good measure but, like all good measures, it has certain imperfections.


Bob Rae: If the figure is $150 million, which the parliamentary secretary estimates as being saved in comparison with the present situation, will he agree that the cost of this measure is somewhere between zero and $150 million in comparison with the measure put forward by the hon. member for Saint-Mau-rice in his original budget. If I might continue, it is approximately one third of that amount. Is that a fair estimation?


Ronald Stuart (Ron) Ritchie: Mr. Chairman, I am not certain I could make a good estimate or that anyone else really could make a valid estimate. Certainly it is not without cost as compared to the original proposal.


Bob Rae: With respect, Mr. Chairman, this is not a trivial matter. The Minister of Finance said he would bring in a budget in November. I remind him that we are now into November. He said he is going to deal with the question of tax expenditures. Surely the department has some mechanism now for estimating what they think the cost of this measure will be. They have a figure of $150 million. They must have some basis on which to calculate the amount, whether we are talking about millions, tens of millions, or more, or less.


Ronald Stuart (Ron) Ritchie: Mr. Chairman, the estimate of $150 million is based on the beginnings of a rapid escalation in the numbers of entities which were prepared to take advantage of the favourable tax treatment. Now that we have something that is intended to be neutral in its tax effects, it is very hard to estimate how many incorporations will take place with this provision. I think it is safe to say that, compared to the present situation, it will be very few, for tax purposes at any rate.


Donald James Johnston: Mr. Chairman, I have a very quick question for the Parliamentary Secretary to the Minister of Finance. Would it be possible for the Minister of Finance to raise this issue in the discussions with the provinces at some point, which I do not think has been done in the past, to encourage the various jurisdictions to try to establish some uniformity in Canada with regard to the incorporation of these professional firms, which is not a matter of federal jurisdiction? I think the
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inequities should be pointed out to the provinces and an attempt made to encourage them to try at least to establish incorporations for tax purposes, which can be done as in the case of Alberta, without essentially destroying the client-professional relationship which is very much cherished by the professions.
That would at least go some way toward achieving a measure of tax neutrality, at least among these professionals. It does not address itself to those professions which are not named, but they still enjoy the 25 per cent rate on the first $150,000. That would be a significant step forward if the provincial counterparts could be prevailed upon to try to bring this forward.


Ronald Stuart (Ron) Ritchie: Mr. Chairman, I think the objective of that suggestion is excellent, but I question whether it would fall on the government or the Minister of Finance to raise such an issue. I think it would come better from the professions themselves.


Bob Rae: On a point of order, Mr. Chairman, in the midst of my frustrations at being unable to get certain information from the government, I referred to the officials of the Department of Finance as kibitzing. This might be interpreted as an unfriendly remark, but those of us who play cards realize that kibitzing is a common activity. I certainly did not mean it as a criticism of the officials. I want to apologize to them if I have offended them in any way.


Some hon. Members:: Hear, hear!


Bob Rae: While I of course want to make it clear that I still feel very frustrated about the lack of information from the department on this important tax expenditure, I am certainly not one to give offence to civil servants unnecessarily. I do not mind giving offence to my hon. colleagues across the way. They expect that.


Ramon John Hnatyshyn: We can take it.


Bob Rae: So can I, but I apologize to those who are not in a position to hurl abuse back at me.
However, 1 still feel extremely frustrated about the lack of information on this tax expenditure.
Clause 38 agreed to: Yeas, 34; nays, 8.
Clause 39 agreed to.
On clause 40-


Bob Rae: Mr. Chairman, as I understand it, this clause deals with an important matter, the question not only of comparative rates of investment credit to be given for investment in different parts of the country but also for research and development in different parts of the country.
As I indicated in my speech at second reading, the concern we in my party have with respect to this measure is about its effectiveness. I think we are entitled to ask, as time goes on
870

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and as we have experience with these investment tax credits, whether these really are the mechanisms and the incentives which change the behaviour of business-in effect, direct investment-and whether this is the most effective way to direct investment.
Initially I would like to ask the parliamentary secretary if he can tell us what the cost of these various measures is and something of the history of the experience of the country with investment tax credits since they were initiated.


Ronald Stuart (Ron) Ritchie: Mr. Chairman, I can give some of the data the hon. member is seeking. The estimated cost of the enrichment aspect of this investment tax credit for the current year in terms of amounts likely to be claimed, that is, from firms which have profits against which to claim them, is $130 million.
In terms of amounts estimated to be earned, the amount is $385 million, and the difference presumably will be claimed in future years should the firms concerned earn suitable profits.
The only piece of information I have which I think bears on the broader question asked by the hon. member is that during the first half of this year real business investment spending on plant, machinery and equipment rose by 9.3 per cent. One cannot say how much it would have risen without the investment tax credit, but it would not have been that high in current circumstances, I am sure. That is not a very precise answer to the hon. member's question, but it is the best I can produce at this moment.


Bob Rae: I know the Liberal party is not interested in arguing about this, but I think it is a very important problem. I have a question to which I hope the minister will find the time and the ability to address himself at some point. The Minister of Regional Economic Expansion perhaps will be able to deal with it as well. It is a very fundamental question. Is the investment tax credit working? It is a very substantial sum of money to be giving to corporations to invest in particular areas when two things are possible, and we do not have the information before us.
The first problem is that investment might have taken place in these areas in any event, in which case the expenditure of government money is completely unnecessary and provides a substantial benefit to companies which might well have taken the same decision in the absence of any incentive or movement by the government. It is very critical to ask whether this is the best way to be spending $130 million of government money in a particular year and how it compares with the direct expenditure of money. There are very few ways of controlling the credit compared with capital cost allowance. Even in comparison with capital cost allowance it strikes me as being an inefficient way to carry on in terms of tax expenditures.
Second, does this form of tax expenditure, which is designed not just to increase investment but to increase investment in particular regions of Canada, provide the government with an excuse for not carrying out direct expenditure?
[Mr. Rae.)
For example, in the field of scientific research and development the parliamentary secretary knows perfectly well that the private sector can decide, for reasons which may have nothing to do with the validity of the research and development expenditure, to do certain work in order to take advantage of a particular credit.
If you accept-and I know from the remarks made last night that the parliamentary secretary does not-the premise that there is such a thing as a tax expenditure and that it is just as much a form of public expenditure as direct expenditure, then I think the question for the taxpayers of Canada becomes, in research and development and in general investment: is this the best way to spend public money, and is this a very poor and inadequate substitute for the kind of direct expenditure in research and development and the kind of controlled and focused activity in terms of scientific research which really should be coming from the Government of Canada?
There are, admittedly, very real differences here between ourselves and the government. The government, of course, feels that if the private sector decides to carry on research and development in a particular area, the research and development that should go- ahead. But I think we're entitled to put forward our point of view, which is to say that neither the budget papers nor the statements made by the parliamentary secretary tonight give us the slightest evidence as to the benefits, as to the merits of the government's proposal or as to how the money is to be spent.
We are in a similar position to the one which faced us a few days ago when the Minister of Finance asked us to agree to giving him a $7 billion cheque. We are aware that not enough research and development are being carried on in Atlantic Canada. We do not know whether these meaures will stimulate development or whether the development they may stimulate is likely to be in the long-term interests of the people of Atlantic Canada. We do not have any information. In any socio-scientific research some evidence is required that what we are doing is worth the expenditure, whether the development which is going on is in place as a result of the investment or whether it would be going on anyway.
I am reminded of the old discussion about cause and effect. Does the fact that everyone sings the national anthem before the Blue Jays game mean that the singing causes the game to start? Of course not. One event merely follows the other. The same can very well be true of investment tax credits. Does the fact that a certain amount of investment takes place in a province following certain benefits mean that it would not have taken place without the benefits? How do we know? What research is being carried on? What evidence does the government have that particular projects are taking off? What evidence do we have that scientific research projects are growing and developing in a coherent fashion because of tax credits which have been given?
November 1, 1979	________________COMMONS
I can see the scorn being shown by members on the other side; it is typical of the intellectual interest they show in these subjects. Nevertheless, 1 think 1 am entitled to ask these questions. If there is evidence, I wish the parliamentary secretary would provide it and tell us which projects are under way, and justify the spending of this money.
When we introduce the concepts of the tax expenditures which hopefully we will get into the centre of the next budget, we will be entitled to ask ourselves whether this is the best form of regional incentive and whether it is the best way to stop the concentration of wealth in central and, now, in western Canada, at the expense of the other regions. I suggets that these mechanisms, by comparison to the very powerful forces acting in the marketplace at the present time, are totally inadequate for the purpose. They are a poor excuse for the economic planning. They are a substitute for economic planning, a substitute for the regional investment which should be going on.
My hon. friend from Humber-Port au Port-St. Barbe and my hon. friend from Winnipeg North will be explaining in terms of their experience how this policy of tax expenditure is a very sad excuse for a serious policy on economic development in Atlantic Canada on one hand, and in terms of scientific research and development on the other.


Donald James Johnston: Would the hon. member permit a question?


Ramon John Hnatyshyn: This should be good.


Donald James Johnston: Did I understand the hon. member to suggest that direct government control of scientific research and development in terms of specific grants should be substituted for investment tax credits given to the private sector in general in determining what their priorities should be? Is that the thrust of that comment?


Bob Rae: I am very glad the hon. member asked me that question, because it gives me the opportunity not only to answer it but to answer the comments he made at some earlier point in the discussion to the effect that this party would not be happy until everybody received all their moneys from the state and paid all their moneys to the state. That is an example of the kind of ideological ignorance which I anticipate from certain members opposite but which is not so often evident from the Liberal benches. It justifies our view that there is not really much difference between those two parties. In any event, that is not what I said.
What I said was this: as we look at the tax expenditure figures given to us by the government in relation to scientific research we believe there is a very real tendency for the government to substitute credits, incentives and give-aways in the tax fields for positive policy. I am suggesting that active co-ordination of an effort by the government and by the public sector must be substituted for what I regard as a rather blind, uncontrolled, and uncontrollable approach by way of investment tax credit. I believe the burden is on those who have tried the investment tax credit approach and the research and development tax credit over the years to demonstrate its
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effectiveness rather than on those who have been inclined to criticize that approach as not being satisfactory.
So, the answer to the two questions is, no, we do not want everybody in Canada to be an employee of the Government of Canada. No, we do not want everyone in Canada to wear uniforms and be dressed in the same way. No, we do not look forward to a totalitarian state in Canada. And, finally, we do not want all scientific research to be directed and controlled by bureaucrats in Ottawa. That is not the thrust of what I was saying. If the hon. member took that meaning, 1 may have been expressing myself poorly. But my message is clear. We must not use tax expenditures as an excuse for the lack of thoughtful, intelligent, and rational government intervention.


Ronald Stuart (Ron) Ritchie: I am sure the hon. member agrees that one of the causes of a rather unsatisfactory economic performance in this country, particularly in the secondary sector, has been inadequate expenditure on research and development. Another cause, I think we can fairly say, is inadequate investment in general. There are some figures which may interest the hon. member.
In the opinion of many, an opinion I share, Canada has been deficient in research and development in terms of gross amount spent and in terms of who should do the research. Here are some interesting comparisons in terms of gross amounts: Canada, 1.1 per cent of its GNP; Germany, 2.1 per cent of its GNP; Japan, 1.7 per cent of its GNP; Switzerland, 2.2 per cent of its GNP, the United States, 2.3 per cent of its GNP.
The second aspect is how much of that research is performed by government and how much by industry, and the distinguishing characteristic of Canada is that not only have we had a lesser share of our GNP going into research, we have had a lesser share that has been put in by industry. Those two factors are both very significant in the kind of economic performance we have had in this country. Canada's percentage has been 40 per cent, which is very, very low by comparision with others such as Germany with 61 per cent, Switzerland with 77 per cent, Japan with 64 per cent, and the United States with 68 per cent.
One of the attractions of this particular proposal, and of its predecessors on which it is built, is that we are now beginning to encourage, as we did not for many years, research and development expenditure by industry, which, to my mind, is one of the best guarantees that R and D expenditures will be productive economically. That is the record of other industrial nations, and the hon. member has to produce some evidence unknown to me to counter it effectively.
The hon. member raises the question of whether these expenditures are effective-investment expenditures, investment tax credits, research tax credits. It is clear that they should be more effective than a comparable expenditure made directly by the government because, for one thing, there is a powerful multiplier effect. We give a tax credit of 5 per cent, 7

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per cent or 10 per cent that is not given unless the expenditure has been many times that, of course, and so we are inducing by this incentive substantial expenditures.
Another factor, and it arises out of experience 1 have had over many years in having to take part in decisions about investment expenditures and R and D expenditures, is that if an investment expenditure is going to cost you less or if an R and D expenditure is going to cost you less, and with the tax credit they do, then you spend money and it is worth your while to spend more, so you do spend more. I do not know if it would be possible for someone with the best sociological or economic weapons to go and determine how much more is spent collectively, but it is a matter of knowledge and logic that more is spent.
There is one other factor which I think is of great importance. Unlike the hon. member, I have far more faith in the ability of those investment decisions to produce good results when they are made by people who have a direct interest in them, a direct knowledge of how the money is going to be used, what it will do for the firm concerned, than I have when it is done by the wisest bureaucrat in Ottawa. Therefore, 1 think I have to disagree very strongly with almost the total burden of what the hon. member had to say in his last two interventions.


Some hon. Members:: Hear, hear!


Mr. Faour:: Mr. Chairman, to begin 1 would just like to comment briefly on what the parliamentary secretary has just finished saying. I have really no quarrel with almost everything he has just finished saying in response to the comments of my colleague, the hon. member for Broadview-Greenwood. But the parliamentary secretary has still not convinced me that there is some relationship, any sort of relationship, between the investment tax credit that the government is proposing and the increase in the research and development that is done in this country. If we are going to be proposing solutions or some sort of encouragement to industry to increase the amount of research and development that is done in this country, perhaps we must look at some of the reasons why research and development in this country are at such a low level, and no studies of which I am aware, no studies which the government, through the parliamentary secretary or the minister, has been able to demonstrate to us, has shown that the low level of R and D and investment in the country is due to some deficiency in the tax laws which do not allow investment credits. It is the cause and effect relationship that has to be shown, and I do not think the government has shown it.
About ten years ago, and perhaps still now but we do not hear too much about it these days, there was very strong concern in this country over the amount of foreign investment in the country and the sort of effect that that level of foreign investment was having in certain sectors of the economy. One area that was always cited as a very serious effect of the high level of foreign investment in Canada was the low level of R and D carried out by branch plants, by the branch plant economy. It would appear to me that this proposal of the

government really does not meet that question. I am not saying that that is the only reason that there is a low level of R and D undertaken in the country, but the investment tax credit in this area does not answer any of the other deficiencies that have been shown to me to be the cause of the low level of R and D in Canada. It is basically a question of cause and effect.
What we are talking about in this case is the effective expenditure of a very large amount of money in times of restraint, which could be used to alleviate some of the very serious social effects of the restraint program of the government in various areas of the country. I would like to look at this in terms of the regional development of the country because one of the prime aims of this clause, as set out in the budget of the hon. member for Saint-Maurice last year, was that this measure would encourage development in certain designated areas of the country, specifically the four Atlantic provinces and the Gaspe part of Quebec. At that time my criticism of that particular provision was that we did not know whether it was going to encourage the level of investment in the Atlantic region.
It seems to me that businessmen who are contemplating an investment are going to look beyond the initial tax credits available to them in pursuing a certain investment, that the real factors affecting their decision as to whether or not to invest will be the over-all market conditions in a region, the availability of skilled labour, access to markets and so on, basic factors of the economy that this investment tax credit does nothing to solve. It has not been shown at all that providing this additional tax credit in certain areas of the country will do anything other than give a windfall to those individuals and corporations which have already, for other reasons, decided to invest in the particular region.
The business community in the Atlantic region is doubtful whether this particular provision has any effect on new construction or new investment in that region. I spoke with several individuals last year when this provision came out in the budget and the response I got was that the real problems in Atlantic Canada cannot be solved by some initial credit on investment in the region. The real problems are basic structural problems, fundamental problems in the relationship of the Atlantic region with the rest of Canada. It has nothing to do with the tax structure on investments. As I mentioned, the problems involve access to markets, the problems of a small local market, and the problem of the whole tariff structure which is geared historically to protect central Canadian industries to the detriment of the east and the west in the country.
As I said, this particular provision is a very serious one because it is costing such a large amount of dollars, at the same time as the restraint program of the government takes dollars out of the Atlantic region. I should like to mention a couple.
The unemployment insurance cutbacks over the last year have taken an amount of money out of the Newfoundland economy the equivalent of a small industry. There is a relative-
November 1, 1979

ly large pulp and paper mill in my constituency which provides salaries of some $40 million a year to the economy of Newfoundland. It would be unthinkable that any Newfoundland politician or citizen, or any Canadian citizen for that matter, would allow that industry to shut down and take $40 million away from the Newfoundland economy. In the unemployment insurance cutbacks announced first by the Liberal government and then enacted by the Conservative government, that is precisely what is happening in terms of the actual amount of dollars. The same amount of dollars is being taken out.
The hon. member for Jonquiere put the impact of this particular legislation into perspective from his point of view. It would be equivalent to the Alcan smelter pulling out of his riding. That would have very serious effects.
The cost of this will not create the benefits which such costs should, especially if they were directed in some other manner. Before the government effectively spends this amount of money, there should be some idea of the effects which it will have. The business community is very doubtful as to whether this measure has any effect on any new investment, certainly in the Atlantic region and perhaps across the country.
Another very serious question raised by this particular measure is that it allows the government to say, "Look how much we are doing for the Atlantic economy." This is precisely what the hon. member for Saint-Maurice said last year when he introduced this measure in his budget. He said that they were going to encourage development and investment in the Atlantic region. He did not provide anything else in his budget for the Atlantic region. In fact in many ways he took money out of the Atlantic region. This was one particular item which he was able to point to and say that he was promoting development in the Atlantic region. The government is doing precisely the same.
The measure provides the government with an easy excuse not to do anything constructive. The $130 million would do a lot more if it was put into transportation to upgrade the system in Newfoundland and the maritime provinces. Many other things could be done. The Atlantic Provinces Economic Council recently released a report which I have not had a chance to study thoroughly, but I am sure the government would find many useful areas in which to spend that amount of money if it was seriously interested in promoting development in the Atlantic region.
Basically, to my mind and to the minds of many members of the business community in Atlantic Canada, this particular measure will tend to give a tax break to individuals and corporations that for other reasons have decided to invest. It will give them a tax break and a windfall in dollars. I should like the government to demonstrate that this particular measure will have a positive effect on the Atlantic economy related to the amount of dollars it will cost.
The hon. member for Broadview-Greenwood asked the gov-erment to show the correlation between the cause and the effect, the correlation between investment tax credit and whatever potential positive effects there may be in various areas, whether it be research and development or regional develop-
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ment. 1 do not think it is too much to ask a government which is proposing to spend this amount of money, that its homework be done to the point that it knows the effects of this particular expenditure.
I do not know what more I can add. The parliamentary secretary has attempted to show a correlation. Frankly I do not think he has. Perhaps he can try again. If the government is serious about regional development, 1 implore it to use this estimated $130 million in some other fashion. It could be used to upgrade the transportation system. It could be used through the Department of Regional Economic Expansion to promote real development in the region. I ask the parliamentary secretary if he has any other data which might provide this correlation. Given the representations of the hon. member for Broadview-Greenwood, it almost seems fruitless, but my frustration is no less than his.
it seems to me a very substantial amount of money is being spent, collected, or not collected, to no end at all. When the government is practising restraint on the backs of the unemployed and the poor people in the region, I do not see how an effective expenditure of hundreds of millions of dollars can be justified unless it is shown that it will create some investment which will create jobs, employment, and economic activity in the region.


Ronald Stuart (Ron) Ritchie: Mr. Chairman, I have just a brief comment which might be of value to the hon. member. There is one specific value to these proposals which 1 am sure he would have in mind. For nearly a year firms in the Atlantic provinces and all across Canada have been making their decisions in light of these proposals, because these proposals are in effect when passed for the current year. When the Minister of Finance in his statement on second reading made the comment that he had muted enthusiasm for some of the proposals in this act, indirectly he was emphasizing the fact that whether or not we agree, some of these things, in fairness, must go through at least for the current year. In fact I think there are far more powerful reasons in this case. While it is very difficult to measure quantitatively the effect of these inducements on investment, because one cannot really know what would have taken place without them, it is a certainty they have some effect.
All hon. members from the maritimes and other parts of the country will be interested in the new additional investment tax credits now given for investment in various transportation equipment and facilities. It is a matter which should be of interest to anyone in thp Atlantic provinces.


Mr. Orlikow:: Mr. Chairman, for years now members on this side of the House, members of the New Democratic Party, and members of the Conservative party when it was in opposition, criticized very vigorously the assistance given to scientific research and development during the time when the Liberal party was the government. They criticized the programs and policies vigorously because they were such obvious failures.

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In June of last year, when the then minister for science and technology announced a program with a proposal that by 1983 we would increase the percentage of gross national product spent in this country by the government, by universities and by private industries on research and development from the then 1 per cent to 1.5 per cent, he was criticized by the present Prime Minister, who spoke for the Conservative party, as well as by the spokesman for our party. Both of those hon. members said that even if we achieved that goal within the five-year period we would still be spending substantially less in terms of percentage of our gross national product for scientific research and development than is being spent by most industrialized countries in the world.
I am not going to go over the figures again, as the parliamentary secretary gave some of them a few moments ago. We said then that this was not enough and we called for increased efforts in government laboratories, in universities and in private industries in the field of research and development. We all agreed that what we should be aiming for was an expenditure of 2.5 per cent of gross national product, and sooner than 1983. That government, having set as its goal 1.5 per cent of the gross national product by 1983, proceeded within less than three months, because of the so-called need for restraint, to cut back on the money expended by the federal government, either through its own research laboratories or through grants to universities. It cut back on already woefully inadequate funds provided for scientific research.
This is not the time to talk about what is happening in government research laboratories operated by the National Research Council or by various departments concerned with agriculture, fisheries and forestry, but I want to deal with the situation in relation to the government's apparent belief that we can do better than we have in the past through some kind of greater concessions to the private sector of our economy.
Former governments, Liberal and Conservative, have tried to encourage private industry in this country to become involved in research and development. This government may believe that the carrots proffered to the private sector by former Liberal governments were not big enough or juicy enough. However, the former government did have programs. It had the Industrial Research and Development Incentives Act, and it had a program for the advancement of industrial technology. Those programs did not succeed.
I was not here when my colleague, the hon. member for Broadview-Greenwood spoke, as I was attending a committee meeting, but I am certain he did not suggest that all research should be done by the government and monitored by government bureaucrats. No social democrat believes that. In spite of the fact that most members of the Conservative party are ignorant of the politics of government in other countries, there is a social democratic government in Germany and there was a social democratic government in Sweden for some 40 years. There have been social democratic governments in Great Britain, Norway, Belgium, Holland and Denmark. Most of

those countries are far ahead of Canada in terms of the efficiency of their industry.
In all those countries which have or have had social democratic governments, whose philosophy and policies are very much like those of the NDP, the private sector is alive and flourishing.


An hon. Member:: And trying to defeat the government.


David Orlikow: And often trying to defeat the social democratic government, as is its right. There is a vast difference between those governments and this government or the former Liberal government. Those governments are not bound to wipe out or destroy the so-called free enterprise system. They accept the fundamental reality that we live in a mixed economy in which some parts of the economic system are owned and operated by the state and some have less government ownership or involvement. I think Sweden and Germany, which have or have had social democratic governments, have less public ownership than we have in Canada.
We have a tremendous amount of public ownership. We have a publicly-owned railway brought in by Liberal and Conservative governments, not by the social democrats. We have Air Canada, a publicly- owned air transport system, and in virtually every province we have publicly-owned electric power systems. 1 do not think there is a member in this House from any party who would suggest that was a mistake because we are getting electric power in Canada much cheaper than they are in the United States, for example, with privately-owned systems.
In the three prairie provinces we have publicly-owned telephone systems. In my province of Manitoba we have had a publicly-owned telephone system since 1909, brought into being by a Conservative premier, Sir Rodmond Roblin, whose name, I am sure, is known at least to some members in this House. We have a Conservative government in Alberta which not so long ago bought control of Pacific Western Airlines. When we advocate public ownership or government involvement in planning we are talking about hard reality and not some kind of unproven or untried theory.
Let me talk for a few minutes about this particular item. I have to assume that the parliamentary secretary suggested the government was going to make it easier and more profitable for industry in this country to spend money and effort on research and development, and that this is going to change the sorry state of research and development in this country. I do not want to go over the figures again, but among the industrial countries of the world Canada is, if not right at the bottom, close to the bottom in terms of the percentage of gross national product spent on scientific research and development. When we consider applied research we find that Canada is the last of eight industrial countries in terms of dollars devoted to industrial research and development.
Not only is the quantity of research and development conducted by industry in Canada very poor, but the quality
November 1, 1979

appears to be very poor. For example, it has been estimated that of the 110 significant innovations in the world since World War II-which covers a wide range of the science intensive industry including electronic components, pharmaceutical plastics, computers, among others-none were first developed in Canada. This survey covers the time period up to 1970, but recent data suggests that Canada still shows a poor performance. Of the 926 companies identified by Statistics Canada that were funding research and development in Canada during 1973, only $10.8 million was received from foreign countries as payment for patent licences and technological know-how. These same companies expended $75.6 million abroad for technology.
What are the reasons for the poor level of industrial research and development in Canada? There are two major reasons. First of all, most of Canadian industry which is Canadian-owned is in the resource extraction area, such as mining and forestry. Such industry requires very little research and development.
For example, in 1969 among the 14 nations belonging to the Organization for Economic Co-operation and Development, Canada had the second lowest percentage of workers in the manufacturing area, 23 per cent, and it has gone down since. Ireland was the lowest at 20 per cent. West Germany was 28 per cent, the United Kingdom 36 per cent, and the United States 34 per cent. The second reason is that Canada has the highest degree of foreign ownership and control among the OECD countries. If one thinks of all the major industries-the automobile industry, the rubber industry, the electrical industry and so on-virtually all of them are almost completely dominated in this country by the multinational corporations.
The Toronto Star conducted a survey about one year ago. It contacted approximately 20 of the major industrial corporations in this country, General Motors, Ford, Westinghouse, Kodak, and Xerox among others. It knew how much business these companies had done in Canada, the amount of sales and so on. It asked each company how much research they did worldwide and how much research they did in Canada. The answers were very illuminating, and ran from no research and development for Kodak of Canada to virtually nothing for the automobile companies. That outlines the problems which this country faces and which this government is ignoring. These large multinational companies must do their fair share of research and development in Canada, and it must be comparable with their sales activity in Canada. There is no evidence that if we give them tax concessions they will do the job.
That brings me to small companies which employ a large number of people in this country. Small companies are usually Canadian-owned and are interested in going ahead. This system does not help small businesses because they must make a certain amount of money before they can take advantage of the tax benefits proposed in this bill. We need more than just a tax gimmick to get companies which operate in Canada to do research and development here. We need a much more aggressive and much more planned system, as well as a great deal
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more government involvement in the form of consultations, co-operation and direction.
I had the opportunity recently to spend a couple of days in Japan. While there our group received a briefing by the Canadian ambassador to Japan. I want to say to the parliamentary secretary that his description of the role which the Japanese government plays in how the country will operate and how industry will be encouraged to expand to meet the needs of the domestic market and the international market so that Japanese workers will have jobs, was very broad.
Japan has a free enterprise system of government. The socialist party is not very strong there. Flowever, any resemblance between the free enterprise system of Japan and that of Canada is almost completely coincidental because there the free enterprise government plays a very active role. It meets on a day to day basis with companies, and it insists that what they do when these companies expand should help, not just the companies, but the Japanese people by providing better jobs and more efficient, technologically oriented industry. Until Canada can achieve that level of expertise, these tax concessions which are being proposed will not begin to meet our very serious failure to modernize and make Canadian industry competitive not only in the Canadian market but in the international market where we must get our share of sales if our unemployment figures are to remain low over the next ten years or 20 years.


[Stage Direction]
Clause agreed to.
Clauses 41 to 65 inclusive agreed to.
On clause 66-
Bob Rae: Mr. Chairman, earlier in our discussions the parliamentary secretary told us that if we were to have a discussion on income debentures, bank taxation and the current situation with respect to the banks and what was happening, that had best take place on clause 66.
I should like to put certain questions to the parliamentary secretary. First of all I should like him to explain how it is that the effective rate of taxation of the banks now stands at 10.7 per cent in the third quarter of 1979, even though no new term preferred shares or income debentures have qualified for preferential tax treatment since November, 1978?
I should like him to tell us how much longer we can anticipate that this low rate of taxation will apply. The conclusion I would draw, without wanting to say any more, is that in a sense the door has been locked well after the horse has bolted. Can the parliamentary secretary explain how it is that we have reached the stage where the rate of the effective taxation is so low, and can he tell us whether the government or the Minister of Finance have any intention of addressing this particular problem in the next budget?


Ronald Stuart (Ron) Ritchie: Mr. Chairman, I am not familiar with the figure the hon. member has quoted. Such data as I have is not quite as recent as the third quarter of the fiscal

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year, which would ordinarily come at the end of October. The figures I have show-and one assumes that this is largely because of the effect of term preferred shares-that the effective tax rate on banks, which had been in the same league as other corporations in the years 1972 to 1975, was around 46.5 per cent, 47 per cent and 48 per cent. They began to decline in 1976, and by 1978 had reached the level of about 29.4.
I think it is reasonable to expect there might be some decline into 1979, because the full effect of term preferred debentures taken on before the budget of November, 1978, would not have been reflected up to that time. For instance, one might cite the $1.5 billion of term preferred debentures that were used for the purchase of PetroCan would not have been in that figure. I thought the hon. member might share some of the feelings that I had on that point. At the moment I have no later figures that I could cite to the hon. member that would really measure the effect. It would not surprise me if it were below 29.4 per cent but I find it very difficult to imagine it being as low as ten point something.


Bob Rae: I can assure the parliamentary secretary that the figures reached my research department and myself, just judging from the statement of the quarterly-
Mr. Chairman, if the hon. member for Burlington is going to be on television sitting behind the Prime Minister, he had better learn how to smile. His unpleasant visage is causing great concern to the children of the country and certainly to many members, particularly on Hallowe'en. As we are in the Hallowe'en season I think he should take his mask off.


Mr. Andre:: Look around you.


William James Kempling: They would frighten anybody. They still have their masks on.


Bob Rae: These are the members that he is frightening and I think he should be aware of that.


Harvie Andre: Who is the Sasquatch beside you?


William James Kempling: Look at the Ayatollah.


Bob Rae: Mr. Chairman, I know it is late and we have been here through a long debate. I should like to ask the parliamentary-secretary if between now and tomorrow, he could look at the quarterly figures that are available for 1979 and look at the fact that in the second quarter of 1979 the Canadian Imperial Bank of Commerce received a tax credit. I cannot cite a figure but I think it is in the area of $1 million. For the third quarter of 1979, both the Banque Provinciale and the Banque Canadienne Nationale, before their merger, received bank credits of over $4 million.
The question in the minds of those Canadian taxpayers who have been made aware of these figures is that if the loophole has been closed, as it is supposed to have been, how is it we now see such a low rate of effective taxation? According to my calculations, in the case of the five majors it is down to 10.7 per cent. I would ask him to look at the figures and, if they are wrong, I will gladly correct them before this Committee of the

Whole House; but if it is that low, what do we intend to do about it? My concern is that it may not be adequate because of the length of time over which these term preferred shares take place. We may be looking at a situation in which significant amounts of revenue may be lost to the treasury as a result of these measures which took place, I think, before this government came to power.
I suggest that some extraordinary measures may be necessary in order to remedy the situation, so that we do not see a very low level of taxation taking place over an extended period of time.
I would call it ten o'clock, Mr. Chairman, and I would appreciate it if the parliamentary secretary would endeavour to get that information for tomorrow.


Mr. Lalonde:: Or the minister.


The Assistant Deputy Chairman:: Order, please. It being ten o'clock it is my duty to rise, report progress, and request leave to consider the bill again at the next sitting of the House. Is it agreed?


Some hon. Members:: Agreed.
Progress reported.



PROCEEDINGS ON ADJOURNMENT MOTION

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

Marc Lalonde: Mr. Speaker, the rules of this House give us only seven minutes to express a point of view at this time. It is difficult to control one's anger for seven minutes on the policy of this government with respect to oil and energy prices in particular. Yesterday the Economic Council of Canada released a review the French title of which is "The Burden of Inertia". I think one could hardly find a better description of this government, particularly with respect to its energy policy.
We have a government that does not listen to public opinion. We saw how this government does not take into account public opinion with respect to Petro-Canada. Not only do we have a deaf government, we now have before us a government which has grown mute when it comes to energy prices and oil prices in particular. The provinces have expressed very clear opinions-the province of Alberta, the province of Ontario. But the
November 1, 1979

Canadian public and this House have been unable to extract any information whatsoever from this government on the policy it intends to carry out with respect to oil prices. That is showing contempt for this House and the Canadian public. It is unacceptable that after being in power for more than five months the government should still be unable to say to this House what it is actually proposing to Canadians in terms of an oil price policy.
Yesterday, the Minister of Energy, Mines and Resources (Mr. Hnatyshyn) appeared before the Standing Committee on National Resources and Public Works and we were unable to get any information whatsoever from him. Even members sitting on the government side could not get any information at all from that minister. That completely withrawn approach of the government must be denounced, and I am sure, rejected, and considered unacceptable by Canadian public opinion. [English]
The irresponsible attitude of the present government concerning the matter of energy pricing, oil pricing in particular, is to be condemned. The province of Ontario and the province of Alberta have come out with clear statements on where they stand. This government will not tell the House and the Canadian public where it wants to take the people of Canada with regard to energy pricing, oil pricing in particular.
At the present time there is an agreement in existence with the provinces which provides for a $ 1 a barrel price increase in January. This would guarantee peace with regard to energy pricing until July 1, 1980. We now hear the government wants to dump this agreement and to tax the people even more by substantially increasing the price of oil. It wants to do this although we have an agreement that has been signed, sealed and delivered on this subject, with the province of Alberta.
This government only thinks about increasing the burden upon the Canadian public. We now have the highest interest rates in our history. Under this government we are heading toward the highest ever prices for oil and gas. According to what we can distinguish from this government's policy, every Canadian home owner and car driver will be taxed an additional $200 at least in the next year. That is over and above the additional cost that will be incurred because of the high interest rates this government has brought forward since taking office in early June.
These are steps that should be fought by all Canadians. They will be fought by the opposition both inside and outside this House. Our position is that we should not be chasing after international prices. That position was made quite clear in 1976 in our white paper on energy. Hon. members can find it on page 127 of our white paper on energy, it reads:
It is the federal government's objective to see domestic oil prices increase to a level sufficient to bring on new Canadian supplies. To the degree that this level is lower than international oil prices it is a differential for the benefit of Canadian consumers and Canadian producers, industrial and agricultural.
Let us have the price determined in Canada by Canadians for Canadians. Let us not slavishly follow a price set up by the
Adjournment Debate
international cartel which is called the OPEC countries. The attitude of the government in taking this country to international prices is one which will drive this country into a recession next winter and next year, in addition to the high interest rates being imposed on our citizens at this time. I urge the government to reconsider its course and to maintain the policy which the previous government set up, one of moderate and gradual increases in price and one where the highest level would be determined by the cost of finding and distributing new resources in Canada rather than being at the mercy of the OPEC countries.


Some hon. Members:: Hear, hear!


Robert Jarvis: Mr. Speaker, 1 would point out to the hon. member for Outremont (Mr. Lalonde) that we have had 11 years of inertia. We have seen the maritimes left totally dependent on foreign oil and gas; we have had a nation without an energy policy for 11 years-nothing under way though proven supplies were falling.
The government is working today on a national oil policy based on energy self-sufficiency. Oil self-sufficiency for Canada is essential. In order to achieve self-sufficiency we cannot continue to rely on foreign sources of oil over which we have no control as to the price charged or the quantities available. The government is now working with the provinces and the industry to establish a domestic price for oil which will provide incentives for, and cover the cost of, the production of new oil. Appropriate pricing can also contribute to reducing growth in demand. We cannot continue to expect that international supplies of oil will be available in quantities sufficient to meet rapid demand growth. We must plan to get through the next decade with more limited requirements.
Among many other important matters which are being discussed with the provinces to obtain agreement on an energy policy package are the implications of an energy price increase. These include the effects on home owners, car drivers, industry and so on. The macro-economic implications are also being studied by my department.
In his original question the hon. member referred to a communication from the provincial premiers following their meeting on October 23. They asked the Minister of Energy, Mines and Resources (Mr. Hnatyshyn) to re-establish the technical advisory committee on petroleum supply and demand and to improve formal communication between the provinces and the National Energy Board.
In reply to the premiers the minister noted that he was reviewing the current and prospective oil product supply situation and is likely to require reconvening the technical advisory committee, particularly in light of its tenuous legality. He also noted that the National Energy Board data is regularly reviewed with the provinces and that the next such review was scheduled for November 5. This government will shortly announce a Canadian energy package based on pricing for

November 1, 1979
Adjournment Debate
Canadians guaranteed to ensure energy self-sufficiency in Canada, by Canadians and for Canadians, by 1990.


ENERGY-TANKER TRANSPORTATION OF CRUDE OIL ON WEST COAST
James Ross Fulton: Mr. Speaker, my question is in relation to Alaskan oil, and before I get too far along with it I would like to put a few quotations on the record. The dilemma with which this country is now faced is the result of an inheritance from the previous Liberal administration, and the difficulty is that the Alyeska line was built from the north slope down to Valdez, and tankers have been transiting down the British Columbia coast for the past two years. The Liberal administration did absolutely nothing in terms of dealing with either liability, jurisdiction, clean-ups or any of the ongoing difficulties which were arising at that time.
The Liberals simply brushed those off, and in speaking with the Prime Minister (Mr. Clark) two weeks ago and questioning him in relation to the difficulties on the west coast and in relation to both the Foothills proposal and the northern tier proposal as well as the TransMountain proposal, I recognized that he has in fact inherited a very serious difficulty from the Liberal party.
I would like to quote first from the Thompson statement of proceedings from 1978, pages 62 and 63. In the first one he states very clearly in his testimony that "a dangerous situation now exists in the waters of southern British Columbia." That was in 1978. On page 63 he states:
Since an increasing amount of this traffic is originating from Valdez and travels along the entire outer coastline of British Columbia, in the middle of our fishing zone, this assessment must encompass a broad geographic region.
He was speaking in relation to environmental, social, navigational and safety aspects of the tankers which were already there. From a recently released environmental impact statement by Cecil Andrus, from pages 37 and 39 I quote as follows:
Presidential Executive Order 12114, signed January 4, 1979, exempts from detailed environmental analyses those portions of a major federal action which might have an effect on the environment of a foreign nation.
That is directed specifically at Canada. At page 39:
If a major oil spill occurred in the Strait of San Juan de Fuca, Port Angeles Harbour, or along the cross-sound pipeline route, it would affect marine resources, water quality, shorelines, shoreline structures, boats, and waterfowl over a wide area. Such an impact could also affect the Pacific coastline, the U.S.-Canadian shorelines of the Strait, and Puget Sound.
Further down on the page:
The cumulative effect of small chronic oil spills is expected to have more adverse impacts than an occasional major spill.
The point I wish to make in all of this-and there are further quotations I will give in a moment-is that the federal government has not given appropriate sanctions or studies in relation to tanker traffic which exists off the coast of British Columbia. The Prime Minister and the new government as well as the previous government of this country have allowed the United States to blackmail us economically and environmentally, and the Prime Minister has done absolutely nothing

to deal with the deadline the United States Congress and President Carter are now setting, which is December 6.
The Prime Minister has done nothing to cut through all our regulatory processes, nor has he done anything else to expedite the construction of a line, from which we will get absolutely no oil by American law, and I think we have to consider the fact that the Alyeska line is constructed. Tankers are moving down our coast at this point, and we have no legislation in place to protect Canadians. The government seems to be sitting idly by hoping, for some strange reason, that either Trans Mountain will suddenly develop itself or that Foothills will suddenly come into flower, knowing full well, as the Prime Minister did when he responded to me, that the National Energy Board had ruled Foothills deficient. Quite frankly, for a Prime Minister to stand up when the national regulatory agency has ruled a corporation deficient makes a mockery of the National Energy Board, and I make no bones about it. I think that is quite improper.
There are two further quotations I would like to give. One is from the U.S. Department of the Interior. It is a news release dated October 15, 1979. The quotation is found at the bottom of the page:
The permitting process is exclusively within our federal and state jurisdictions, thereby minimizing risk of potential delay resulting from obtaining approval from the Canadian government.
Quite clearly, the U.S. government is not interested in what this government has to say, and I must say neither the corporate sector nor the Liberal nor Conservative governments have actively pursued options of either tanker safety or minimizing of spills, and also in terms of spill clean-ups on the Pacific coast have not actively pursued the possibility of either moving oil from Alaska in the northern region by rail or having Petro-Canada initiate an involvement in the hearing process in order to pursue options other than simply allowing Foothills to have access to the corridor which is Canadian territory. It is in fact our jurisdiction, and we have regulatory processes in this country which should be heard and not be circumvented either by the Prime Minister or by anyone in the House.


Robert Jarvis: Mr. Speaker, may I, through you, first congratulate the hon. member for Skeena (Mr. Fulton) for joining us in condemning the previous government for leaving us with a dangerous situation with respect to oil, particularly on the west coast. Protection of our environment, of our Canadian coasts and of our fisheries, is the prime goal of this government and one which we intend to pursue with all energy and direction.
With respect to the hon. member's reference to the Department of the Interior and to the position of the U.S. government, I would advise him that the U.S. government has requested that this government put forward its position. On October 20, after this question was first raised by the hon. member, a supplementary aide memoire was sent to the U.S.
November 1, 1979

government stating that the Canadian government's position was unchanged. I will read the text of the aide memoire now since it is brief. It reads:
The United States government is referred to its request of February 28, 1979, for an expression of Canadian views and preferences regarding various proposals for transporting Alaskan and other crude oil to the U.S. northern tier and other inland states. On April 16, 1979, the Government of Canada told the United States government of its preference for the proposal put forward by Foothills Oil Pipe Lines Ltd., of Calgary. On August 20, 1979, Foothills significantly modified its application eliminating the need for tankers by proposing an all-overland pipeline route from Alaska. The Government of Canada expressed its clear preference for the modified Foothills proposal in an aide-memoire of September 28, 1979, because it would reduce the number of tankers travelling along the west coast.
On October 15, 1979, Foothills informed the Government of Canada that for a number of reasons it was withdrawing from the contest as an applicant, at least for the present. The Government of Canada remains firm in its objective, as stated on September 28, of minimizing the risk of environmental damage on the west coast from oil tanker traffic and of seeking means whereby current risks, including those in the sensitive inner waters of Juan de Fuca strait and Puget Sound may, if possible, be reduced. It should also be said again that the Government of Canada cannot make any final decisions until completion of National Energy Board consideration of the application now before it.
The President of the United States will be visiting Ottawa on November 9 and 10, 1979. The Prime Minister of Canada looks forward to this opportunity to discuss the full west-to-east pipelines question with him at that time.
Mr. Speaker, I should also add that the United States is aware of the time required for the completion of the Canadian regulatory process-


The Acting Speaker (Mr. Scott, Victoria-Haliburton):: Order, please. The hon. member for Ottawa-Vanier (Mr. Gauthier).
[ Translation]


NATIONAL UNITY-QUEBEC REFERENDUM-INQUIRY WHETHER PUBLIC SERVANTS WILL HAVE FREE VOTE
Mr. Jean-Robert Gauthier (Ottawa-Vanier):: Mr. Speaker, I asked for a debate this evening to discuss further the important question of the participation of federal public servants in the referendum campaign which will be held in Quebec next spring. On October 17 last I asked the Prime Minister whether his government would clarify the legal position of federal public servants in the referendum campaign. Mr. Speaker, freedom of speech is one of the fundamental rights of a free society. Each citizen, whether he is a public servant or not, must have this right and be able to exercise it. In the specific case of federal public servants, the oath of allegiance must not be viewed as forbidding this freedom of speech, especially in the case of a referendum and in view of the importance of this referendum for Canada as a whole.
There are, of course, certain restrictions to the freedom of speech of certain public servants involved through their duties in the development and implementation of government policies. However, to suggest that all public servants must be excluded from some sort of political involvement is not quite realistic. Most public servants are not involved in the development of policies and do not have access to the type of
Adjournment Debate
information which could threaten the government. Because of this, I believe that they should be excluded from section 32 of the Public Service Employment Act. These public servants should be free to take part in an election or a referendum campaign.
Indeed, this is essentially one of the recommendations of the committee on management and personnel, the famous D'Avig-non committee, which has been referred, so we are told, to a cabinet committee for consideration or indefinite shelving, despite the fact that the D'Avignon committee realistically and democratically recommended that most public servants be excluded from section 32 of the act and be free to take part in an election or a referendum.
It must be emphasized, however, that some officials must still be restricted from participating in elections in which I include the referendum, by reason of their responsibilities. It is to be regretted that the Progressive Conservative government could not recognize the soundness of the proposals put forward by the D'Avignon committee and accept the suggestion that there are three classes of civil servants: those who should be free to participate, those who should ask permission before they can do so, and those who should be restricted or completely forbidden from participating. I would have hoped that this government would not have hidden behind the screen of the Public Service Commission, that it would have shouldered its responsibilities and taken a position. Unfortunately it preferred to hide behind the Public Service Commission. Well, they hide behind this committee, that committee-everything is referred to committees. This is a no action government.
I know well that the Public Service Commission delivered an opinion yesterday based on legal advice given to them by justice. It was a recent one because I understand that they also had one, an official one-

-officieuse as we say in French, an informal opinion that was given to us in July or June last. According to my information, there is contradiction between the two and I wonder if in the spirit-

-of freedom of information, can the Prime Minister (Mr. Clark) or his parliamentary secretary table those two legal opinions in the House so that members of Parliament and the Canadian public can see the difference between the opinion given unofficially in June or July saying no, they cannot participate, and the one given recently saying yes, they can participate? I want to know what the reasons were for this change of face or this change of mind.
Also I would like to take this opportunity to question the Prime Minister. A policy was announced last week regarding the contributions of Crown corporations which are supposed to be at arm's length and not under the auspices or under the

November 1, 1979
Adjournment Debate
control of the government. Instructions were given by the Prime Minister to Crown corporations, specifically Air Canada and Canadian National. He said, "You do not contribute funds to the support of the yes side of the referendum debate". I question these policies because they contradict somewhat the position of the Prime Minister regarding freedom of participation for the public service. On the one hand he said that they are free to go and participate in the referendum, and on the other hand he said to the Crown corporations which are supposed to be at arm's length with the government that no, they cannot participate. I would like to have from the parliamentary secretary a logical answer to this rather tenuous and rather difficult reasoning of the Prime Minister which, in my view, does not stand up to logic or reason.
Finally, I and many other Canadians are asking the Prime Minister: where is the leadership; where is the Canadian leadership; where is the Prime Minister on this question of the Quebec referendum? I speak to you, Mr. Speaker, as a Fran-co-Ontarian, not as a Quebecker, a fellow born and raised in Ontario. I am a fourth or fifth generation Ontarian. I believe strongly in this country of mine, Canada. [ would like to see my Prime Minister involved directly in this referendum campaign because I think the fabric of my country is at stake. I asked him, "Will you participate in this debate", and he said no.
I say to him, is he going to hide his head in the sand like an ostrich, is he going to shadow box with the Canadian public and then say, "You see, I won the referendum?" Is he going to suggest that because he shadow boxed himself into a situation where he did not know what was going to happen and in which he did not participate-is he then going to claim that he saved the country? Is this the kind of Prime Minister we are going to have, or is the parliamentary secretary going to tell me tonight that the Prime Minister will once and for all tell the people that he will vote no, and encourage all Canadians to say no to this referendum, or is he going to wishy-washy himself into a position which nobody understands yet? Will he please clarify the situation for me tonight?


Mr. John Bosley (Parliamentary Secretary to Prime Minister):: Mr. Speaker, I have had some conversations in the past with the hon. member for Ottawa-Vanier (Mr. Gauthier), and tonight he again has done what he has done in the past and has done in the committee. He starts with one question and winds up with about six more. I am perfectly prepared to get him some other information if he wants that, but I think perhaps the fairest thing to do is deal with the original question which is before us for the late show, and which involves the matter that we promised we would deal with, providing the House, as we did at the Miscellaneous Estimates Committee, with the position given to us by the Public Service Commission after seeking legal opinion.


An hon. Member:: That is their opinion.


John William Bosley: That is also the opinion of the government, and that is the position that needs to be made clear perhaps to the hon. member.
1 think the hon. member has a copy of this position, but for the record I should perhaps read some of it so that it is clear. It states in part:
-the commission has come to the conclusion that as the law now stands it is possible for federal public servants to engage in some referendum activities without violating section 32.
Without reading all of the letter perhaps I should read the caveat clauses, which are these:
-federal employees must recognize that there may well be partisan party work going on during the campaign.
As the hon. member knows, it is that section in relation to partisan party work to which we are referring.
It states:
-there may well be partisan party work going on during the campaign. Therefore, the commission considers it appropriate to advise federal employees to take special care and use their own discretion to ensure that any activities they undertake do not actually engage them, as such, in partisan party activity.
Furthermore, the commission must also emphasize that in general, federal employees, in deciding whether to become involved and, if so, in deciding what the specific nature of that involvement might be, should at all times be conscious of their obligation not to engage in activity which might adversely affect their ability to perform their functions in the federal public service in an effective and credible manner.
We also emphasize that. It then continues:
The foregoing consideration should be of particular importance to senior federal employees, especially those directly involved in. . . policy advice to the government.
Finally, in all instances, employees are advised to consult with their deputy heads-
I think that is perfectly clear and I know of no other position taken by the Public Service Commission, to which the hon. member alludes. If he can give me some evidence that there is,
I would be happy to search it out, but I do not know of any.
Our position on why Crown corporations should not make financial contributions to either side of the referendum campaign is probably most easily understood as being the same reason that we feel strongly about the rights and privileges ol senior public servants, to which the hon. member refers. We suggest that the act that governs the behaviour of individuals does not prohibit activity in the referendum, subject to some limits. I suggest that it is equally appropriate to say that federal Crown corporations, which belong in some sense to all Canadians, are in a difficult position if they take a position one way or the other.
There is a question as to what the federal government's role should be in this-


The Acting Speaker (Mr. Scott, Victoria-Haliburton):: Order, please. The motion to adjourn the House is now deemed to have been adopted. Accordingly, this House stands adjourned until tomorrow at 11 a.m.
At 10.29 p.m. the House adjourned, without question put, pursuant to Standing Order.

Friday, November 2, 1979