1981-01-16

Mr. Gordon Taylor (Bow River):: Madam Speaker, I rise on a matter of urgent and pressing necessity under the provisions of Standing Order 43. Whereas many farmers in Alberta and, indeed, in all the prairie provinces are unable to deliver their quotas because local elevators are jammed and some farmers deliver only by travelling many miles to elevators on alternate rail lines, and whereas farmers require a cash flow, the same as any other business, I move, seconded by the hon. member for Red Deer (Mr. Towers):
That the Minister of Transport move aggressively by making more cars and trains available immediately to move our grain from all of the prairie provinces.


Madam Speaker:: For presentation, this motion requires the unanimous consent of the House. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.


CANADIAN BROADCASTING CORPORATION
Mr. Benno Friesen (Surrey-White Rock-North Delta):: Madam Speaker, my motion is presented under the provisions of Standing Order 43. On Wednesday evening, January 14, the CBC "National" in Vancouver rebroadcast the first five minutes of news used the night before. This rerun happened the same day the corporation was defending its application for a proposed new CBC-2 network. Since CBC-2 will, if approved, be largely a schedule of rebroadcast shows, I move, seconded by the hon. member for Richmond-South Delta (Mr. Siddon):
That the CBC be urged to resist the temptation of using the CBC "National News" as a dry run for a possible CBC-2 network.


Madam Speaker:: For presentation, this motion requires the unanimous consent of the House. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.


FISHERIES
Mr. Ted Miller (Nanaimo-Alberni):: Madam Speaker, I also rise under the provisions of Standing Order 43 on a matter of pressing necessity. Whereas U.S. senator, Charles Percy, has indicated there will be movement in the U.S.-Canada east coast fisheries treaty, whereas this movement can only result in further compromises on the part of Canada, and whereas this House has unanimously endorsed the present treaty and rejected previous demands for further changes, I move, seconded by the hon. member for Skeena (Mr. Fulton):
That this House reaffirm its expectation that the current agreement awaiting U.S. Senate approval shall be signed so harmony can once again occur between U.S. and Canadian fishermen in Atlantic Canada.


Madam Speaker:: For presentation, this motion requires the unanimous consent of the House. Is there unanimous consent?


Some hon. Members:: Agreed.


Madam Speaker:: Is it the pleasure of the House to adopt the said motion?


Some hon. Members:: Agreed.


[Stage Direction]
Motion agreed to.

no)

Mr. Andre Maltais (Manicouagan):: Madam Speaker, I ask the unanimous consent of the House under the provisions of Standing Order 43 to move a motion on an important matter of pressing and urgent necessity.
In view of the lay-off of a thousand workers during the past year on the North Shore as a result of the closing down of the ITT at Port-Cartier, and following the 650 further lay-offs by

January 16, 1981
the Iron Ore Company of Canada at Sept-Iles and Scheffer-ville, I move, as the member for Manicouagan, seconded by the member for Broadview-Greenwood (Mr. Rae) and for Central Nova (Mr. MacKay):
That the House urge the Minister of Employment and Immigration (Mr. Axworthy) to spare no effort and take all means at his disposal to help without delay the workers of Sept-Iles and Schefferville recently laid off by Iron Ore.


Madam Speaker:: The House has heard the motion of the hon. member. The presentation of this motion under Standing Order 43 requires the unanimous consent of the House. Is there unanimous consent?


Some hon. Members:: Agreed.


Madam Speaker:: The House has heard the wording of the motion. Does the House agree to pass the said motion?


Some hon. Members:: Agreed.


[Stage Direction]
Motion agreed to.

(English]

Mr. Walter McLean (Waterloo):: Madam Speaker, I rise on a matter of urgent concern which I hope will receive the unanimous agreement of the House. In the light of reports of over 600 persons killed in the last five days in fighting in El Salvador and of 9,000 deaths due to political violence in 1980, and in light of Canada's support for the United Nations resolution of December condemning military aid to El Salvador, followed by the present visit of the Prime Minister (Mr. Trudeau) to Mexico City and the recent visit of the Secretary of State (Mr. Fox) and other ministers to Mexico, signifying Canada's interest in Central America's concern, I move, seconded by the hon. member for Edmonton South (Mr. Roche):
That this House urge the government to increase its diplomatic efforts to stop the flow of arms to El Salvador, and that the Secretary of State for External Affairs be encouraged to meet with the seven-man diplomatic mission of the revoln ;onary democratic front in Ottawa next week.


Madam Speaker:: For presentation, this motion requires the unanimous consent of the House. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.


AIRPORTS
Mr. Dave Nickerson (Western Arctic):: Madam Speaker, I rise under the provisions of Standing Order 43. In view of the fact the Department of Transport has reduced hours of maintenance at northern airports and apparently is also considering transferring MOT airports to territorial authorities which do not have the money adequately to maintain and expand them, I move, seconded by the hon. member for Prince Edward-Hastings (Mr. Ellis):
That the Minister of Transport cease his systematic downgrading of airports north of 60.


Madam Speaker:: Presentation of this motion requires the unanimous consent of the House. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.


AUTOMOTIVE INDUSTRY
Mr. Ian Deans (Hamilton Mountain):: Madam Speaker, under the provisions of Standing Order 43, I move a motion of urgent and pressing necessity. In a report prepared for the Ontario government which was leaked and published today, it is indicated that within the auto industry, at the very best, one in five jobs will be lost in Canada, and that in Ontario the losses will be in excess of that figure. 1 therefore move, seconded by the hon. member for Winnipeg North Centre (Mr. Knowles):
Thai the government require the auto industry to appear before the finance committee of this House to justify its actions and in particular the raising of prices 36 per cent over the prices of the 1980 model year, and for maintaining a 16 per cent gap between the price of similar cars sold in the United States, thereby contributing to the disastrous economic conditions reported today.


Madam Speaker:: For presentation, this motion requires the unanimous consent of the House. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.


GOVERNMENT ADVERTISING
Mr. Girve Fretz (Erie):: Madam Speaker, I rise under the provisions of Standing Order 43 on an issue that has a direct impact on Canada's youth. It is a well-known fact that credible researchers and doctors have warned of the possible
January 16, 1981

long-term, harmful effects of the prolonged use of marijuana, especially such use by young people. In light of these warnings, I move, seconded by the hon. member for Surrey-White Rock-North Delta (Mr. Friesen):
That this House urge the government to divert some of its huge and proposed advertising budget toward a sustained, intensive education program designed to alert Canadians to the potential hazards of marijuana use.


Madam Speaker:: For presentation, this motion requires the unanimous consent of the House. Is there unanimous consent?


Some hon. Members:: Agreed.


Some hon. Members:: No.



ORAL QUESTION PERIOD

[Stage Direction]
[ English ]

Hon. Michael Wilson (Etobicoke Centre):: Madam Speaker, my question is directed to the Minister of Energy, Mines and Resources. Earlier this week an official from Chevron, one of the key operators in the Hibernia project off the coast of Newfoundland, stated that the Hibernia project, under the present terms of the National Energy Program, is not economic. Since Petro-Canada is a participant in this project, would the minister advise the House of Commons whether he has sought the advice of PetroCan on this matter and, if so, does it agree with the conclusions reached by Chevron on this matter?


Hon. Marc Lalonde (Minister of Energy, Mines and Resources):: Madam Speaker, i am sure that the hon. member would not want to misquote Chevron officials. What Chevron has said, if 1 remember correctly, was something to the effect that they would not be in a position to decide on the production of Hibernia unless they were assured as to the price they would be able to get for that production. There is nothing in the National Energy Program that provides any specific price for the oil that will be produced offshore. We said there would be consideration given to a special reference price, but that price has not been determined as yet and Chevron indicated that they would want to know what price they can expect for their production before they can start it. I find this a very reasonable and understandable position to adopt and I have no quarrel with it.
There is nothing in the National Energy Program that is at variation with this particular concern which they have expressed, and there is nothing in the NEP that prevents Chevron from proceeding with the Hibernia exploration and development. What they need and will require to know is what price they will get. That is what we will be negotiating during the next while.
Oral Questions


Michael Holcombe Wilson: A supplementary question, Madam Speaker. The minister did not answer the question I put to him, which was whether he has discussed this matter with Petro-Canada. On Wednesday I asked the minister whether he had discussed the matter of the cancellation of the Syncrude expansion with Petro-Canada, and at that time he said he had not. We are talking here about two very important elements in the future supply of oil for Canada.
My question to the minister is, what is the role of Petro-Canada as a window to the industry? How is the minister utilizing that role of Petro-Canada in coming to conclusions as to how the National Energy Program should be implemented, particularly on this very important question of price for offshore oil?


Marc Lalonde: Madam Speaker, the hon. member referred to Syncrude. 1 indicated at the time that I had not discussed this particular aspect with the president of Petro-Canada. 1 am sure that since that time the hon. member has read the statement made by Petro-Canada that it disagrees with the decision taken by the other partners in the case of Syncrude. I think it is a pretty good indication of the sense of national interest by a national company, compared to that of private companies in this particular field.
As far as Hibernia itself is concerned, I have not had discussions yet with Petro-Canada as to what specific price would be required to bring Hibernia into production, except discussions of a very general nature a few months ago. I think first of all we have not had conclusive evidence yet that there will be the possibility of commercial production in Hibernia, although we are quite confident that this will indeed be a very good discovery.
As to the exact price that will be required for the oil, we will have to wait a while and have further discussions with all parties concerned. Petro-Canada will obviously be consulted in that respect. At the present time, however, it is premature to arrive at a specific price proposal. This is a matter that will be negotiated over the next few months. I must remind the hon. member that we are still a few years down the line before we have production out of Hibernia.


Michael Holcombe Wilson: Madam Speaker, surely the minister knows that before any decision is taken on production and future exploration we must have a better idea of price.
Supplementary to the answers which the minister has given, has Petro-Canada updated its financial projections for 1981 and for future years to reflect the impact of the National Energy Program on its exploration, development and production activities in western Canada? If so, would the minister advise the House as to the conclusions reached? Many private sector companies have done this and we are seeing large drops in cash flows proposed by these companies as a result of the National Energy Program. What is the position of Petro-Canada in the same area?

January 16, 1981
Oral Questions


Marc Lalonde: Madam Speaker, 1 will be very happy to provide the hon. member with the exact figures he has requested, and I will obtain them from Petro-Canada. However, I can draw to his attention that another Canadian company, Husky Oil, announced yesterday that it was not going to decrease its exploration budget this year but increase it. 1 can say that the Canadian government has approved an exploration budget for Petro-Canada for the coming year which is substantially increased over what it was before. There is every reason to believe that there will be more exploration, not less, carried out by Petro-Canada in 1981.
As to the specific figure requested by the hon. member as to how much exploration will take place in western Canada, I will obtain that from Petro-Canada. 1 have only the global figure with me now for exploration for the whole of Canada, including the offshore.


NATIONAL ENERGY PROGRAM
Mr. Jack Shields (Athabasca):: Madam Speaker, my question is also for the Minister of Energy, Mines and Resources. Does the minister recognize that the national energy policy and the lack of an agreement with Alberta is delaying virtually every tar sands project in northeastern Alberta? I am referring to the Alsands, Cold Lake, and more recently the Syncrude expansion and Suncor project being in jeopardy. Does the minister realize that the province must proceed with other projects to keep the economy in Alberta vitalized?


Marc Lalonde: Madam Speaker, I have to disagree with the statement that the National Energy Program is delaying the tar sands project, but I have to agree with the hon. member that the lack of an agreement with the province of Alberta is delaying those projects at the present time.


Michael Holcombe Wilson: You are not listening, Marc.


Marc Lalonde: We have made several proposals to get those tar sands projects proceeding, but Alberta refuses to negotiate any arrangement which would settle the question of the tar sands project independently from all of the other aspects of the energy discussions.
In that respect, 1 must say that I find it rather strange for a Canadian, and an Alberta minister in particular, to declare, as reported in The Globe and Mail yesterday, that Alberta decided to block approval of new oil sands plants mainly because their construction would have provided jobs for people mostly from outside Alberta. 1 find that passing strange.


Jack Wendele Shields: Madam Speaker, I think the minister knows full well-and again it is the half truths that he is using-that he has not tried very diligently to get an agreement with Alberta. Recognizing that this is happening, that the lack of an energy agreement is there and that the national energy
policy is delaying these projects from going ahead, will the minister be prepared in two or three years' time to cope with the strain on social services and the social injustices that will occur in Alberta? When he recognizes that his oil policy is a crock, he will have to change it and all these programs will be going at one time. What does the minister intend to do about the increased crime which will result from the overstraining of the economy of Alberta? What does the minister intend to do about the strain on the divorce rate, the strain on schools, hospitals and on all social services in Alberta? I have lived through this and 1 know what I am talking about. What is the minister prepared to do about those things?


Marc Lalonde: Madam Speaker, 1 am afraid there is not much 1 can do about the divorce rate!


Mr. Lawrence:: You are sure?


Some hon. Members:: Oh, oh!


An hon. Member:: You cannot do anything about energy either.


Marc Lalonde: On the other hand, I understand the seriousness of the concern expressed by the hon. member. That is why we have made many attempts to get an agreement with Alberta in order to get these projects ongoing, projects which will benefit northern Alberta in particular, the whole of Alberta and the whole of Canada.
I must say that even after the rejection of our proposal in July by Mr. Lougheed 1 went back in September and offered him an additional price in respect of the tar sands plants. That offer was again rejected by my colleague in the government of Alberta. 1 have indicated that we are still ready and willing to discuss the question of the tar sands and heavy oil at Cold Lake separately, if necessary, in order to get those projects proceeding quickly and avoid delaying their construction. Unfortunately 1 have not been able to obtain any positive reaction from the government of Alberta as yet.


THE ECONOMY
Mr. Bob Rae (Broadview-Greenwood):: Madam Speaker, my question is for the Deputy Prime Minister and Minister of Finance. It concerns the inflation situation in Canada and the announcement today by Statistics Canada that in 1980 we had the highest annual rate of increase since 1975. Since the minister and the Prime Minister have declared war on inflation and have drafted an army of unemployed in order to fight this war, does he really think it fair to continue conscripting young people, the unskilled, those in eastern and northern Canada into this army, and not others, and does he really think that further restrictions on demand will reduce inflation
January 16, 1981

when this policy has been tried for a number of years and clearly is not working?


Hon. Allan J. MacEachen (Deputy Prime Minister and Minister of Finance):: Madam Speaker, the description of a policy by the hon. member does not represent a policy which the Prime Minister or myself support or propose to implement.


Bob Rae: Madam Speaker, if what I have described is what is going on, then I suggest the minister really has no choice but to recognize that that is exactly the implication of the kinds of policies he has been following. Since analysts in the industry are telling us that high interest rates and restricted supply have been responsible for runaway food prices, which has been one of the main problems facing the average Canadian in the past year, can the minister tell us why the government is continuing policies which, while they are supposed to fight inflation, because they restrict supply are really causing inflation in the food industry?


Allan Joseph MacEachen: Madam Speaker, I disagree with the hon. member's analysis of the statements of the analysts. He is attributing the underlying forces of inflation entirely to higher interest rates. He knows perfectly well that inflation in 1980, during the course of the year we have just completed, arose from a number of factors much more widespread and diversified than high interest rates, including the increasing cost of food imported from abroad, which happens in Canada; higher energy prices arising from international markets and a decison of the Government of Canada to ensure security of supply for this country; bad climatic conditions throughout the world providing for increased prices for grain; and higher meat prices as a result of the normal cycle in that particular industry.
1 would ask the hon. member to take a rather broader look at the forces which accounted for inflation in 1980. I would add that probably the higher interest rates we are suffering are more a manifestation of these underlying forces than they are in themselves the driving force behind inflation. I just want to add my analysis to the one the hon. member has given.


Bob Rae: Madam Speaker, the minister is prepared to allocate responsibility for the problem of inflation in Canada to every actor in the economic scene with the exception of the government and policies which the government itself can control. 1 find that an abdication of responsibility which in current circumstances is really intolerable.
My final supplementary question is this. The minister has expressed concern on many occasions about the possibility of a wages explosion. 1 wonder if he could tell us why he is not equally concerned with the ravaging effect that inflation has had on the standard of living of the average Canadian, on wages and on purchasing power; and does he not feel that a cost of living tax credit would do a great deal to show the average Canadian that the government is indeed concerned with the human cost of inflation? Is he concerned with assuring average Canadians that they do not have to seek personal solutions to a social problem but that the government is
Oral Questions
prepared to play its part in providing a solution to a very real problem for every Canadian?


Allan Joseph MacEachen: Madam Speaker, I disagree with the hon. member's suggestion that the government is not concerned with the impact of inflation on Canadians, particularly on low and middle-income Canadians. One of the first things we did at the beginning of this Parliament was to increase the guaranteed income supplement to help what I consider to be the most needy group in the community. As the hon. member knows, we have a fully indexed old age security system, a guaranteed income supplement which is fully indexed, and the spouse's allowance and the veterans' disability pension also are fully indexed. All of these measures which impact most directly on the most needy are fully protected against changes in the cost of living.
I believe, Madam Speaker, that the hon. member should take that into account when he asks for an additional cost of living tax credit. 1 think we have gone a long way in protecting the most affected citizens through the indexing provisions that have been passed and supported by the Parliament of Canada.


AUTOMOTIVE INDUSTRY
Mr. Bill Kempling (Burlington):: Madam Speaker, I have a question for the Minister of Industry, Trade and Commerce. In view of the latest move by the U.S. government through the U.S. loan guarantee board to give further aid to Chrysler with attached conditions of employment, what is the status of the loan agreement between Chrysler and the Canadian government in view of the cutback of $400 million in investment?


Hon. Herb Gray (Minister of Industry, Trade and Commerce):: Madam Speaker, it is my understanding that the U.S. loan board has not yet made a definite decision to recommend the issuance of further loan guarantees. The day before yesterday they issued a statement indicating the basis on which they would be prepared to recommend the issuance of loan guarantees involving certain concessions by the parent corporation, the parent corporation's lenders and the UAW.
With respect to the Canadian situation, we have not agreed to any changes in the agreements we entered into with Chrysler last spring, and that is our position at this time. Earlier this morning 1 met with the leaders of the Canadian UAW to consult with them as a result of their participation in the discussions with the UAW in the United States. Now that I have had this consultation, I will be prepared to meet with the Chrysler Canada people, but our position is that we have an agreement with them and we have not agreed to any changes in it.

January 16, 1981
Oral Questions


William James Kempling: I have a supplementary question for the same minister. Several Canadian parts suppliers are being asked to reduce prices, to hold prices at current levels, or carry Chrysler's account until other financial arrangements can be made. Where do they stand in any renegotiation of the loan agreement? Will the government seek to get assurances from Chrysler for Canadian businessmen who are assisting, at great risk and with no compensation? Will they get some protection?


Herbert Eser (Herb) Gray: Madam Speaker, 1 understand that the Chrysler Corporation in the United States is asking for concessions from its suppliers in that country. So far as 1 am aware, although I can check into it, none of the arrangements that are being contemplated by the U.S. authorities on the basis of which they may extend further loan guarantees involves protection for U.S. suppliers. But this is an aspect that I can certainly look into with respect to the Canadian situation.


AGRICULTURE
Mr. W. C. Scott (Victoria-Haliburton):: Madam Speaker, my question is for the Minister of Agriculture. It deals with the increased price of food. The over-all increase in the cost of living index is 11.2 per cent but the rise in the price of food for home consumption is 14.8 per cent. My question to the minister is this. Since the minister has repeatedly stated that farmers' income remains static and is even declining, I should like to ask him how he squares this with the 14.8 per cent increase in the price of food, taking into account the fact that farmers' income is steadily decreasing?


Hon. E. F. Whelan (Minister of Agriculture):: Madam Speaker, 1 do not know where the hon. member is getting his information. The income of farmers who are efficient, productive and well organized is not going down steadily. Statistics show that farmers' income is perhaps not exactly keeping pace with incomes in some other sectors of society, but farmers' income is still in the net profit position. I stand by what 1 said earlier that the agricultural industry in Canada is one of the healthiest in the world, and it is in one of its healthiest stages ever in Canada.


Some hon. Members:: Oh, oh!


ALLEGED PROMISE TO CONTROL INTEREST RATES
William C. Scott: Madam Speaker, I have a supplementary question for the Minister of Finance. 1 should like to ask him what has happened to his grandiose promises of a year ago to bring high interest rates under control as a means of stemming runaway inflation and stimulating our economy, having in mind the effect that interest rates are having on farmers, on the small business community and on the cost of the food basket, and in view of his budget
prediction of a 9.7 per cent rate of inflation for this year which has now surpassed 11 per cent.


Allan Joseph MacEachen: Madam Speaker, the hon. member asks what happened to the promise which 1 made. I want to remind him that I did not make any promises with respect to interest rates because 1 realized at the time when this phenomenon occurred that it was probably a very difficult problem to solve quickly because it is the result of underlying inflationary forces. I do not think we are going to get interest rates down to the level we would like until we get inflation down, and that will take some time. I have said that in the past and I intend to repeat it in the House of Commons and elsewhere.


COMBINES
Mr. Ray Skelly (Comox-Powell River):: Madam Speaker, I have a question for the Minister of Consumer and Corporate Affairs, but first I would like to suggest to the Deputy Prime Minister some other techniques for reducing inflation. As we know, the high inflation costs reported today are partly due to the price of energy. I should like to suggest that some major oil companies have contributed substantially to inflation by restrictive trade practices and price gouging. The department's answer to this over a few months has been that they have conducted a seven year investigation into the industry and into these practices, that the minister has promised to report the results of the investigation in July, in September and in December, but we have heard nothing as yet. It has dragged on and on and more and more promises are being made. Another investigation is promised, but no action is taken. When will the minister give us some action instead of promises and instead of more investigation? When will we get action to deal with these restrictive trade practices and gouging?


Hon. Andre Ouellet (Minister of Consumer and Corporate Affairs and Postmaster General):: Madam Speaker, I am pleased to advise the House that the Director of Investigation's report has now been completed. It is now being printed and translated and should be published in early February.


Raymond John Skelly: Madam Speaker, this goes further than just reporting. The profits of the oil companies have increased up to 65 per cent in the first nine months of last year. Eastern refiners are looking at roughly a 100 per cent increase on their income margins, while U.S. producers have profits less than half of ours. I think that some of the problems have to do with the failure of the government to place before the House competition legislation which will work, as well as the failure of the minister to act vigorously in this area. Would he indicate to the House when that legislation will be placed
January 16, 1981

before the House? I urge him to place it before the House early so that we can have a look at it.
[ Translation]


André Ouellet: Madam Speaker, 1 have already indicated on several occasions that I want to make amendments to the competition legislation. The relevant bill is now on the drafting board, and when it is placed before the House, ! hope it will have the support not only of the hon. member who has just asked the question, but also of all our hon. colleagues, and thus quickly become law.


CROWN CORPORATIONS
Mr. Bill Clarke (Vancouver Quadra):: Madam Speaker, my question is for the Minister of Energy, Mines and Resources. The president of Eldorado Nuclear Limited told the Public Accounts Committee recently that his company intends to dispense with the services of the Auditor General as auditor of that Crown corporation. Knowing what a blow this will be to the principle of comprehensive auditing and to the principle that more, not fewer, Crown corporations should be audited by the Auditor General, will the minister tell the House if he has any intention to use his position to prevent the Crown corporation from firing the Auditor General?


Marc Lalonde: Madam Speaker, those decisions are made by the Crown corporations themselves and their boards of directors. Many Crown corporations have auditors other than the Auditor General, who come from the private sector. I am aware that Eldorado Nuclear Ltd. made such a decision, but to have both an auditor from the private sector and the Auditor General for this year. However, in due course it would like to have someone from the private sector as auditor like a large number of other Crown corporations. I fail to see anything wrong with having an auditor from the private sector. The question surprises me all the more as it comes from the party of the hon. member which is always so concerned about expanding the public sector, especially in the oil industry.
[ English |


William Hillary (Bill) Clarke: Madam Speaker, the minister knows that the Crown corporation cannot take this action on its own and is not capable of making that kind of decision. I am asking the minister specifically about order in council PC-1980-3127 which replaces the Auditor General as the auditor of Eldorado Nuclear Ltd. and makes no mention of any outside auditor. Is the minister saying that this order in council is revoked and, if so, what is the replacement for it?
Oral Questions


Marc Lalonde: Madam Speaker, I should appreciate the hon. member sending me a copy of the order in council in question. 1 know one has been passed. The decision of the government merely confirmed that of Eldorado Nuclear Ltd. to the effect that, in 1981, the Auditor General of Canada and an auditor from the private sector would work together, or side by side, in auditing Eldorado's books.


EXTERNAL AFFAIRS
Mr. John Gamble (York North):: Madam Speaker, my question should be directed to the Secretary of State for External Affairs, but in his absence I will direct it to the Deputy Prime Minister, who will know that last week Canadians, including a renowned Canadian author and columnist, Barbara Amiel, were incarcerated in the Mashava prison in Mozambique during which time Miss Amiel almost expired as a consequence of contracting tropical diseases. Having regard to the fact that both Canadians were incarcerated without just cause by the government of that country, has the Government of Canada sent a stern note of protest to the government of Mozambique for the harsh and uncivilized treatment accorded Canadian citizens?


Hon. Yvon Pinard (President of the Privy Council):: Madam Speaker, seeing the Secretary of State for External Affairs is absent, I shall take notice of the question of the hon. member and convey his views and suggestions to the secretary. I shall make sure that the hon. member gets a reply as soon as possible.


John Albert Gamble: Madam Speaker, my supplementary question is also directed to the Deputy Prime Minister. We know that the two Canadians to whom I made reference were released as a consequence of efforts made by officers of the United States embassy in Mozambique. We also know that when Canadian embassy officials assisted the government of the United States in securing the release of some members of its embassy in Tehran, the United States was very rapid in responding with a note of considerable thanks to the government of this country. Has Canada followed that same practice, and has it in fact thanked the government of the United States for the efforts of its officials?


Yvon Pinard: Madam Speaker, in light of my answer to the previous question, it is obvious that 1 cannot say more, and there can be no question of a speed contest in that field if the United States were fast in thanking us for our action in Iran.

January 16, 1981
Oral Questions
Are we as fast as they are in extending our appreciation in other circumstances? I told the hon. member that the subject is important, that his questions were serious, that his suggestion was very worth while and that 1 will raise the matter with the Secretary of State for External Affairs at the earliest opportunity and the hon. member will have a reply as soon as possible.


CANADIAN BROADCASTING CORPORATION
Miss Pat Carney (Vancouver Centre):: Madam Speaker, my question is addressed to the Minister of Communications, who indicated yesterday his support of the concept of CBC-2, Tele-2, which the president of CBC has described as a network mainly of reruns of material run on tbe basic CBC service, Could the minister explain why he favours a concept of reruns, which has limited benefit to the television and film industry in Canada, over increasing Canadian productions on the basic service, which has direct benefits to the television and film industry in Canada?


Hon. Francis Fox (Secretary of State and Minister of Communications):: Madam Speaker, the hon. member was either not in the House yesterday afternoon or did not read the blues to find out exactly what 1 said because she is not interpreting my comments correctly. What 1 am basically interested in as Minister of Communications, as 1 believe are most people in the cultural community in Canada, is an extension of Canadian programming facilities and a greater amount of Canadian quality program production in this country.
When the hon. member speaks about CBC-2, I believe she takes CBC-2 in isolation from the general thrust of the government in this area. Our first priority at the moment is extension of services to northern and remote communities. Yesterday morning the new CTV service to the north was inaugurated through the co-operation of the CTV network and the CBC by using the CBC House of Commons network, which soon will be giving some 60 hours a week of new services to northern remote communities. Probably within the next two weeks TVA will also be using the Anik 3 satellite in another wrap-around system with the House of Commons proceedings, which will mean additional French language network services available on satellite in this country.
Second, I have also indicated my complete agreement with the CRTC's position of extending services throughout Canada and having a greater number of Canadian programs available throughout this country. I fully expect that through the CRTC hearings, which are to begin on February 9, on extension of services within the next six months we will have in this country new multi-channel services available via satellite, providing Canadian programming throughout all parts of the country. I think these are very important initiatives indeed.


Pat Carney: Madam Speaker, my supplementary question is also directed to the Minister of Communications who, in spite of his lengthy statement, did not answer my question. My point is that we do not need a second network to bicycle replays and retreads. We can video-cassette them or buy video discs; we do not need a second network.
To be specific, the president of the CBC has told House of Commons committees and has already indicated publicly that, of the half billion dollar budget of the CBC, only $ 18 million is spent on private production. Why does the minister not direct the CBC to use the $30 million it is seeking for CBC-2, Tele-2, to increase the level of Canadian production on the basic service?


Madam Speaker:: Order, please. 1 am afraid 1 have to ask the minister to be brief.


Francis Fox: Madam Speaker, what I was trying to point out to the hon. member was that what we are interested in is a much greater number of Canadian program productions done in this country, partly through the CBC and partly through the private sector. Hopefully the CRTC, which shares these types of objectives, will come up with the best way possible of doing so. We are interested in seeing an increase in program production by the independent program production sector in this country. The CBC increased its budget in that regard over the past few years. I know the president of the CBC is indeed interested in having additional program production material done by the private sector in Canada.


PETRO-CANADA INQUIRY WHETHER OFFER MADE TO PURCHASE PETROFINA
Mr. Hal Herbert (Vaudreuil):: Madam Speaker, my question is for the Minister of Energy, Mines and Resources. I believe he is the proud holder of a Petro-Canada credit card. Can he deny or confirm that Petro-Canada has made a purchase offer to Petrofina? If not, can he tell us whether eastern Canadians will be given the opportunity of buying gas from their own company, in the near future 1 hope?


Marc Lalonde: Indeed, Madam Speaker, I am very proud to have a Petro-Canada credit card, but I would certainly like to be able to use it in Petro-Canada service stations in eastern Canada as Canadians already do out west. 1 know that a great many Canadians share my feelings. 1 am not aware of any approach made by Petro-Canada to Petrofina in recent months. I hope, however, that our over-all program announcing the acquisition of foreign companies will enable it to be possible in 1981 for Petro-Canada to buy out at least one, two
January 16, 1981

or three foreign companies with a view to enhancing Canadian ownership in that sector.


CANADIAN WHEAT BOARD
Mr. Gordon Towers (Red Deer):: Madam Speaker, in view of the fact that apparently the Minister of Agriculture has either forsaken the farmer or does not understand economics, I should like to ask a question of the minister in charge of the Canadian Wheat Board. The Minister of Agriculture stated that farm income is up and he thereby equated it with increased net income, which is not the case because net farm income is down.
Could the minister in charge of the Canadian Wheat Board tell the House about, or table the details of, the $100 million expenditure by the Canadian Wheat Board for the Prince Rupert terminal?


Hon. Jean-Luc Pepin (Minister of Transport):: Madam Speaker, the Prince Rupert terminal will be the creation of a consortium in which a number of companies and pools are taking part. The federal government is contributing to it by way of a $22 million appropriation for facilities. I really do not see what is the issue because my information is that all of this is being processed now in a very satisfactory fashion.


Thomas Gordon Towers: Madam Speaker, I just cannot understand how a member of cabinet fails to realize that there has been a suggestion by the Canadian Wheat Board that it will spend $100 million of grain growers' money, money which they cannot afford because of the programs of the Minister of Agriculture. Could the minister tell us what this money will be used for and how it will be expended?


Jean-Luc Pepin: Madam Speaker, my information is that the Canadian Wheat Board is not a member of the consortium at Prince Rupert. Occasionally 1 have seen reference to the need for surge capacity, but no decision has been made on that particular issue.


ENVIRONMENTAL AFFAIRS
Mr. Jim Fulton (Skeena):: Madam Speaker, my question is directed to the Deputy Prime Minister and Minister of Finance. I am sure the minister is aware of the special dumping permit of Amax Limited which has been given to no other mine in Canada. It was granted during the 1979 federal election, unknown to the House. Until September 12, 1980, John Aird was on the board of Amax. On September 15, 1980,
Oral Questions
he became the lieutenant-governor of Ontario. His connections with the federal Liberal party are well-known.
Was there any direct or indirect communication of any kind between John Aird and members of cabinet or their staff regarding the permit for Amax Limited at Alice Arm?


Allan Joseph MacEachen: Madam Speaker, 1 have no knowledge of that, and I will make inquiries.


James Ross Fulton: Madam Speaker, yesterday in Vancouver the Nishga leaders, along with Archbishop Edward Scott, met with Amax. Church leaders in Canada, including Bishop Remi De Roo and the archbishop of the Anglican Church of Canada representing millions of Canadians, the British Columbia Federation of Labour, the Building Trades Council and the United Fishermen and Allied Workers Union representing affected workers, along with the Prime Minister, the Minister of Indian Affairs and Northern Development and the Minister of Fisheries and Oceans, are on record now as supporting a review, including a public inquiry. We in this House have been stalled since April of last year.
Will the Deputy Prime Minister rise in his place on this occasion and show some leadership by calling for a public inquiry? If not, will he inform members of the House and millions of Canadians that he will make an announcement in the House next week regarding a full public inquiry?


Allan Joseph MacEachen: Madam Speaker, I will have the representations of the hon. member considered and will give him an answer as soon as possible.


PETRO-CANADA STATEMENT OF OFFICIAL ON OFFSHORE OIL PRODUCTION
Hon. Elmer M. MacKay (Central Nova):: Madam Speaker, will the Minister of Energy, Mines and Resources be kind enough to assist me in what appears to be an anomaly? 1 understood him to say, in answer to a question from my colleague, that it was premature to set a price for oil production on the east coast. Yesterday it was interesting to see one of the officials of Petro-Canada, the group vice-president for the east coast, reported as saying the following:
-the oil industry needs to know what the price of the oil is going to be before offshore production can proceed. There is no point in the government saying to the oil industry: "Go find the oil, and then we will decide what the price will be." That's totally backwards.
He went on to say:
A price needs to be set that will be close to or at world price if we are going to see these extremely expensive offshore developments take place.
Has the minister of energy been in touch with Petro-Canada? What is the basis for this apparent disagreement between the government's petroleum corporation and his own statements in the House?

January 16, 1981
Oral Questions


Marc Lalonde: Madam Speaker, the hon. member must have misunderstood what 1 said at the time. I have no disagreement with the notion that the price must be set before production starts. We know that production in this field is several years down the line. Supposedly the member quoted a vice-president of Petro-Canada. I thought he was referring to the vice-president of Chevron, but even if he is a vice-president of Petro-Canada, 1 have no quarrel with the argument that there must be a decision on price. What the price will be is a matter which is being examined and will be decided in plenty of time for the necessary expenditures to be incurred for production purposes; there is no doubt about that.


Elmer MacIntosh MacKay: Madam Speaker, I wonder whether the minister could assist me with respect to another comment of Mr. Meneley, the same Petro-Canada official. In a headline story which appeared in the January 14 edition of the Halifax Chronicle-Herald, he is quoted as saying that oil exploration will decline in 1981. In one article he is reported as saying that it will decline because of "an extremely serious worldwide shortage of oil rigs" which "continues to plague companies exploring off the east coast". He agrees with Mobil Oil Canada and Petro-Canada officials in this respect. Then in the same newspaper he says that oil industry production "in 1981 will likely decline because of. . . political pressure to try to change the National Energy Program". These are direct quotes of Meneley.
Does the minister not see the contradiction? On the one hand this Petro-Canada official is saying that "political pressure" will stop east coast oil production. On the other hand he is saying that there is a "worldwide shortage of oil rigs". Does the minister agree that these contradictory statements of an official of PetroCan, who appears to be taking a very high political profile in this important industry on the east coast, are not in the best interests of the east coast?


Madam Speaker:: Order, please.


Marc Lalonde: I disagree with the hon. member, Madam Speaker.


TRANSPORT
Mr. Jack Murta (Lisgar):: Madam Speaker, my question is for the Minister of Transport. I would like to ask him whether he can inform the House how close the government is to establishing a short-term study, which has been talked about, in terms of the resolution of the Crowsnest Pass rates.


Jean-Luc Pepin: Madam Speaker, I think quite close. It is not as early as I would like it but it is quite close. The main subject will be the creation of a
task force, which would go into the subject and try to develop a consensus, which has already progressed quite substantially in western Canada.


Jack Burnett Murta: Madam Speaker, statements in the press have indicated that a lobby by eastern food processors has been a major stumbling block in terms of the government's resolution as to what direction they should go. Can the minister comment on this and either confirm or deny these particular reports?


Jean-Luc Pepin: Madam Speaker, I am sure the interests of the eastern feeders and cattle people, as opposed to the interests of the western cattlemen, will be brought up in the discussion which is to take place soon among members of the cabinet. That will be but one factor among many others.



ROUTINE PROCEEDINGS


Allan Joseph MacEachen: Madam Speaker, under the provisions of Standing Order 41(2) I would like to table copies of the Public Accounts for the year ending March 31, 1980.


QUESTIONS ON THE ORDER PAPER
[Stage Direction]
(Questions answered orally are indicated by an asterisk.)
Mr. D. M. Collenette (Parliamentary Secretary to President of the Privy Council):: Madam Speaker, the following questions will be answered today: Nos. 1,662, 1,670, 1,728, 1,750 and 1,778.


Mr. Neil: Since the inception of the DREE program, what are the details of all grants made to Bombardier Inc., Montreal?


Hon. Pierre De Bane (Minister of Regional Economic Expansion):: Order Paper Questions
Bombardier Ltd Quebec Region Offers Made and Accepted From 1969 to October 31,1980
Location	Date	Product	Type of	Eligible	Amount of	Direct Jobs*La Pocatiere	Accepted 16/09/74	Transportation	Project Expansion for a	Costs $ 4,404,359	Incentives *$ 1,385,698	690Valcourt	23/06/80	equipment Snowmobiles and	new product Expansion	$ 9,821,000	$ 1,964,200	320La Pocatiere	27/06/80	motorcycles Transportation	Expansion	$1 1,600,000	$ 2,320,000	580Montreal	27/06/80	equipment Locomotives and	Expansion and	$16,192,000	$ 3,238,400	159Total:	4	diesel motors	modernization	$42,017,359	$ 8,908,298	1,749
* This project having been completed, the amount represents total payments by DREE. This amount is higher by $277,139 than the original offer made to the company.


Mr. McKinnon: Did the Department of National Defence order, from Canadian Arsenals Ltd., $7,064,016 worth of pyrotechnical equipment under contract number MA40.3689205 and, if so (a) what exactly is included under the general term "pyrotechnics" (b) for what purpose?


Mrs. Ursula Appolloni (Parliamentary Secretary to Minister of National Defence):: Yes. In response to the Department of National Defence contract demand 3689205, Supply and Services Canada entered into a contract with Canadian Arsenals Limited for the supply and delivery of pyrotechnical equipment to the Department of National Defence.
(a)	120,000 handfired parachute flares. This contract also includes the purchase from the Swiss manufacturer of the manufacturing rights and special production tooling by Canadian Arsenals on behalf of the government.
(b)	This item is used by the land forces as illuminating device.


Mr. Stewart: 1.	Since its inception, by year and by province, what is the total disbursement for the DREE program?
2.	For each year what were the percentages of total grants received by each province?
3.	What percentage of the program is in administrative over-head costs?
4.	Is the annual cost of administration (a) increasing (b) decreasing?


Pierre De Bané: The reply for the Department of Regional Economic Expansion is as follows:
1.	See list below.
2.	See list below.
3.	1979-80: 8 per cent (1979-80 is the first year administrative costs were analysed on this basis).
4.	Comparisons are not yet available. See reply to part 3 above.
Regional Development Incentives Program Disbursements of Authorized Development Incentives
SMillions
Nfld.	P.E.l.	N.S.	N.B.	Que.	Ont.	Man.	Sask.	Alta.	B.C. Yukon	Total1970/71	-	.1	.5	5.5	4.0	.6	1.0	.2	.8	.2	12.91971/72	.4	.8	3.1	4.6	16.8	2.4	3.1	2.7	LI	1.3	36.31972/73	3.1	.2	4.4	4.6	23.0	9.6	12.2	.8	2.0	.8	60.71973/74	.8	1.3	8.7	6.3	36.5	5.9	2.9	1.3	11.8	.3	75.81974/75	1.6	.3	9.0	5.8	36.2	7.0	5.6	1.7	1.9	.8	69.91975/76	3.2	.8	9.6	7.0	33.0	13.6	5.3	4.7	5.7	.9	83.81976/77	1.4	2.0	9.4	11.3	33.3	7.8	9.5	2.2	4.7	.]	81.71977/78	1.2	3.1	7.0	5.8	28.9	6.8	6.1	3.4	.7	.1	63.11978/79	4.0	1.3	4.9	3.3	33.2	6.7	6.4	3.3	1.6	2.1 .1	66.91979/80	5.5	2.1	10.9	11.8	53.4	8.5	1 l.l	2.9	.8	1.6	108.61980/81 (to 30-09-80)	1.3	.5	2.7	2.8	18.9	1.8	2.6	.7	.2	.7	32.2Total	22.5	12.5	70.2	68.8	317.2	70.7	65.8	23.9	31.3	8.9 .1	691.9Percentages for above	1970/71	-	1	4	43	31	5	8	1	6	1	1001971/72	1	2	9	13	46	7	8	7	3	4	1001972/73	5	1	7	8	38	16	20	1	3	1	1001973/74	1	2	1 1	8	48	8	4	2	16	100
January 16, 1981
Income Tax A cl
Percentages for above
1974/75	2	1	13	81975/76	4	1	12	81976/77	2	2	11	141977/78	2	5	11	91978/79	6	2	7	51979/80	5	2	10	111980/81 (to 30-09-80)	4	1	8	9Total	3	2	10	10


Mr. Stevens: For the current fiscal year, what are the estimated expenditures of the Department of Fisheries and Oceans for (a) advertising (b) free or subsidized publications (c) other information conveyed to the public?


Hon. Romeo LeBlanc (Minister of Fisheries and Oceans):: (a) None, (b) $555,000, (c) $953,000.


Mr. Stevens: For the current fiscal year, what are the estimated expenditures of Uranium Canada Ltd. for (a) advertising (b) free or subsidized publications (c) other information conveyed to the public?


Marc Lalonde: Uranium Canada Limited reports as follows: (a) media advertising-nil, (b) free or subsidized publications- $2,000 (estimated expenditures by EMR on behalf of UCAN),
(c)	other information-nil.


David Michael Collenette: Madam Speaker, I ask that the remaining questions be allowed to stand.


Madam Speaker:: The questions enumerated by the hon. parliamentary secretary have been answered. Shall the remaining questions be allowed to stand?


Some hon. Members:: Agreed.



GOVERNMENT ORDERS

[Stage Direction]
[ Translation]

Allan Joseph MacEachen: that Bill C-54, to amend the
52	10	8	2	3	1	10039	16	6	6	7	I	10041	9	12	3	6	-	10046	11	10	5	1	-	10050	10	10	5	2	3	- 10049	8	10	3	1	1	10059	6	8	2	1	2	10046	10	10	3	5	1	100
statute law relating to income tax and to provide other authority for the raising of funds, be read the second time and referred to Committee of the Whole.
[ English]


Mr. Andre:: Madam Speaker, yesterday I sent you a note indicating my intention to rise on a point of order today in respect to the commencement of the second reading of Bill C-54. The basis for my point of order is that this bill is out of order as currently constituted, by my reading of the rules and the precedents. In particular, Madam Speaker, I refer you, and the members of the House, to Standing Order 60(11), which states:
The adoption of any ways and means motion shall be an order to bring in a bill or bills based on the provisions of any such motion.
I underline the words "based on the provisions of any such motion."
Examination of Bill C-54 indicates that part I of the bill, consisting of the first two clauses, is defined as borrowing authority. Indeed, the first clause cites this part as a borrowing authority act, which is clearly out of the ambit of the ways and means motion passed by this House earlier this week, on January 13. It is clearly in violation of Standing Order 60(11), which states that bills must be based on the provisions of any such motion.
Previous speakers have been called upon from time to time to adjudicate points of order based on this Standing Order. These have resulted in precedents, the consequences of which are given in our bible, if you will, of parliamentary procedure, Beauchesne's. In that regard, Madam Speaker, I refer you to section 518 of the fifth edition of Beauchesne's, page 175. Section 518(1) says:
A bill, related to a ways and means resolution, must be based on, but need not be identical with, the resolution. The taxing power of the Crown is limited by such resolutions, but relatively minor widening of exemptions from taxation may be allowed.
Then reference is made to Journals, December 18, 1974, page 224. That is a decision by one of your predecessors, Madam Speaker, the Hon. James Jerome. At that time his decision was to disallow the point of order raised. In that decision he said:
Finally, the most desirable practice is for the bill to adhere strictly to the provisions of the motion, and departures, if any, ought to be the subject of the strictest interpretation.
So it is quite clear what the Speaker of the House had in mind at that time.
January 16, 1981

The second paragraph of section 518 of Beauchesne's fifth edition reads as follows:
The most desirable practice is for the bill to adhere strictly to the provisions of the resolution, and departures if any, ought to be subject to the strictest interpretation.
Then paragraph (2) makes reference to decisions of previous Speakers which gave rise to the precedent stated in that section.
It might also be worth while, Madam Speaker, to refer to Erskine May's nineteenth edition, page 790, wherein it states:
If any provisions of a bill arc found to go beyond the resolutions on which the bill is founded, further resolutions must be passed before those provisions are considered in committee on the bill, or the bill must be amended so as to conform to the resolutions to which the House has agreed.
Quite clearly, Erskine May establishes that the bill must conform rigorously to the ways and means motion upon which the bill is founded and, as I indicated, a ways and means motion is an order to bring in a bill based on that motion and nothing further.
In presenting argument to this it may be that the government will cite as an example Bill C-ll of 1977, which was brought in by a previous Liberal government. In this bill a borrowing authority was combined with an income tax act. At that point in time no point of order was raised, simply because it was not recognized for what it was, namely, an out of order presentation. 1 would submit that the fact we may have violated the Standing Orders of the House on that occasion does not mean we are therefore to violate the Standing Orders of the House on every other occasion in any future development. It is also interesting to note that the successor government, the Progessive Conservative government in 1979, did not attempt to resort to that tactic of combining the two but, in fact, had a separate borrowing authority bill, in keeping with our previous practices. They also had a separate income tax bill.
It is hardly necessary for me to state, Madam Speaker, and I think it is self-evident, that the rationale for the precedents as summarized in Beauchesne and the precedents established by previous Speakers, is that should this become an accepted practice of attaching onto bills other items which are based on ways and means motions, which have only a tenuous association, then surely we would be establishing a precedent for venturing into, in a very major way, the way in which this legislature treats legislation proffered by the executive.
Such a major step in this direction is something which should be very carefully considered and something which should not be allowed to happen merely as a result of an understandable interest on the part of the government which is attempting to group together pieces of legislation in an attempt to get as much through as possible with as limited exposure as possible. I suggest that we treat this point of order seriously. It is not raised in a frivolous attempt to try to disrupt the government's legislative program.
Income Tax Act
Both sections of the bill, the borrowing authority and the Income Tax Act, are deserving of the most careful treatment by this House. We are not approaching this point of order from the point of view of trying to employ procedural arguments with regard to the substance of this legislation. It is a procedural argument which we believe goes to the fundamental operation of this House. We feel that if this situation is allowed to proceed unchallenged, or if perhaps it is found to be in order, then we would be venturing onto very dangerous ground.
We strongly recommend to you, Madam Speaker, that careful consideration be given to the decisions of your predecessors and to the citations in Beauchesne's, and we feel confident that in fact this legislation, as it has been presented, is out of order and that it is up to the government to make the necessary amendments.


Mr. Lambert:: Madam Speaker, this is one more incident since 1970 in which we face the problem of a bill being introduced following the acceptance of the ways and means motion which differs in a material way from the ways and means motion. In the original instance it involved the so called income tax reform bill, and many more such instances have occurred. Mr. Speaker of the day did not judge that he would have to examine a three inch thick bill to determine the differences. I pointed out to him that I had counted, on preliminary examination, some 39 such instances. I will say that there was the distinction that since the government was able to introduce major amendments under those circumstances I was, therefore, as a private member, able to do so as well. That is the rationale of the 1970 decision, and Mr. Speaker did allow me to introduce amendments.
Subsequently, there was the question relating to some excise tax legislation of whether a bill had to conform strictly. That is not so. Generally-and the word is "generally"-there may be a change of wording and there may be-
[ Translation]
-as the saying goes in English, one can dot one's i's and cross one's t's and add a few commas-

-but there cannot be any material extension in the scope of the bill. The procedure, as you well know, Madam Speaker, is that at the time of the presentation of the budget by a minister of finance, the ways and means motions are tabled. Subsequently, as is indicated in Beauchesne's fifth edition at page 175, the second paragraph of clause 517:
A minister of the Crown designates a day for consideration ot the ways and means motion under the terms of S.O. 60(2).
And that has happened. Paragraph (3) goes on to say:
On the designated day. the ways and means motion is decided upon without debate or amendment.
And that would refer to the ways and means motion which appears in the Votes and Proceedings of Monday, January 12. I can recall the wording which you used, Madam Speaker, in so designating that motion. You said that if the ways and means motion is put and the House accepts it, then the

January 16, 1981
Income Tax Act
minister has leave and the first printing is so ordered of the bill dealing with the ways and means motion.
But here is where we part company because Bill C-54 is an omnibus bill. It has two parts and is not the case where the ways and means motion is contained solely in the bill. It says that a bill will be introduced based upon the ways and means motion. As I look at Bill C-54, I see that the first portion deals with borrowing authority. If it is permissible to include borrowing authority, then the bill concerning income tax could be part of an omnibus bill with five or six subjects attached, and the subjects need not be generally related.
As we have learned from past experience, the government can choose to, shall we say, stitch together a number of bills or, in one bill stitch together a number of matters which are clearly compartmentalized and which amend certain legislation. This I believe was not meant to be.
I was a member of the procedure committee in 1968-1969 which brought in this change in the rules. I know that the subsequent minister of finance, Mr. Macdonald, who was also the government House leader, was the chief protagonist of the changes in the rules. It was clearly indicated that in order to facilitate a minister of finance in presenting the ways and means motion, this could be presented not only at budget time but at some other occasion, and since the motion would not be debated but merely voted upon, that there was the authority to bring in a bill based on the ways and means motion. At no time has anything been said to the effect that the borrowing authority provisions would be a part of this bill.
That is the practice to which my colleague, the hon. member for Calgary Centre (Mr. Andre), and I are objecting. It should not be. The bill should deal with income tax and income tax related matters, because there is also in the ways and means motion a clause to amend income tax application rule 71, and that is perfectly in order. But to include the other portion is totally and utterly wrong.
There is also the possibility that the bill may be considered to be in order. I must address myself to the possibility that the Chair will find that my colleague and I have not made our point. I refer the House to the debate on the borrowing authority bill which took place in the fall of 1979 when, for I do not know how many days, the House was consumed in reviewing interest rates, housing, and every damned thing conceivable because, somehow or other, the Chair felt that there was a thread running through the debate. Therefore, in dealing with an income tax bill in Committee of the Whole, we could have a general economic debate.
There is another point. The rules have never foreseen that provisions with regard to borrowing authority should be considered in Committee of the Whole. That part in itself cannot be considered in Committee of the Whole without the unanimous consent of the House, so I think the government has placed itself in a dilemma in regard to this matter. I suggest to you, Madam Speaker, that the question really is not open, although it can be contemplated.
If you look at the intent of Standing Order 61, the points made by the hon. member for Calgary Centre, the rulings of Mr. Speaker Jerome in considering these matters, as well as the remarks of Mr. Speaker Lamoureux, and also the arguments by the former member for Peace River, Mr. Baldwin, and myself, I suggest that you will rule in our favour and that that portion of the bill dealing with borrowing authority will have to be excised.


Allan Joseph MacEachen: Madam Speaker, I should like to say a word or two on the point of order raised by members of the opposition.
I believe that the government is proceeding correctly and on the basis of precedent in seeking authority to borrow as part of an income tax bill. You will realize, Madam Speaker, that the Financial Administration Act provides that statutory borrowing authority must be obtained from Parliament to permit the government to increase its outstanding debt. That is the law.
Up until 1975 it was usual to tack on a request for borrowing authority to a supply bill. That was the practice. For the hon. member for Edmonton West (Mr. Lambert) to say that it is not possible to deal with borrowing authority in Committee of the Whole, asks us to recall the practice that must have prevailed when, on supply, the Committee of the Whole usually dealt with the items of supply and with the supply bills. Of course, at a certain point we changed the rules to provide that the Committee of the Whole would not deal with supply in the usual way. That is a side argument made by the hon. member for Edmonton West, that would have to be examined in the light of the practice that must have prevailed when the borrowing authority requests were dealt with in the committee on supply. I do not know what difference in principle would exist in terms of Committee of the Whole that would deal with this particular bill.
The main point is that up until 1975 the request for borrowing authority was tacked on to a supply bill. Mr. Speaker changed that because it was true that in certain circumstances it would not be possible for the House to debate that request for supply. It was only because there was no opportunity for debate that the ruling was made. Subsequently the practice was continued of tacking it on to supply bills, with the understanding that there would be one day's debate. This was provided for.
In 1979 another practice was introduced. The borrowing authority was sought by adding a clause to the income tax bill, to amend the income Tax Act. That was accepted; there was no difficulty; no point of order, and it was regarded as appropriate.
It is true that the former minister of finance and myself did introduce separate borrowing authority bills, and 1 think quite appropriately in those circumstances, because neither of us, in seeking very large borrowing, had produced a budget. That was quite a different circumstance. To ask the House to provide the borrowing authority before a budget plan had been produced might have been procedurally correct through some
January 16, 1981

other method, but certainly it was sound to provide separate bills. These are the only two exceptions.
It was open to me in this particular case to select a number of options. It occurred to me that this would be the most appropriate option because the request for borrowing authority flowed from the budget statement. The income tax changes flowed from the budget and the economic statement of April, and the former budget. They were all part of the same general framework.
The only objection that was ever taken and upon which the ruling of the Speaker was based in 1975, was that no opportunity was given for debate in the House on the request for borrowing authority.
In the case at hand there will be full opportunity to debate on second reading the request for borrowing authority and to provide the House with an opportunity to relate that borrowing request with the over-all economic strategy of the government and with the income tax changes. It will be possible for the House to debate fully in Committee of the Whole the request for borrowing authority and all other matters, and it will be possible for the House to debate it at third reading. Certainly no parliamentary protocol or no parliamentary principle has been violated, in fact we are providing full opportunity for debate for all these matters in Committee of the Whole and on second and third reading, with the Speaker in the chair. We are solidly anchored on the precedent of 1977 when the borrowing authority was attached to an income tax bill and when no exception at all was taken.
In conclusion, Madam Speaker, I suggest that to cite the ruling of Mr. Speaker in 1975 is irrelevant in this particular case because the objection taken was that there was no opportunity to debate in the whole House. In this case we are providing opportunity to debate on second reading, third reading, and in Committee of the Whole. A ruling in that particular instance does not seem to be relevant to this case. The House is being given the opportunity to debate fully, in an integrated way, the over-all budget package through this method.


Mr. Knowles:: Madam Speaker, obviously this is a technical point but I agree with my friends in the Conservative party that it is an important one.
May I say at the outset that my colleague, the hon. member for Broadview-Greenwood (Mr. Rae) has argued quite often that the whole question of the borrowing authority should be considered as an integral part of the debate on budgetary and financial policy. In that sense, at least in principle, he agrees, and I agree, with the contention of the Minister of Finance (Mr. MacEachen) that the whole budget debate should take place more or less at the same time.
Even so, we do recognize in this place that we should follow the rules that we set down. Indeed, the rule about a bill based on a ways and means resolution is that that bill should be based on that resolution and should deal only with the matters in that resolution.
Income Tax Act
I point out, in an effort to harmonize these two positions, that when the Minister of Finance makes a budget presentation, and a vote in support of the general principles of the government's financial policy has been taken, that comes to us not just in one bill but comes already in two or three bills, a bill to amend the Income Tax Act, the Excise Tax Act, the Customs Tariff Act, and maybe others.
It would seem to me that all that would flow from this point of order, if Your Honour agrees with the point that has been raised, would be that the borrowing authority ought to be in a separate bill. In other words, as the result of a budget presentation by the Minister of Finance that dealt with all of these matters, we would have not just three bills, but four bills.
I make this other point, namely, that one of the rules around here is that nothing can be done without notice. That is why we have motions under Standing Order 43 every day to try, by unanimous consent, to put propositions before the House for which there is no opportunity to give notice. But there has to be notice of any government bill.
In this case we had no prior notice that there would be a bill including the borrowing authority. The indication was that there would be a bill based on the income tax resolution adopted as a ways and means proposition. It was only when Your Honour read out the title of the bill that we got the words "an act to amend the statute law relating to income tax and to provide other authority for the raising of funds". I suppose in the title was the indication as to what was to be in the bill, but there had been no notice of that, not even an attempt to do it under Standing Order 43. It seems to me that if the government proposes to bring before Parliament, out of the budget presentation, changes in the Income Tax Act, changes in the Excise Tax Act, changes in the Customs Tariff Act, and something regarding a borrowing authority, there should be a proper procedural basis for all four of those elements.
The accepted procedural basis for the first three, the Income Tax Act, the Excise Tax Act and the Customs Tariff Act, is a ways and means resolution. At the same time the government could have put on the order paper a notice of motion of a bill to provide for the borrowing authority. 1 think it is in those terms that the House might think and Your Honour might consider the whole matter.
As must be obvious, 1 fully agree with the contention of my colleague, the hon. member for Broadview-Greenwood, that these things should be considered together, but surely we must follow the rules at the same time. I noted that when the hon. member for Calgary Centre (Mr. Andre) raised the point, he treated it as a serious procedural point, not as an attempt to delay the business of the House. I would imagine that if Your Honour feels that you must reserve on the ruling, that we would agree we might still go ahead with the debate on second reading of the bill, subject to Your Honour's decision on this important point, simply as to whether the borrowing authority should be in one of the three ways and means bills or whether it should be a bill by itself, but introduced at the same time.

January 16, 1981
Income Tax Act


Mr. McGrath:: Madam Speaker, if you hold that the borrowing authority is correctly in the bill, then it seems to me you have created a conundrum of having a bill before us for which notice has not been given. We are entitled to ask the question flowing from what the hon. member for Winnipeg North Centre (Mr. Knowles) has said, namely, where does this borrowing authority come from? Notice of ways and means substitutes for notice of motion. But if you hold to the argument that the borrowing authority has no place in a ways and means motion, then you have a borrowing bill before the House which has not conformed to the regular notice required under the rules of the House. I would just put that to Your Honour as a very important argument.
My other point is with respect to what was said by the Minister of Finance (Mr. MacEachen). The fact that something like this has slipped through once does not constitute a precedent. 1 would submit to Your Honour that in this particular instance two wrongs do not make a right.


Yvon Pinard: Allow me to make a few comments, Madam Speaker. Strange as it may seem, yesterday we were censored for breaking with tradition but today, to support their argument they are quite prepared to disregard a precedent which was clearly established in 1977. It is important to recall that. What I respectfully want to bring to your attention, Madam Speaker, is the fact that the Standing Order which refers to the way taxes are to be levied in Canada is relatively limited. It is Standing Order 60. Sections 1 and 11 of that order which have to do with our problem and all the other sections, except perhaps section 2, refer to the budget, the budget speech and the budget debate. So when a government wants to levy taxes, contrary to the practice applicable to all other bills it has to table a ways and means motion and, of course, the ensuing bill must faithfully reflect the ways and means motion. And that is the whole extent of the very limited rules we must follow. The significant aspect in this case, in the ruling you have to make, is the fact that first of all it is not written anywhere, there is absolutely no order, no specific rule which states that the borrowing authority cannot originate from a bill to amend the income tax legislation. That is a fact, it is not mentioned anywhere. My colleagues opposite maintain that the borrowing authority should not be part and parcel of the bill but, Madam Speaker, they cannot tell you that it goes against the Standing Orders because it says so at a given page, in a given section. Nothing anywhere stipulates that it cannot be done. So that is the first basic and significant point-it is not forbidden.
When there is no rule to enlighten us we examine parliamentary practices. And as the Minister of Finance (Mr. MacEachen) so aptly put it a few moments ago, according to parliamentary practice until 1975-I will not give more details, I will not repeat everything that has been said-the borrowing authority was found in supply bills. One day in 1975 a ruling was made by Mr. Speaker, I have it here as
reported on page 924 of the Journals of the House of Commons for December 9, 1975, where Mr. Speaker said after a point of order had been raised, I will ask that the section having to do with the borrowing authority be taken out of the supply bill, but not a bill such as this one to amend the income tax legislation because, in keeping with our parliamentary practice and the Standing Orders, the supply bill is adopted without debate at the very end of a supply period. As pointed out by the Minister of Finance, hon. members would have no opportunity to debate the issue of borrowing authority. I will read the ruling because it is fundamental to demonstrate to what extent it cannot apply in this case since there is plenty of time for debate. I am still quoting from page 924 of the Journals of the House of Commons:
[ English]
I would therefore suggest at this stage, when the supply bill is about to go through all stages before this Parliament without debate or without amendment, that in my view it can only go forward through that sort of process if clause 5 can be stricken from it.
[ Translation]
That is the essential part on which the Speaker rested his ruling which did not refer to a case identical to this one but both have something in common because the borrowing authority was provided in a supply bill. The Speaker had stated that there was no time to debate that aspect and he had thought that in all fairness for hon. members it had to be taken out. That was in 1975. So the practice was dropped but there is another one where an obvious precedent was set in 1977, and here I refer hon. members to page 78 of Journals for November 2, 1977, when Bill C-ll had been introduced by Mr. Chretien, seconded by Mr. Horner. 1 quote:

"An act to amend the statute law relating to income tax and to provide other authority for the raising of funds, was read the first time and ordered to be primed."
And so on.
[ Translation]
And my last quotation appears on page 70. This bill including the borrowing authority was finally approved and passed, which creates precedent. It is not, as mentioned by the hon. member for St. John's East (Mr. McGrath), because it was not consistent with his argument, what he described as a slip or a caper. It happened in our parliamentary system, in our procedure and it had been current practice for years. The borrowing power was related to a supply bill until the Speaker decided that there was not enough time to discuss it. We now have sufficient time to deal with it.
This was explained a while ago by the Minister of Finance. There will be second reading followed by consideration in Committee of the Whole and third reading.
Therefore, while in 1975 the Speaker was justified when he dissociated the borrowing power from a supply bill, that argument is no longer valid today, and secondly, we have the
January 16, 1981

1977 precedent. Third, no standing order prohibits it. And fourth, it is always important to consider the spirit of a Standing Order.
My colleagues mentioned a while ago that when quoting Beauchesne's fifth edition on page 177, we referred to the relation between the bills and the ways and means resolutions, which must be as close as possible to the ways and means notice of motion.
True, but what is the spirit behind this ruling since we are not told that we cannot include a provision with respect to borrowing powers? What is intended is that all the provisions of a bill relating to income tax, to the levying of a tax or to amendments to the Income Tax Act, be specified in the ways and means motion. If today there were new amendments to the bill introduced on Tuesday, or if there were provisions amending the Income Tax Act not specified in the ways and means motion, then, I would agree. My colleagues would be right, the bill would be different from the ways and means motion. It is in that sense that we should understand the need for the bill to coincide or agree with the ways and means motion. Reference is to the provisions dealing with fiscal measures. There is nothing in our rules to cause us to include any borrowing authority in the ways and means motion, there is nothing in our rules to prevent us from including in a bill amending the Income Tax Act, a borrowing authority authorized under the Financial Administration Act. That must be read in its context. The essential and required concurrence between the bill and the ways and means motion must exist in matters pertaining to fiscal measures, and not in matters pertaining to borrowing authority.
So, the hon. members opposite are right in saying that the bill must agree with the ways and means motion. If one looks at the bill, one sees it does in fact agree with the motion. They do look alike as far as tax provisions are concerned. But there is nothing anywhere to compel us to include any borrowing authority in the ways and means motion because that is not a taxation measure; there is nothing to provide that it should be included in a ways and means motion, and this explains why no reference is made to it in our motion. There is nothing inconsistent in that. And that is the fourth reason why I respectfully submit their argument is not valid. In summary, there is no rule against this, and we must consider the similarity between the notice of a ways and means motion, and the bill in the context and in the spirit of this taxation legislation. There is also the precedent I mentioned as well as the other reason.
Finally, my learned colleague from Winnipeg North Centre (Mr. Knowles) raised the question of the absence of a prior notice. But there again there are two reasons why his argument does not hold. First, we are bound, by our Standing Orders, to give notice of a bill and not of its contents and provisions. We gave notice of Bill C-54 through the notice of the ways and means motion. We have therefore observed the
Income Tax Act
rules in that respect. We gave notice of the bill, and in no way did we have to give notice of clause I, clause 5, or chapter three. We gave notice of the bill, and by doing so we observed the rules. That is the first argument.
The second argument-I said there were two but in fact there are three-is to the effect that when the bill was read, when it was introduced, it was then the hon. member learned that the borrowing authority was included in the bill. But there was sufficient notice, Madam Speaker, and as a subsidiary reason I would add, as you said last Tuesday, that this notice was even more generous than what is prescribed by our Standing Orders.
Therefore, as early as last Tuesday, hon. members were made aware, through the introduction of this bill and its title, that the borrowing authority was an integral part of this bill to amend the Income Tax Act. It is therefore a subsidiary argument that I raise, because in reality no one has been prejudiced; this is a procedural argument to which 1 respond also with a procedural argument. The rules provide that notice must be given of the bill but not of the provisions it contains. So there has been no injustice and the rules have been followed.
The third argument which should settle the matter is that, again in the precedent of 1977, no separate notice was given of the bill to amend the Income Tax Act and to grant the government a borrowing authority.
I refer once again to the precedent with regard to the other matter raised by the hon. member for Winnipeg North Centre. Notice was given of a ways and means motion, but no separate notice was given for the borrowing authority bill. In parliamentary practice, precedents carry a lot of weight when there are no written rules. They are being invoked today. It will be noted that the argument I have just made is not merely a procedural argument nor merely a point of law.
This is because, essentially, even though we humbly and respectfully submit that we have a good case based on our rules, the precedents and parliamentary spirit, I believe that, in practice, the members of the House are far from being penalized by this procedure. First of all, they were given reasonable notice, second, they will have time to debate this matter, and third, which should please everyone, this will avoid the need for the House to consider separate bills which can be dealt with together, which is not irregular or abnormal and which could perhaps become a more usual practice in the future for combining related provisions. Now why has this been included in this bill? There is a precedent. We have the statutory authority to do so as the Financial Administration Act provides that the borrowing authority must be requested of Parliament. I do not want to repeat all my arguments, Madam Speaker, but parliamentary spirit has been respected, the hon. members are not being deprived of their rights, and the law and precedents give us every justification for the manner in which this bill has been introduced, and that is why I would ask you to dismiss the objections raised by my learned colleagues.

January 16, 1981
Income Tax Act


Madam Speaker:: The hon. member for Edmonton West (Mr. Lambert) on a point of order.


Marcel Joseph Aimé Lambert: 1 rise on a point of order, Madam Speaker. I am certain that the President of the Privy Council (Mr. Pinard) would not want to make any false representations to the House, but when he stated that a bill ensuing from a ways and means motion and including a request for a borrowing authority was introduced in 1977, he said that no notice had been given. Madam Speaker, I would like to quote from the Journals of 1977, on page 70, where we find the following:
Pursuant to Standing Order 60(11), on motion of Mr. Chretien, seconded by Mr. Horner, Bill C-l I, an act to amend the statute law relating to income tax and to provide other authority for the raising of funds, was read the first time-
Actually, this was based on a motion which covered both points, that is the amendment to the statute and the authority for the raising of funds. I therefore believe that the case which occurred in 1977 is not the same as the present one.


Yvon Pinard: Madam Speaker, if I may, I would simply say that I fail to understand what the hon. member is talking about. This does not contradict what I have said. There was a ways and means motion. As I have said, no separate notice was given, and the hon. member has not contradicted what I have been saying.


Madam Speaker:: The point of order raised is certainly very important. The arguments of the hon. members have been expressed very seriously, for which I thank them, since it will be very useful to me in making a ruling on this point of order. This point has been raised, as the hon. member for Calgary Centre (Mr. Andre) said himself, to ensure that the rules of this House are being followed and not to drag out the debates of the House. I thank them for having acted in this spirit and I also thank all those who took part in the debate. However, this is a complex matter. I shall have to refer to all the precedents which have been quoted and analyse them so as to make a ruling in the best interests of the House of Commons. I shall therefore reserve my ruling on this point of order. In the meantime, I believe that we could proceed with second reading.


Harvie Andre: Madam Speaker, I rise on a point of order. 1 am just seeking clarification of your statement. I recognize the desirability of the Chair being precise in your ruling so as not to encumber future legislators with something done in haste. On the other hand, I wonder in respect of the procedure at this point what position we might be in if, for example, we spend the remainder of this day on second reading and the ruling of Your Honour is that this is not in order and that there must be two separate bills, as 1 believe to be the case. Are we then today debating a borrowing authority bill or are we debating an income tax bill? In my view those are two separate bills which should be based on the Standing Orders of the House. Therefore I wonder what will be the outcome. Will we be
called back to repeat the initiation of each of these bills should that be your ruling when it comes down?


Madam Speaker:: I 'hink we can proceed to the discussion on second reading of this bill without prejudice to whatever has been said. I will study the matter and rule later on, but 1 think this can be done. 1 do not think the House will find itself in an impossible situation should 1 rule one way or the other. Therefore we will proceed with the second reading.


Allan Joseph MacEachen: Madam Speaker, Bill C-54 now before the House deals, as we have heard, with borrowing authority and a number of amendments to the Income Tax Act. It thus combines those elements of my recent budget and, in some cases earlier budgets, which are in most urgent need of legislative attention. Because this bill is so closely related to the budget, indeed because it flows from the budget I introduced on October 28, 1980, I should like to take this occasion to mention briefly the economic policy strategy outlined in the budget in the light of economic developments over the last few months. I believe this will assist hon. members in judging certain components in the bill.
As hon. members will recall, the basic economic policy strategy in the budget is to pursue a moderate and carefully balanced policy in a period when Canada, like other national economies, is facing a very difficult economic situation. In my recent budget speech 1 emphasized the need to deal with the inflationary pressures we are facing, and noted the possibility also of some deterioration on the price front due to more rapid rates of increase in energy and food prices. In fact the developments in recent months indicate that there has been somewhat more pressure on food prices than had been anticipated, related to below average yields of some crops and to lower marketing of hogs and cattle. More generally it seems even more clear now than at the time of the budget that inflation is the most serious and intractable problem facing the Canadian economy.
There have, however, been a number of encouraging developments since the budget. There has been a continued growth in employment, with the rise for the fourth quarter amounting to 1 per cent. In 1980 the proportion of the population with jobs was at a record level of 59.2 per cent. The recent trade figures have also been most gratifying, the balance of trade amounting to SI8.7 billion at an annual rate in November, and $11.8 billion at an annual rate over the last three months. Unfortunately the very high levels of short-term interest rates abroad have tended to offset this strong trade performance and thus the Canadian dollar has been under downward pressure in recent months. Nonetheless, the indications are that the fourth quarter has shown moderate strength, and the actual outcome for 1980 as a whole is likely to be stronger than expected in the fall of last year.
In this context the gradualist approach of the budget, relying upon a balanced package of measures to bring down the rate of inflation gradually and promote employment and
January 16, 1981

productivity growth, continues in my opinion to be appropriate and justified. Those who advocate more economic stimulus at this time should realize that such a course must inevitably lead to further aggravation of current inflationary pressure. It would also require abandoning the policy of bringing the size of the government's deficit under control.
At the other extreme there are those who would advocate more restrictive policies. The supporters of such policies must recognize, however, that they imply some combination of increased personal and corporate taxes or Draconian measures to cut government expenditures. Any such expenditure cuts would lead to disruption of important public programs since the growth of total budgetary outlays is already under restraint. Moreover, extreme restrictive policies would have high costs in the form of lost output and higher unemployment. Rather than either extreme, I attempted in my budget to adopt a strategy of gradual deficit reduction. As such it marks a fundamental shift in the stance of fiscal policy.
After 1974 the federal deficit and financial requirements steadily mounted as the government moved to stimulate the economy. Now the government has chartered a more determined anti-inflationary course for fiscal policy. The importance of this has been driven home by the resurgence of inflation. We heard and listened to further evidence on that point during the oral question period. This shift in the direction of fiscal policy should make more funds available for supplying expanding investment. It will thus provide useful support to the government's supply-side initiative.
A major factor bringing about the deficit reduction is the government's commitment to expenditure restraint. The growth rate of spending on total outlays, that is, the sum of budgetary expenditures, loans, investments and advances, is projected to decline from 13.2 per cent in 1980-81 to 12.8 per cent in 1981-82, and to slow to around 10 per cent by 1983-84.
The planned growth in spending is within the trend rate of the gross national product. It will bring the government's share of total outlays in GNP back down to 20.3 per cent by 1983-84, the same share as in 1979-80.
The slowdown in spending growth will be achieved in significant part by removing the burden of financing petroleum compensation payments from the general government revenues and putting it where it belongs. While this burden will be shared by consumers they will still pay less for energy than if we had moved more rapidly to international levels. Inflation will thus be restrained.
The cutback in expenditure growth will also be facilitated by the new expenditure management system under which the government is identifying its priorities within an over-all framework for restraint. With this framework-
Income Tax Act


The Acting Speaker (Mr. Ethier):: Order, please. I regret to interrupt the hon. minister. It being one o'clock. I do now leave the chair until two o'clock.
At one o'clock the House took recess.


AFTER REC ESS
[Stage Direction]
The House resumed at 2 p.m.
The Acting Speaker (Mr. Blaker):: When the debate was interrupted at one o'clock, the Hon. Deputy Prime Minister and Minister of Finance (Mr. MacEachen) had the floor.


Stanley Howard Knowles: Now he will have a chance to say something.


Allan Joseph MacEachen: Mr. Speaker, when the House rose at one o'clock I was referring to the approach of the government to expenditure restraint. 1 said that the cutback in expenditure growth will also be facilitated by the new expenditure management system under which the government is identifying its priorities within an over-all framework for restraint. Within this framework there will be, nevertheless, room to finance new initiatives in the priority areas of energy and economic development.
These energy and economic development initiatives are an integrated part of the budget strategy. They represent an innovative supply-side approach to the inflation problem. In the past our tendency to focus too narrowly on demand management policies and our failure to tackle supply problems have contributed to the build-up in inflation. The budget took action to right this balance. Over the next three and a half years, $8.4 billion from new energy taxes has been allocated to help us achieve security of supply and reduce our vulnerability to oil price shocks.
Increased expenditures on economic development over the next three or four years will help bring about renewed growth in productivity and dampen cost increases. The amount of $1.5 billion has been set aside for a major expansion of our activities in such areas as industrial development programs, research and development, export promotion and transportation; $350 million has been set aside to promote industrial restructuring and manpower retraining in areas of particular need. I hope the Minister of Employment and Immigration (Mr. Axworthy) and the Minister of Industry, Trade and Commerce (Mr. Gray) will amplify our intentions in this respect very soon.
In addition, $2 billion has been set aside for western initiatives in areas vital to the growth and diversification of the economies of the western provinces such as western grain handling and prairie water developments. Thus, a grand total of $12 billion has been allocated in the next three years to essential productivity and supply initiatives. This should help to reduce inflationary pressures by increasing supply in Canada, which was one of the major themes struck in the budget presentation.

January 16, 1981
Income Tax Act
I should also like to comment briefly on monetary policy. The Bank of Canada's policy of restraining, and over the long run gradually reducing, the rate of growth in the money supply, parallels the budget strategy of gradually reducing the size of the deficit. In recent months the bank's interest rate policy has been directed to limiting the downward pressure on the Canadian dollar, because of the inflationary impact which would result from an excessive decline in our exchange rate. Subject to this constraint, and in the context of the very high levels of interest rates in the United States, the bank has also attempted to limit as much as possible the upward adjustment in Canadian interest rates. This policy reflects the same balanced and moderate approach which is the basis of the economic policy strategy outlined in the budget. As such, it is fully consistent with the government's economic policies, and I should like to reiterate the support given in the budget for the monetary policy pursued by the Bank of Canada.
Let me turn to a brief discussion of some of the other major items in Bill C-54 now before the House. Part I of the bill will provide for borrowing authority in fiscal 1981-82, and part II of the bill reflects various income tax measures arising out of the October 28 budget and those proposed in the fiscal and economic statement presented to the House on last April 21. 1 might note in passing that although borrowing authority in the last two fiscal years was provided in a separate bill, this was in circumstances in which borrowing authority was being sought before a newly elected government had brought down a budget. In more normal circumstances in the last ten years borrowing authority has either been combined with the income tax bill or with an appropriation act.
The $14 billion of borrowing authority being requested arises from $11 billion financial requirements set out in the budget, plus some allowance for contingencies related to foreign exchange operations. As hon. members will recall, the budget strategy is one of deficit reduction through restraint in the growth rate of our expenditures. The budgetary deficit is expected to decline from $14.2 billion this year to $13.7 billion next year. This is only a modest reduction, but it is a start and is important as a symbol of the strength of our commitment to deficit reduction. Larger declines in the deficit will be required as growth speeds up, with the deficit expected to decline to $11.8 billion in 1983-84.
With rising sources of funds from non-budgetary accounts, financial requirements decline more rapidly than the budgetary deficit. They will decline from $12.2 billion this year to $11 billion next year, reaching $7.2 billion in 1983-84. As a percentage of GNP, the drop is expected to be from 4.3 per cent in 1980-81 to 3.5 per cent in 1981-82, and to 1.8 per cent in 1983-84, the lowest since 1974-75.
In recent years most borrowing authority legislation carried a clause which automatically cancelled any unused authority at the end of each fiscal year whether or not new authority has been obtained. In the past when this occurred and new borrowing authority had not yet been passed by Parliament, the government was able to continue with its borrowing program on unused authority obtained in earlier years which was not
subject to automatic cancellation. Since it was not always possible to foresee when Parliament would be sitting or what the parliamentary legislative calendar might be, these old borrowing authorities provided a useful degree of flexibility. During the first four months of the current fiscal year, however, almost all of this non-lapsed borrowing authority was used up. To provide some degree of flexibility in the future, the legislation proposes to exempt $3 billion, or whatever amount remains if it is less than $3 billion, from automatic cancellation at the end of fiscal 1981 -82.
The $3 billion margin for contingencies being requested is in line with the margin which has been provided in recent years. The financial requirements for 1981-82 to which 1 have referred exclude requirements for foreign exchange transactions. There are major uncertainties arising from foreign exchange transactions, since either a major weakening or a major strengthening of the exchange rate would have an impact on the borrowing requirement. If the Canadian dollar were to be strong, then the government would have to raise more Canadian dollars to purchase foreign exchange. On the other hand the Canadian dollar could be weak, and the government would then be faced with the need to borrow foreign currencies.
The clause referring to the ability of the government to borrow and repay loans in foreign currencies is a technical one and is similar to a clause which was first included in a borrowing authority request introduced by the former government in 1979. Over the years Canada has borrowed and repaid funds in a number of currencies. However, in 1978 Canada made a number of large foreign loans and established standby lines of credit with a number of foreign banks. The clause was added to confirm Canada's right to borrow in foreign currencies.
The Financial Administration Act is currently under review, and a clause clarifying the government's ability to borrow and repay in foreign currencies would be included with any amendments to that act. Once such an amendment has been passed there would no longer be a need for this clause in borrowing authority bills.
As a matter of interest to hon. members, 1 would like to set out the government's debt program so far in the current fiscal year and the amount of borrowing authority which has been used up. Up to January 15, 1981, in domestic markets the government has borrowed a total of $9 billion. Of this amount, $5.3 billion was raised through the issue of marketable bonds and $4.6 billion through the issue of treasury bills, while net Canada Savings Bonds redemptions reduced the amount borrowed by $0.9 billion. In foreign markets, on balance, the government has drawn the Canadian dollar equivalent of $0.8 billion on its standby lines of credit with Canadian and foreign banks. The amount comprises $1.1 billion drawn in December and currently outstanding and a $0.3 billion repayment on these lines earlier in the fiscal year.
Since borrowing authority for the Fiscal year 1980-8! was not obtained until July 17, 1980, borrowing up until that date
January 16, 1981

was charged to $2.9 billion of non-lapsing borrowing authority obtained earlier and carried forward. Virtually all of this non-lapsing authority has been exhausted. Since July 17 all borrowing has been charged to the new authority for the fiscal year 1980-81. As at January 15, 1981, there was approximately $5.1 billion of this authority outstanding. This is more than enough to complete the planned debt program in the final quarter of this fiscal year, and a considerable portion of this amount will likely expire on March 31, 1981.
To summarize our 1980-81 financing operations, at the start of the fiscal year there was $2.9 billion of non-lapsed borrowing authority outstanding. This was reduced to just over $100 million by July 17 when $12 billion in additional authority became available under the Borrowing Authority Act, 198081. At the end of December the amount still available was $5.1 billion.
This description of our recent debt program and the current position with respect to borrowing authority provides the important pieces of information necessary for consideration of this part of the bill. If members wish further detailed information I will be happy to provide it to the House at the appropriate stage in the proceedings.
Part 11 of the bill, hon. members may be surprised to learn, is the first government income tax bill to be introduced for debate since the fall of 1979. It includes certain measures first announced in the budget brought down by the former government on December 11, 1979, and which were reintroduced in the ways and means motion which I tabled on April 21 of last year, along with the income tax measures announced in the budget of October 28 last.
Some of the measures contained in the bill affect the 1980 taxation year and it is therefore important that this legislation receive consideration at this time so that Revenue Canada can be given authority, by law, to proceed with the processing of 1980 income tax returns. Taxpayers are already filing returns, many of which will require the payment of refunds as a result of measures proposed in this bill. Among the measures which affect the 1980 income tax returns, all stemming from the recent budget or the statement of last April, are the following:
deduction of remuneration paid to a spouse by a person carrying on an unincorporated business, the exclusion for overseas employment,
-the refundable abatement for individuals in Quebec, changes relating to property transferred between spouses, deductions for travelling expenses of part-time employees, increased deductions allowed volunteer firemen, deduction of the cost of an aircraft used by an employee,
-changes affecting the child tax credit, employee loans, and teachers at Canadian forces bases abroad.
This is not a complete list but it does illustrate that 1980 income tax returns for a large number of individuals are affected by measures in this bill.
There are also a number of important measures for corporations, some of which went into effect on December 11, 1979, and most of which apply to the taxation year 1980. In addition
Income Tax Act
to tax assessments, many business transactions and corporate plans are being delayed awaiting passage of this income tax bill.
I should also point out, Mr. Speaker, that draft material relating to the tax measures in this bill was made public on five occasions during the past five months. In addition to the details set out in my notice of ways and means motion last April 21, 169 pages of draft legislation were issued on August 28. Another ways and means motion and supplementary information were introduced with the October budget, and an exposure draft of the legislation was tabled in this House on December 19. Finally, additional information on the budget measures was set out in the ways and means motion tabled on Monday of this week.
These documents which were provided afforded taxpayers and professional tax advisers an opportunity to comment on technical aspects of the law before the formal introduction of the legislation. 1 would like to express my thanks to the many who responded with suggestions for improvements. The legislation now before us has been improved significantly by those suggestions.
In this regard I would like to refer to one important change which has been made in the oil and gas sector. The October budget proposed a change in the treatment of drilling costs that would qualify for the 100 per cent write-off as Canadian exploration expenses. It was to apply to expenses incurred after 1980. My colleague, the Minister of Energy, Mines and Resources (Mr. Lalonde), and 1 received a number of representations on this particular change and its possible adverse effect on drilling activity in the period before the new petroleum incentives program becomes fully operational. As a result, 1 have agreed to postpone until 1982 the changes proposed to the tax treatment of exploration drilling expenses. This change should have a significant effect on exploration activity in the current year, particularly that activity undertaken by Canadians whose exploration expenses also qualify for payments under the petroleum incentives program.
I would also like to mention that many of these measures, which make up the larger part of the bill, were proposed by the previous government and should therefore be generally acceptable to members opposite.
In addition, the bill contains the various income tax proposals announced in the October budget. Several important changes were proposed at that time. There is the new 50 per cent investment tax credit designed to encourage new manufacturing investment in the poorer regions of the country. There are important changes in the tax rules affecting credit unions to accommodate a number of problems of concern to them. One of those changes will facilitate the pooling of credit union funds for major investments in Canadian equities.
In order to help reduce shortages of rental accommodation and stimulate the construction industry, this bill will reintroduce the tax incentive for multiple unit residential buildings for construction starts between the budget date and the end of this year.
The bill will implement a number of changes to the treatment of exploration and development expenditures as a conse-

January 16, 1981
Income Tax Act
quence of the National Energy Program. There are also several technical changes affecting business income, including the requirement that interest income of corporations and partnerships and certain trusts be reported on the accrual method. Most firms follow this practice, but some have opted to follow a different practice which results in a deferral of tax for interest accrued but not received.
In conclusion, Mr. Speaker, this is undoubtedly an important bill. Members of the House will take the opportunity, obviously, to comment on its contents and on the problems affecting the economy. It is not the first time we have had an opportunity in this session to debate this subject. We had a very intensive six-day debate following the budget, and before Christmas we had a lengthy debate on economic conditions, both of which permitted a very large number of hon. members to express their views on fiscal and economic policy. It is obvious that members will want to add to their thoughts as this debate opens and, certainly, I will be listening very carefully in the hope I will receive advice which can be implemented and which will do more good than damage to the economy. There is always lots of advice, but if it were implemented it would probably worsen conditions. I am asking the House to give me advice which will improve, not worsen, the situation.
1 remind the House again that the changes for the 1980 taxation year are important. They affect a large number of taxpayers who will be filing their returns, and I would hope that the authority will be given by Parliament so that refunds which may be owing to Canadian taxpayers will be authorized in time. I believe that this authorization can be given without depriving Parliament of a reasonable opportunity to debate the contents of the bill and the circumstances surrounding it, not only at second reading but at Committee of the Whole and at the third reading stage.


Harvie Andre: Mr. Speaker, I must say in opening that it must be a considerable relief to the Minister of Finance (Mr. MacEachen) finally, after so many months in office, to have a chance to deliver a budget address. He delivered a mini-budget last April 21 the contents of which he stole from the hon. member for St. John's West (Mr. Crosbie), who was the previous minister of finance. He then was forced to put his signature to and deliver the energy program of the Minister of Energy, Mines and Resources (Mr. Lalonde) on the now infamous day of October 28. Today, for the first time since the minister assumed his high office of Minister of Finance, he has had a chance to deliver a budget address and apparently to indicate where he feels his policies are leading the country.
In his opening remarks, the minister commented on the length of time between the income tax amendments and the borrowing authority and the budget. I do not wish to rehash an earlier procedural debate, but for years and years, as the minister pointed out in his contribution to the procedural debate, the borrowing authority was attached to supply. Finally, as the Speaker was reviewing the matter, it was found that in fact this procedure was in violation of Standing Orders of
the House and the matters were severed. To learn now that we were actually wrong all those years and that the matter really has more to do with taxation, does not really stand up under close scrutiny. Borrowing authority in fact is a stand alone provision in the same way as matters of customs tariffs and excise are stand alone provisions, though they flow from government policy.
The minister in his early remarks laid out his interpretation of the policies which he is following. He seems to be enamoured with the word "gradualist". He used it several times today, and apparently in an interview with a reporter of the Toronto Globe and Mail on Monday, January 12, in which he said:
In a sense. I'm working in a gradualist approach because I believe it is less damaging in current circumstances and over time will have its results unless we have further shocks to the system.
The minister is engaging in an approach which unfortunately has become quite habitual to members of the government. For example, earlier in the same Globe and Mail article, the minister said:
-the basic framework of his policies, as laid out in the budget, is to restrain government expenditures, bring down the deficit gradually, back the Bank of Canada's monetary policy and try to support industrial development, energy development and economic adjustment through government spending.
It is a political approach taken by the government to gain the support of the public. In searching for the phrase to describe this approach adequately, the only one I could come up with which seemed fitting is the "big lie" approach. The government articulates its policies in terms of goals of motherhood in the hope that these goals will be interpreted and viewed by the public and the media, which translate this House to the public, as the substance of its policies in order to perpetuate a fraud on the public.
For example, on October 2 the government introduced its constitutional proposal and said that it was very simple and would entail a flexible amending formula and better protect human rights. There were many who accepted that proposal at face value and there were some who even said they would endorse it, and I think of my friends to the left, who took that position and are now finding it rather uncomfortable. Only after a closer look at what was involved is it becoming widely recognized throughout the country that in fact the opening statement of October 2 on the goals of the government on the constitution could not be further from the truth. The reality of what the government is proposing in the details, and that is where it counts, is far more profound, far more dangerous and destructive to the unity of the country than anything suggested in those original motherhood goals.
Similarly, on the budget come energy address of October 28, the goals as articulated by the Minister of Finance who read the program, can hardly be opposed by anybody. The goals were to protect Canadians from undue increases in energy prices, to Canadianize the industry, to make the country self-sufficient, to reduce demand and to encourage conservation. Those goals are eminently sensible, and goals against which no sane person would argue.
January 16, 1981

However, upon closer scrutiny one will see that they are not so sensible. In terms of detail the approach is the "big lie". Unfortunately there are still some people in this country who do not quite recognize the fact, but every day more and more people are recognizing that the national energy policy is not Canadianizing the industry but is driving the Canadian entrepreneurs and Canadian companies-the driving force of the industry-out of the country. It has the effect of increasing state ownership perhaps, but certainly not of increasing Canadian ownership. These policies will not make us self-sufficient, because in this year alone we will lose between $2.5 billion to $4 billion of exploration, which Canadians would like to put into the industry, because it is all going south to the United States.
1 know there are certain hon. members who like to think that the multinational oil companies are trying to pull a scam. They simply have to read the newspapers, and not just the headlines but the details. For example, yesterday Walkers Consumers Home, a wholesale Canadian company, announced that it was investing $600 million new money in the oil and gas industry in the United States. This happened after it looked at this National Energy Program designed to help the Canadian oil and gas industry, this program which the minister said on October 28 is going to result in a tremendous boom to Canadian companies and will Canadianize the industry. No one opposes that goal, but in reality it is doing just the opposite.
This apparent refusal to look at the evidence is disturbing. I suppose history has shown that the "big lie" approach works, however. If you say often enough that we are going to be self-sufficient and are going to be Canadianized, then apparently people will believe it, even though Canadian money is leaving the country. We are not Canadianizing, Mr. Speaker, and we are not going to be self-sufficient. This is the "big lie" approach and we have it again in this budget.
The minister says that the framework of the budget is to restrain government expenditures. When the details of the October 28 budget and government expenditures are examined they show that he was repeating the big lie put out by the Prime Minister (Mr. Trudeau) during the election campaign when he made a pledge that the Liberals would "manage more rigorously the nation's finances in order to make more effective use of the taxpayers' money". He also said, "We will hold the line on government expenditure growth under the rate of GNP." That was the commitment, and the Minister of Finance says that is his policy.
According to this document, however, for the coming fiscal year the projections for the growth in government expenditures on a public accounts basis is 12.8 per cent whereas they are projecting in terms of growth in the economy, the GNP, inflation included, of 11.1 per cent. The minister can say, as he did to the reporter, that it is his policy to restrain government expenditure, but the numbers show just the opposite. How long can a democracy last when a minister can get away with that kind of big lie, Mr. Speaker? He says that is his policy when in
Income Tax Act
fact his policy is just the opposite. That is on a public accounts basis.
On a national accounts basis, which really gets at government spending reality, not just public accounts used as a kind of fudge number-national accounts get closer to the truth- growth and expenditure for next year is projected at 15.9 per cent, a whopping increase of 4.8 per cent ahead of the gross national product according to their members. Yet the minister said to the reporter, and repeated it in the House today with a straight face, that their policy is to restrain government spending.
It is sad that this kind of talk seems to have no effect on the supporters within that party. They are quite prepared to say, "Aye, sir." It is now apparently accepted public behaviour for politicians, when in government, to outline their goals, and then when their performance goes in exactly the opposite direction and they know that it does, no price is to be paid for it. That is the tragic thing that is happening. The big lie technique is used so frequently that we seem to have become immune to any analysis of it.
The minister's second point was that he is going to bring down the deficit gradually. Granted, in this budget document there is a projection of the deficit coming down, but how gradual is gradually? Independent analyses by groups not directly owing allegiance to the Minister of Finance show that his projections of what is going to happen to the deficit are not in keeping with the facts.
The minister is going to back the Bank of Canada's monetary policy. What a courageous position to take! It is strange to see what a difference a year makes. About a year ago his colleague, the Minister of Industry, Trade and Commerce (Mr. Gray), who was then the Finance critic for the Liberal party, said that if he could not bring interests rates down he would resign. What a difference a year makes, Mr. Speaker.
What are the Bank of Canada's interest rate policies? It seems that they are something that come out of their policy in regard to the dollar-keep the dollar from falling in value and do whatever you have to do to interest rates in order to achieve that. In reality that means that we are in lock step with the United States and that we have to do whatever they do. This great nationalist government which promises to Canadianize the oil industry cannot seem to find a way to Canadianize the Bank of Canada.


Michael Holcombe Wilson: Keep interest rates up so that they will go down.


Harvie Andre: As my colleague points out, the policy is to keep interest rates high so that they will go down! Presumably as inflation goes down interest rates will go down, so what you have to do to make them go down is keep them high. If 1 sound confused, Mr. Speaker, I can assure you that 1 share that confusion with virtually everyone in this country, including lots of economists such as the Economic Council of Canada, the C.D. Howe Institute, and others.
6288

January 16, 1981
Income Tax Act
The minister cannot be consistent even in the same paragraph. He talks about holding down government expenditures, restraint, bringing down the deficit and then he says that through government spending he is going to support industrial development, energy development, and economic adjustment. Through government spending he is going to restrain spending, but then through government spending he is going to support these figures. He cannot be consistent within the same paragraph.
Let us examine what he says. He is going to support industrial development. Who can be opposed to that? However, when the Minister of Industry, Trade and Commerce, who would have responsibility in this area, was asked for his industrial development strategy which during the election campaign was absolutely promised to be forthcoming just as soon as the Liberals were returned to power, he said it has a lower priority than the constitution, and that they cannot get after it because they are working on the constitution. He cannot walk and chew gum at the same time!
Are all the economists, planners and so on, in the Department of Industry, Trade and Commerce sitting around moaning and groaning about the constitution? 1 have not seen the Minister of Industry, Trade and Commerce at any of the constitutional meetings. I did not know that the Department of Finance and the Department of Industry, Trade and Commerce were involved in the constitution. Is the whole apparatus of the Government of Canada coming to a grinding halt while they try to convince Mr. Duclos and others like him who have a little bit of spine, that they had to support this imposition-


Mr. Cullen:: Oh, oh!


Mr. Deputy Speaker:: Order, please. It is the practice in the House to refer to hon. members by their constituencies. I am sure that the hon. member, being an experienced parliamentarian is aware of this.


Jack Sydney George (Bud) Cullen: Oh, oh!


Harvie Andre: Thank you, Mr. Speaker. I refer to the hon. member for Montmorency (Mr. Duclos). The hon. member for Sarnia (Mr. Cullen) should have as much character and fortitude as the hon. member for Montmorency.


Jack Sydney George (Bud) Cullen: I have more, but I talk some sense.


Harvie Andre: The hon. member for Sarnia is well trained; he knows when to say aye.
I think it was the Minister of Transport (Mr. Pepin), in an earlier incarnation as Minister of Industry, Trade and Commerce, even before I was here, who coined the phrase "industrial development strategy". He started work on it then. 1 do not know how many years ago that was, but we are still waiting. In any event, this Minister of Finance says he is going to do it. How is he going to do it? By restraining government spending and holding the deficit in check. Then the government talks about energy development.
It is totally baffling how the Minister of Finance could on Monday, January 12, after seeing the impact of his October 28 energy policy, still maintain that there will be energy development in this country anything like what is needed. Obviously the Minister of Finance is not an ignorant man. He is not dumb. He is aware of what is happening. But because it does not fit in with the politics of the moment to acknowledge it, we carry on with this policy of the big lie.
We hear things such as, "This is what we are going to do. We are going to have energy development." The minister knows that is not what is happening. I know that his officials, below the deputy level, are scurrying for cover and saying that they did not have anything to do with that October 28 document, that they did not see it. We hear them say that it was done by EMR, the deputy, and one or two people around him. No one in finance had any say, and there are some honourable people in that department who would have liked to have had some say in producing a budget for this country. However, for some reason or other that task was turned over to the Minister of Energy, Mines and Resources and he produced that body blow.
Unfortunately for the Minister of Finance, he is the one who will have to pick up the political credit for it. He will find that unemployment this year will be far greater than he had expected or planned. His officials never really had a chance to look at that energy policy. I gather no one in government did, other than the department of energy. But the Minister of Finance is the one who will have to pay the political price of accounting for that increased unemployment, the increased drain on the public treasury for its subsidies on the imports, and the increased strain on the dollar because of our increased balance of payments deficit, and on and on. The Minister of Finance will have to bear that cross put on his shoulders by the Minister of Energy, Mines and Resources who somehow conned him into reading his energy policy.
Economic adjustment is another thing to which the minister is committed. What does economic adjustment mean? Is it another Department of Regional Economic Expansion? Do you remember that, Mr. Speaker? The Department of Regional Economic Expansion was supposed to cure regional disparity in Canada. How many years have we had of that department? And out of it we have regional disparity which gets worse and worse. What kind of economic adjustment is he planning here? I can only wonder and worry.
Sometime soon there needs to be a reawakening and a sensitivity to politics and to our political leaders in Canada. A closer examination is needed of what politicians and governments are saying and doing. We need a better way of holding them accountable. It is intolerable and of great concern, with potential enormous damage to our society, to our nation and to our democratic future, to have these kinds of big lie techniques utilized, apparently with some success.
For example, we can hear "our goal is that of self-sufficiency and increased Canadianization" but under that they introduce policies which produce exactly the opposite effect. We can see something of this sort in the October 28 budget
January 16, 1981

where the minister said in one paragraph there will be no export tax "because 1 have talked to the premiers of the producing provinces," and in the next paragraph we read "but 1 am going to put a charge on gas sold to U.S. customers". That is a direct contradiction. There has to be a political price for that kind of political dishonesty, Mr. Speaker, otherwise it becomes common usage. We will destroy common language, destroy any respect for democratic institutions, and we will destroy the underpinnings of democracy itself. The next few steps to the total removal of any true democracy are not that far along the line. That price needs to be paid soon because the frustration levels, and the consequences of us not facing up to that and ensuring that we do not allow that kind of behaviour to happen will be pretty severe on our children and grandchildren. We have an underlying obligation as members of Parliament to leave the country in at least as good shape as we found it, and hopefully we will leave it in better shape. However, I am afraid we are failing in that regard quite badly.
This collection of budgets and mini-budgets, and what have you, which the minister has collected under this income tax amendment bill today, and the economic consequences which the minister described in his speech are, as 1 pointed out, at odds with the goals he talks about. I have pointed out some of the inconsistencies and downright deceptions, as have so many other members in this House in past weeks. However, I want to put on the record some of the observations made by independent groups, not by people associated with this party or other parties or people who have vested interests. For example, the Economic Council of Canada published an analysis of the budget in a document entitled "An Assessment of the Impact of the Federal Budget on the Canadian Economy". On page 4 of that document we read:
The federal budget impact reduces the CANDIDE Model 2.0 growth rate in 1980 from -0.4 per cent to -0.6 per cent. Using the budget projections for energy investment further lowers the growth rate to -1.1 per cent. This is close to the Department of Finance projection of -1.0 per cent.
In other words, the Economic Council of Canada employing its Candide economic model, which has some credibility, is at least as good as the model of the Minister of Finance, which shows minus 1.0 per cent. For 1980, according to the Economic Council of Canada, the budget of October 28 made things 10 per cent worse than the government was saying.
In 1981, the Economic Council has pointed out that their model shows that the budget of October 28 reduces the growth rate from 1.4 per cent to 1.1 per cent. In other words, if there had not been that budget, we would have a growth rate projected this year of 1.4 per cent. Because the Minister of Finance took budget action, the gradualist approach he called it, growth rate will be reduced to 1.1 per cent. That is marvellous.
At page 6 of that document we find the following:
Adding the alternative energy investment assumptions of the Department of Finance further reduces the growth rate to .5 per cent. This compares with the Department of Finance projection of 1.0 per cent-
Income Tax Act
So, using the economic model of the Economic Council of Canada, employing the last budget which was introduced, they conclude that for 1981 the growth rate will be half the level projected by the Department of Finance. That comes from the Economic Council of Canada, not a group of people who have partisan leanings, and if they do have any, presumably they would be Liberal because most of the members were appointed by Liberal governments. However, I do not believe they have any biases.
Then the Economic Council looked at the following years, and this is their conclusion. They conclude:
The general impact of the federal budget appears to be one which increases the rate of unemployment. The pre-budget base case suggests an unemployment rate of 8 per cent for 1981 but our budget alternatives show the unemployment rate lying between 8.2 per cent and 8.6 per cent.
In other words, had there not been any budget at all, there would have been unemployment of 8 per cent, but as a result of the budget, unemployment will be between 8.2 per cent and 8.6 per cent, according to the Economic Council of Canada. They conclude that the growth in the GNP will range between .5 per cent and 1.1 per cent.
Another interesting observation of the Economic Council of Canada on this budget and the income tax bills which flow therefrom, is that one of the hidden impacts of the federal budget is its compositional effect on savings. It will have a tendency to reduce the percentage of savings occurring to provincial governments' corporate sector and personal sector, and at the same time decrease the proportion of disservice or increase the proportion of savings occurring to the federal government. I think that perhaps this tells the real story of this budget. The real story of this budget is to take money from personal savings, that is out of your jeans, Mr. Speaker, and my jeans, to take money out of the corporate sector, that is presumably money which might have been invested to create new jobs, to take money out of the provincial governments, which 1 am sure will delight them, and to put it in the treasury of the federal government. That is the over-all thrust of this budget.
In order to accomplish that, in order to give them those funds which they will undoubtedly dream up for some vote-producing expenditure programs, they are quite prepared to see unemployment rates go up by perhaps .5 per cent, and, 1 think more, because there are other considerations, but at least by .5 per cent. They are quite prepared to see inflation increase to alarming levels, much higher than previously anticipated. They are quite prepared to see the Canadian public bear that cost through less job security, through more unemployment and through higher costs, in order that they can collect those extra savings from the provincial governments, from the corporate sector and from the private sector.
Perhaps that is what the minister may have said in his interview with The Globe and Mail on January 12, that part of his gradualism was economic adjustment. It is the adjusting of other people's money from other people's jeans into his jeans.

January 16, 1981
Income Tax Act
That is the economic adjustment which seems to be the thrust of his policy, according to the Economic Council of Canada.
In the event that someone will argue that the Economic Council of Canada is a group that cannot be trusted, or that somehow they are prejudiced and therefore we should not believe them when they say that this minister's energy policy will make things worse, I should like to bring to the attention of the House a document called "The Canadian Review" by Data Resources of Canada, a Toronto-based company which is in the business of economic modelling. They, too, have a model of a Canadian economy, they too have analysed this budget, and they too have some observations to make about the budget. They say:
-the budget nevertheless has a restricted impact on real economic growth in the short run. Because of lags in the response of households, firms and governments to the new energy incentive programs, expenditures likely will expand more slowly than revenues until well into 1982. The budget therefore represents one more force weakening the prospective recovery in 1981-82.
They go on to state:
In comparison with the base solution with no policy changes-
In other words, no budget.
-the economic effects of the budget are more pronounced since the assumed changes in energy prices are larger. Consumer prices are increased by 1.2 per cent in 1981 and by 1.7 per cent in 1982. Real GNP is reduced by 1.1 per cent in 1981 and by 2 per cent in 1982.
So they too conclude, as the Economic Council of Canada concludes, that the budget will make things worse by at least 1.1 per cent in 1981 and by 2 per cent in 1982, worse than projected by the government. However, the Data Resources group, to their credit, also looked at the secondary effects of that economic policy. They analysed the fact that because the government failed to reach an energy agreement with the producing provinces, the government of Alberta has put on hold certain large projects, and therefore a number of companies have decided that they will shelve their plans. As a consequence, many of the things that were anticipated, such as new tar sands plants, new heavy oil plants, new development of oil and gas, will not be occurring.
The Data Resources group has done an analysis of this and has found that the aggregate effect of the secondary developments, which were not analysed by the Economic Council of Canada or by the Department of Finance, are to further reduce real output for 1981 by .7 per cent and by 1 per cent in 1982, with a considerable loss of revenue to the federal government. The cost to the federal government, for example, is an increased deficit in 1981 of 1.2 per cent and in 1982 of 2.5 per cent, which means that the figures which the Minister of Finance gave with regard to the reduction in the deficit, when he said that the deficit in 1981 will be $14.2 billion and then it will be a little bit lower in 1982, a deficit of $13.7 billion, are incorrect. According to the Data Resources group, it will not be $13.7 billion next year, it will be $15.2 billion. In fact, the deficit will continue to increase. I do not think there is any doubt about that, but presumably by then the Minister of Finance will be off in some new high office and he will not have to worry about it, but will let the next minister of finance worry about accounting for the fact that there is this discrepancy between predictions and actions. It is alarming and 1 think it should be of concern to real Canadians-


An hon. Member:: What a slip!


Harvie Andre: -to all Canadians-it is the same, real and all Canadians-to allow that kind of misinformation, if you will, to allow our politicians to get away with misinforming the public when in fact they know that the situation is quite different.
Precisely what is wrong with our economy and what should be done to change it? One of the better analyses, the recent terse analysis in the popular media, was, 1 thought, done by Don McGillivray of Southam writing in the Montreal Gazette of January 14 where he describes those who believe that there is a trade-off between inflation and unemployment and those who believe that by increasing unemployment you can then reduce inflation. He describes these people as being the people who wrote the MacEachen budget last fall. He writes:
They produced the Thatcher economic policy in Britain. They seem to be gaining the upper hand in the incoming administration of President-elect Ronald Reagan in the United States.
He goes on to say that these people who believe that there is a trade-off between inflation and unemployment "talk in a kind of code about 'restraint' and 'gradualism' and 'disinflationary demand policies'."
If those words sound familiar, it is because they have all been used by this Minister of Finance. The last phrase was used by the deputy governor of the Bank of Canada. This is a tipoff as to what is really involved. They are all, according to McGillivray, and I share his views, followers of the economic policies of John Maynard Keynes who believes the government could use its budget to add to the demand for goods and services when things are slack and thereby raise the economy, and it could reduce demand by cutting its own spending and taxing away some consumer money when things get overheated. Then he describes that people these days are one-way Keynesians who seem to be in charge and seem to think if you raise interest rates, people will stop buying cars and houses, which will cause the producers of cars and houses to lower their prices and will cause some people to be put out of work and thereby will lower their expectations, so the whole thing will have a disinflationary effect. But, as he points out, the fact of the matter is the Keynesian policy just does not work any more, and it has not worked. The reason given by Mr. McGillivray, and I think there is some validity to this, although I do not think it is the whole story, the fact of the matter is that people who are out of work do not stop consuming. They stop working and they stop producing, but they do not stop consuming.


An hon. Member:: What do you want them to do, starve?


Harvie Andre: Members of the New Democratic Party apparently are not willing to listen to any criticisms of that great guru.
January 16, 1981


An hon. Member:: He is the captain of the gurus.


Harvie Andre: In fact the member says it is not his guru, but several times at least since we have come back he has talked about the classical Keynesian cure to what is wrong with the economy; increase the deficit, spend more which will generate demand, put people to work and we will all be in a bed of roses. That is exactly what I have heard them say.
The truth of the matter is there is something more fundamentally wrong with Keynesian policies or the Keynesian approach. It has a fundamentally inflationary bias built into it. To begin with, it calls on governments to run surpluses when the economy is overheated. That is almost an impossibility in a democracy. It is almost impossible for a government to run a surplus because the number of spending plans dreamed up by politicians, bureaucrats and others are absolutely overwhelming, and no matter how overheated the economy gets, the reality is there is some just cause out there for money to be spent on. It is almost impossible to run the kinds of surpluses needed to balance off the deficits that are incurred in terms of stimulus.
On the other side, it is fundamentally inflationary in instinct. The theory is that governments, by spending more, putting more money into the economy, stimulate demand and bring on jobs. However, there is a time lag. When you stimulate demand, the first thing that occurs is the price goes up. The first thing that occurs when there is increased demand is a price increase. After the price goes up, you get increased supply. The increased prices bring on the new production and you are up to new levels. You have this inherent inflationary bias in the process, and that is what is wrong with the New Democratic approach. They are talking about more government spending, stimulating demand and thereby helping inflation. Perhaps, but in the process this would raise inflation to a new high. That happens everywhere.
Therefore, when the Minister of Finance talked about supply-side economics, members of the NDP had a little hiccup of concern because to them that is a buzz word for neo-Conservatism or something, and it frightens them. When the Minister of Finance talked about supply-side economics, he was starting to get on the right track. Unfortunately, that kind of talk is equivalent to the kind of talk that he is going to hold down government spending while in fact spending keeps going on. It is talk but not action. He at least mentions supply-side economics, but in fact does not deliver. We are still chomping along on the old demand-side or Keynesian approach without any indication of any changes.
What sorts of indication would we expect to see if the minister was sincere in looking at supply-side considerations? What we would have seen in that budget was increased spending on science and technology, for example. We would have seen in there increased investment in the productive side of our economy, the supply side. We would have seen, for example, some tax changes directed toward increasing productivity. These are not unknown things in this economic world. The Minister of Finance, when asked by a Globe and Mail reporter why it is that Japan and Germany seem to be doing so
Income Tax Act
well even when they have to pay world prices for energy and Canada cannot, said it has to do with the philosophy of the people. The minister blames our lack of performance in comparison to the Japanese and Germans on us. We are lazier than the Japanese or Germans, 1 guess. In fact, if he would look at what the Christian Democratic government had done in terms of productivity incentives, the supply-side economics, if you will, in the 1950s and early sixties he would get some valuable instruction on what can be done about increasing productivity. I might add that he should do the same thing in respect of Japan where productivity increases have been absolutely spectacular to the point that in just a very few short years, they have been able to produce automobiles at considerably less than our friends to the south who invented all the technology in the first instance.
The economic problems of this country are bad and, regrettably, getting much worse. The predictions for next year are bad; unemployment is going to be a great deal higher next year at this time than it is this year, and 1 say that regrettably; inflation will be higher next year than it is this year, unfortunately; and as a result of the energy portion of that budget, we are in for some very tumultuous months ahead in terms of unity in this country. Things are going to get worse before they get better. We are in a very uncomfortable position, and there is no sense of direction from the government. There is no sense of purpose. One is hard pressed to come up with a definition of what are the goals of this Liberal government. The Prime Minister is involved in some sort of North-South dialogue, running around in Brazil in his tennis shoes. No one quite knows what he is doing; looking for avocados in Austria. The Minister of Finance delivered an energy address which is having a disastrous effect on the country. The minister of industry says he cannot get around to thinking about an industrial development strategy as long as the constitution remains an issue. There is nothing happening in terms of transportation, agriculture or in any area of the economy that we can see.
Faced with that kind of drift, the energy industry people of my part of the country are abandoning this country as a place to invest. Tragically, they are abandoning Canada. They are leaving for the United States, or at least sending their money there, awaiting a change here or some direction or sense of purpose from the government. People in other parts of the country are in despair over what is happening. The polls tell us what all we politicians are hearing directly, that is, that most people think next year will be worse than this year. That is rare because people are optimists by nature. They usually think things will be better next year than they are this year, yet for the first time for a long time people are thinking things will be worse next year than this year. This really is a cause for alarm. Rather than groom himself for a potential higher office, which he apparently is doing-he is changing his image to protect himself from the political risks he might be taking- 1 suggest this might be an opportune time, for the sake of

January 16, 1981
Income Tax Act
Canada, for the Minister of Finance to address in a real way these concerns Canadians are feeling.
This is an absolutely crucial period for the country. It is a time when leadership is needed, not in any small sense, but desperately. The Liberal party has the majority of seats. There is no way anybody else can exercise the leadership that is required. It has to be the members of the Liberal party. I plead with hon. members opposite not to sit silently in their caucuses, but to challenge their Prime Minister and their Minister of Finance to address the real problems of this country and to show some leadership. Let us get this country working again. We have the potential. If we had a government which understood that potential, appreciated it in a real sense and seized it, then perhaps there are few limits we could not achieve. But in the meantime, we are faced with addressing nothing less than the junk this government brings forward in the form of economic policy. In the days ahead, my colleagues will address various aspects of this bill. They will address the way in which this bill adversely affects small businesses, farmers, the private energy sector and private citizens.
Before I sit down, I might just say it is interesting to note that as I went through the ways and means motion for this bill, I found that with one or two exceptions, almost every attractive item of some benefit to Canadians-and I think improvement-was taken out of the budget of December of 1979 of the hon. member for St. John's West. Since that budget was, regrettably for Canada, defeated, there really has not been anything forthcoming from this government.


Michael Holcombe Wilson: This government is very tired.


Harvie Andre: Ironically, after not quite a year in office, this government is already looking very tired, run down, listless and leaderless.


Bob Rae: Mr. Speaker, I want to take this opportunity to apologize to the Minister of Finance (Mr. MacEachen) because in the last speech I gave before Christmas, I said something which 1 do not usually say. I said something personal about the minister which I want to withdraw. I said that the minister had neither profile nor courage. I withdraw unreservedly the remark that he has no courage. I think it takes a lot of courage to be a minister of finance in a Liberal government and to come before the House and present day after day the kinds of policies the minister has presented to this House.


Miss Jewett:: Policies?


Bob Rae: I use the term in its loosest sense. It is in that spirit I withdraw the notion that the minister lacks courage.
The hon. member for Calgary Centre (Mr. Andre), who just spoke, discussed a term which has become fashionable. As all terms become fashionable, they inevitably become appropriated by the Liberal party and the Liberal government. The hon. member for Calgary Centre was discussing the question of the supply side of economics and the danger of our simply returning to priming the demand pump in an attempt to get the
economy out of a recession, which I think we all agree we are in.
I want to say to the hon. member for Calgary Centre that due to the policies of his colleague, the hon. member for St. John's West (Mr. Crosbie), it is true that I did have some things to say about the basic lessons of Keynesian economics, which I felt his government and his party had still not understood. If I may refer to a remark which I made in my first speech ever in the House of Commons, I said that the Liberal party was the party of pre-Keynesian economics and the Conservative party was the party of pre-Cambrian economics. I think that term is an epithet which deserves-not because I said it-to be revived from time to time. Indeed, in the face of certain real reactionary tendencies on the part of many people in our economy, in government and in politics, one has to defend the very elementary principles which Keynes put forward 50 and, indeed, 60 years ago about the nature of a modern economy. That is not to say that he had all the answers or that his prescriptions were adequate for the problems we now face.
We are living, as is self-evident, in a post-Keynesian era. It is remarkable that Keynes, who died over 30 years ago, would still be regarded somehow as the representative of modern economics. We have moved well beyond that, and by definition we are living in a post-Keynesian era. However, still faced with the seventeenth, eighteenth and nineteenth century philosophy which we often hear from the Conservative party, one has to say occasionally a kind word about the man who fractured so many myths which were part of those views so many years ago.
With respect to the question of supply and demand economics, I would like simply to quote someone who I would have thought to be far closer to the views of the hon. member for Calgary Centre than I, that is, Mr. Irving Kristol, who is generally regarded in the United States as one of the primary philosophers of the new conservatism in the United States. Writing in the Wall Street Journal, one of my favourite newspapers for light reading, of December 19, 1980, Mr. Kristol had this to say, and I think it is a very intelligent remark:
The trouble with this reasoning-
He was referring to the reasoning of certain conservative economists, and indeed some of it parallels very closely the things which were said by the hon. member for Calgary Centre.
-is the curious disjunction it posits between "supply" and "demand". These terms are purely analytical concepts, indispensable to economists. But the real world does not consist of some people working on the supply side of the street while others saunter down the demand side. There is only one street, and we all walk in it together. Supply-side economics does not mean that demand should be repressed while supply is encouraged. For if demand is repressed, supply will be repressed too-as Mrs. Thatcher has discovered to her sorrow, and as every businessman knows full well, even if he forgets this knowledge when talking economics.
I want just to put to rest the theory-and it is very widespread-that this is no time to be encouraging demand, that this is no time to be encouraging consumers to exercise their choice in the marketplace-to buy, if you like-and that this is
January 16, 1981

no time to be concerned about the fact that we have seen over the last three years a real drop in the standard of living and a real loss in purchasing power in Canada. This real loss in purchasing power is predicted, even in the budget of the Deputy Prime Minister and Minister of Finance, to continue over a period of two or three years and even longer. It is a fundamental error of policy to argue that the way to fight the inflation from which we suffer at the present time, or the way to get Canada moving away from the economic problems it faces, is to ignore problems of consumer demand and consumer purchasing power and the fact that the economy is working at a 75 per cent or 80 per cent capacity, and to simply concentrate on what is now chicly known as the supply side, at the expense of the real income and the real standard of living of Canadians.
That is not to say that the simple cutting of a tax or the provision of a cost of living tax credit will be sufficient. I do not buy the theory that one can simply return to the Kennedy tax cut of 1962 and 1963 or the policies which were so successful between 1945 and 1965 in stimulating the western economies and say that this is adequate today.
Clearly we are living in a new situation where there really are severe problems on the supply side. We are living in an era when cheap energy is no longer possible; indeed we are coming to the last 30, 40 or 50 years of the hydrocarbon era. We need some different policies if we are to deal with the increased international competition in the automobile industry, which will be discussed by the hon. member for Hamilton Mountain (Mr. Deans), in the steel industry, in textiles and in the petrochemical industry. If we are to deal with the international competition in these fields, we need industrial strategies and policies which will relate directly to the need for investment in these fields and long-term planning.
The accusation that we in this party are simply talking about the government wildly spending more money in terms of consumer purchasing power is totally inaccurate. It is simply not an accurate reflection of what we have been saying, nor what we have been talking about over the last five years in terms of an industrial strategy and the need to look at all regions of Canada in producing an industrial strategy and in planning for our future. It is very, very important for people to realize that these two matters cannot be separated. One cannot simply say that we should do something on the demand side and not be concerned about from where the supply will come.
For example, if the value of our dollar rises and we engage in a policy of simply encouraging demand, the impact on the balance of payments and on foreign replacement for products currently made in Canada will be very serious. It will pose a very serious problem. On the other hand, if the policies are mixed correctly so that we can start substituting for imports- and perhaps neo-conservatism is the first foreign import for which we should be substituting-then it makes sense to expand consumer purchasing power. But we must ensure it is mixed correctly with correct investment policies on the govern-
Income Tax Act
ment side and on the business side so that Canadians will be able to purchase Canadians products. I should like to refer to the example of the human tragedy involved in what has gone on in the automobile industry in the last two or three years with the number of lay-offs and the number of people who have lost their livelihood. There is a slogan which the industry has characterized. It is: "Buy the cars your neighbours helped to build". There is nothing a Canadian would rather do than buy a car his neighbour helped to build, but the difficulty is that at the moment there is not one Canadian worker involved in the assembly of small cars which will be gas-efficient in the 1980s, and these cars are in demand.
This is because for decades governments have been willing to accept the investment planning and investment strategies of the big three and big four automobile makers that have been quite happy to make whatever they wanted here in Canada. They have not exercised any control over the long-term investment planning and investment strategy of the major car manufacturers. This is something which must be said. The decisions on supply, investment, what people make, what is produced in Canada, where people work in Canada and how goods are produced, cannot be separated from the fact that at the moment Canadians are suffering from real losses in their standard of living. To simply say that we will increase supply at the expense of the real standard of living of Canadians in my view is a very false choice, but unfortunately and clearly the one which has been taken.
In answer to my questions today, the minister said that the government did not intend to create an army of unemployed; that he did not accept such a characterization of his policy. It is not always pleasant for someone to have to call something unpleasant when it is. I am reminded of governor Bouey's statements in committee, on the radio, or in his speeches to the Empire Club and other democratic organizations for the average Canadian. He always refers to "slack" in the economy. He never refers to unemployment or unemployed people. He never talks about the fact that there will be tens of thousands and hundreds of thousands of people out of work who do not have the means of joining with their fellow citizens in producing something or doing something useful with their lives. He does not talk about the fact that when people no longer do something which they think is useful, they become dispirited and despondent. He does not talk about those things, he talks about something called "slack". Of course he does, because governor Bouey is a human being and he does not want to think that the implications of government policies are very hard on people and cause real human anguish and problems. It is not possible to function in that kind of a world, so we all call things by something else; we invent neutral terms to define an awful problem. Bureaucrats spend most of their time doing this. They speak in a language which has no relationship to what is going on in the world, in society or in the human economy.
That is why I think an army of unemployed is being created today. The government is conscripting people, but it is conscripting them on a very unequal basis. Because of the restric-

January 16, 1981
Income Tax Act
tions on demand in our economy at the present time, if one lives in eastern Canada or northern Canada, if one is unskilled or happens to be born a woman and not a man, or if one is a native person, the chances are higher that he will end up joining that army of unemployed. We must ask ourselves two questions in fighting this war on inflation. First, we must ask ourselves whether it is fair, and the answer is no, because of the inequity of the policy which is being followed. Also, we must ask ourselves whether it is working, and the answer is no. It is futile. The policy of the government, no matter how one puts it, is to restrict demand both in terms of government spending and consumer spending and hope that it will have the effect of reducing inflation. This policy was followed by the government of the Prime Minister (Mr. Trudeau) in the old days, by the Hon. Leader of the Opposition (Mr. Clark) when he was prime minister, and by the Prime Minister now that he is again leader of the government. There is no distinction and there is no difference; it is exactly the same policy. There has not been a single shift away from the so-called expenditure line or path about which the Minister of Finance is so proud to talk. Well, one man's road to expenditure is another man's road to unemployment. That is exactly what has happened with the government's policy at the present time. It is a futile policy.
My colleague from Hamilton Mountain will be talking about how futile that policy has proven to be in the automobile industry. That policy has enabled us to see that all the reduction in consumer demand in the world has not had the effect of reducing prices in Canada. In fact, the prices of automobiles in Canada have risen 35 per cent to 40 per cent in the past year to 18 months. If you look at the oil industry, you see that the restrictions in demand will not have the effect of reducing the price.
In answer to questions from our party, the Prime Minister admitted that the oil companies had been making exorbitant profits over the past two or three years. One simply has to ask oneself: What kind of world are the people who make economic decisions living in? Do they seriously think the way in which to fight inflation and deal with the fundamental economic problems of the country is to constrict demand and say that an industrial policy is less important than the constitution and less important than the energy package? Do they not see that you cannot separate an energy package from an industrial program? Do they not see that these things go together? Do they not see that you cannot talk about Canadianization of the oil industry without talking about Canadianization of the industries which supply the oil industry? Yet, we are told these things are being put on the shelf. We are told they are less important to the government than the constitutional matters. I think the constitution is important. I also think the economy is very important. I think it will be a sad day for the Canadian people when the government decides that some of its pet projects will be seen to be very important but others, which affect the livelihood of Canadians right across the country, will be regarded as second best.
The government has presented us with an income tax bill. I said the Minister of Finance had courage. I think it really does take courage. It is the same kind of courage the emperor had when he walked down the street with no clothes on. It takes courage to come into this House with a pathetic series of housekeeping measures which have nothing at all to do with the major problems which face Canadians. These measures have nothing at all to do with the challenges facing our future, or the real inequities which exist, not only in our economy but in our tax system.
It is to those inequities in the tax system I wish to turn. One of the most interesting features which I found in the budget speech of the Minister of Finance was his referral, in a very general way, to some of the problems facing the tax system. He referred in a very general way to the philosophic question of whether one should allow for greater depreciation and greater tax expenditure on the part of the government or whether one should shift to a policy of the government giving direct grants, trying to get away from tax expenditures which have become so large in the past few years.
He then said they would be presenting a discussion paper on the taxation of capital gains. He said, apart from this, the major features of the income tax sections of the budget would have to do with the small business development bond and the 50 per cent investment tax credit for investment in DREE. The SBDB, as it is now called, was a policy that was started by his Conservative predecessors, which involved absolutely no innovation whatsoever. The investment tax credit idea for certain regions in Canada is an idea which is about as original as it was in 1963 when it was first put forward by Walter Gordon.
It has been introduced time and time again as an attempt to solve the problems of regional disparity in Canada on a very temporary and ineffective basis. But nowhere in the budget do we see any discussion of the philosophy behind the Income Tax Act. Nowhere do we find a discussion as to what the general purpose or thrust of the policy is. Nowhere do we find an attempt to say that in 1967 the Carter commission put forward certain recommendations and in 1972 the tax reform bill was passed in order to achieve certain results, this is where we stand now and this is where we would like to go for the 1980s. The fact is we are further away from the principle that a dollar, no matter how it is earned, should be taxed equally and fairly. We are further away from that principle than we were in 1967, when Mr. Carter put forward his recommendations in the royal commission.
I point out to the hon. member for Sarnia (Mr. Cullen)- and I would like to hear him announce this at one of those meetings I am sure he holds regularly in his riding-that there are 24 Canadians who earned over $200,000 in 1977 who paid no tax. I would like to hear him tell that to the workers in his riding. The member for Sarnia can tell that to the petrochemical workers in his riding. If they tried to do that, Mr. Speaker, they would be thrown in jail. These are 24 Canadians who legally, because of the loopholes we have in our tax system, paid not a penny in taxes.
January 16, 1981


Stanley Howard Knowles: A buck is not 'a buck is a buck is a buck' any more.


Bob Rae: It depends on what your buck is and where it comes from.
However, Mr. Speaker, the government has produced its discussion paper. It has not discussed it. I have not seen a statement from the minister, nor have I seen one indication from him as to what his point of view is on the question of taxation of capital gains in Canada. But they have produced a discussion paper. I have not heard anyone discuss it. I have not heard anyone present a point of view about it. 1 have not heard the minister say, "I would like to see this referred to the Standing Committee on Finance, Trade and Economic Affairs." But the paper has been produced and it does say some very interesting and useful things.
First of all, the paper says that of all countries in the OECD, Canada is tied with Italy for the lowest level of taxes on inheritance, gifts and wealth-.07 per cent of our gross national product. That is really squeezing the rich until you can hear the pipsqueaks. The United States taxes six times that much. As a percentage of the GNP, the United States receives almost six times as much in taxes from inheritances, gifts and wealth.
That is the Valhalla of the Conservative party. In the nineteenth century they were the colonialists from Great Britain. Everything was right in Great Britain and nothing was right in Canada. Now everything is great in the United States and nothing is right in Canada. Switzerland taxes at 1.09 per cent. I always thought Switzerland was a kind of haven for wealthy people. Not at all. You can see how the mythology is so wrong.
Listen to this remark from the discussion paper. Occasionally civil servants let themselves go in these reports. Here is one statement:
Canada's extreme position may already be a cause of concern to the extent that it restricts the government's ability to promote a fair and equitable distribution of income and wealth in the country.
As the member for Regina West (Mr. Benjamin) just said, "Exactly". Amen. What can we say? If you do not collect it from the rich, you must collect it from someone else. We hear a great deal from the government about its being strapped for money and that there is a fiscal imbalance. I have spoken about this before in the House and I will not give a speech on it again tonight. There is a real imbalance in Canada. Why is it as significant as it is? One of the reasons is because this government has decided that the wealthy in Canada, and those people whose only achievement in life is to have chosen their parents wisely, will not be taxed. They will not be taxed in Canada as they are in every other country in the OECD-not just socialist Sweden or horrible Great Britain, but also in the wild and woolly United States.
We do not even have the same taxes as the state of Utah. The only state in the U.S. which does not have a succession
Income Tax Act
duty and tax on wealth is the state of Nevada. There they have a Las Vegas philosophy, which seems to have been taken up by the Government of Canada as a taxing philosophy. The actions of this Liberal government surpass arrogance. It comes to the people of Canada one year after the brief Tory hiccup, and says, "Look, we face these tremendous problems. We don't have a tax base. We have a tremendous crisis in our fiscal imbalance with the provinces. We are facing terrific problems because of inequity in the taxation of oil and gas. There is a horrific deficit with which we have to deal. There is the fact that we are not dealing with other taxation problems and the country is in a tremendous fiscal problem. The public expenditures have run away and we must do everything we can to control them. We must cut back".
All one can ask is, "Who was running the store"? Where are they now? There are those who are here in another form, such as the hon. member for Sarnia, like life after death. Some of them have passed on to other places, jobs, commissions and royal commissions and the senates in the sky. However, some are still here, and they are the ones who are responsible. In 1972 the Liberal government, under the current Prime Minister, decided that it would abandon the field of wealth taxation, taxation on inheritance or estate tax. Since the elimination of the estate tax in 1971, it has had the effect of a lump sum transfer of $4.5 billion to Canada's wealthiest citizens.
In that year, for example, it was estimated that approximately $66 billion in wealth was being freed of any tax burden whatsoever and that the cost to the treasury in future taxes would amount to some $12.5 billion. Current estimates of wealth can only be approximated since it is hidden behind a statistical curtain, but we do know that personal income has increased by over three times and that personal savings have increased by over six and a half times since 1970. We also know that the concentration of wealth has increased dramatically since that year. In 1970, a grand total of 5,893 Canadian domicile estates were subject to a federal estate tax. These few estates had total assets of $1 billion, $210 million of which was contained in the 90 estates of millionaires which were reported in that year.
The point is that we cannot continue with a series of minor income tax proposals which fiddle here and fiddle there without recognizing that we face a major crisis, what I call a "crisis of fairness", in our tax system. I think of the people in my riding who receive their pay packet every two weeks and know exactly from where the taxes come. They see it every two weeks. They do not receive any fancy deductions, because they are employees and receive wages. They have none of the whole range of deductions which are open to those people who are self-employed, those who are able to turn themselves, as if by magic, into a personal corporation or those who are able to use a marvellous invention called the inter vivos trust in order to split family income.
As long as the government is prepared to say that there is a whole realm of wealth which can be transferred from one generation to the next without taxation, it will be those people whose taxes will continuously rise and whose purchasing power
6296

January 16, 1981
Income Tax Act
will continuously decrease. Inflation has the effect of increasing the wealth of those people who have it, and ravaging and cutting away at the real incomes and standard of living of those people who have nothing other than what they earn and what they have saved.
We look upon these measures with the realization that they are nothing but a stand-pat, pathetic-I would not call it "effort", because it is not an effort-series of proposals which do nothing to deal with the real problems. In the few minutes left to me, I would like to outline the approach our party will take during this debate. The hon. member for Kamloops-Shus-wap (Mr. Riis) will discuss the small business development bond. He will deal with the problems of the SBDB which, as the hon. member has said on many occasions, is simply a drop in the ocean and does not apply to those people who are not incorporated or would rely on the program for working capital. The program is so limited and so restricted that it only benefits a very few members of the small business community. It is better than nothing, but that is all one can say about it.
There is also the topic of MURBs, which is another tax haven and which will increase the number of those people earning over $200,000 who will pay no tax. It will enable us to give another golden loophole award next year because people will be able to shelter their income from taxation, but it will do nothing to solve the housing problem, as has been pointed out by the hon. member for Vancouver East (Mrs. Mitchell), who will point it out once again.
The investment tax credit does not really deal with the problems of the regions. The rate of corporate taxation has effectively declined. The rate in manufacturing is now down to 20 per cent. In the oil and gas industry, it is down to 11 per cent and in mining down to 10 per cent. In banking the rate is down to 9 per cent and 13 per cent. How many members can go into their ridings and say that the average employees in their ridings are paying taxes at a rate of 10 per cent, 12 per cent or 13 per cent. No member can because everybody is paying far more than those rates.
Finally, the hon. member for Vancouver-Kingsway (Mr. Waddell) will discuss the energy tax proposals. I make the point that, in our view, the government is missing a golden opportunity to really advance public ownership in the Canadian oil industry, that it has, in a sense, gone after the wrong targets by focusing too much on the provinces and smaller companies and not enough on the multinational corporations. They are missing a golden opportunity to increase our self-sufficiency in oil and natural gas.
In closing, I simply want to say that this bill is a statement of bankruptcy. Unfortunately, we are not allowed to put the government into receivership. That is a decision which will have to be taken by the voters in a few years. I have no doubt that the kinds of policies which are being followed by the government will lead to the decision by the voters that, though Liberalism now appears to be so impregnable, so smooth, so self-confident and so oily in its determination to win over all Canadians to its point of view in the kind of condescending self-serving way we now recognize as being the key notes of
modern Liberalism, they must reject this type of Liberalism for all time.
[ Translation]


Mr. Deputy Speaker:: Order, please. It being 4 p.m. the House will now proceed to the consideration of private members' business as listed on today's order paper, namely, notices of motions, public bills and private bills.


PRIVATE MEMBERS' MOTIONS
[Stage Direction]
(English ]
Motions Nos. 14, 22, 23, 24 and 25 allowed to stand by unanimous consent.

Mr. Thomas Siddon (Richmond-South Delta) moved:: That, in the opinion of this House, the government should consider the advisability of initiating an independent commission of inquiry to investigate the serious deficiencies within the administration of search and rescue services on Canada's west coast.
He said: It is most appropriate and, I believe, long overdue that we should have an opportunity to debate in this House a motion which is of such life-saving importance. I set down motion No. 26, Mr. Speaker, because events have shown in recent years that there is indeed a serious lack of co-ordination and there is a question of administrative inefficiency which must be addressed regarding the relationship of the Minister of National Defence (Mr. Lamontagne) and the Minister of Transport (Mr. Pepin) to the delivery of search and rescue services, particularly on the west coast.
In March, 1980, I wrote to the Minister of National Defence and to the Minister of Transport urging them, in the wake of the Lee Wang Zin sinking on December 25, 1979, to initiate such an inquiry. Letters of response from both ministers, which I received later that month, refused to consider initiating such an inquiry. I subsequently submitted this motion to the House and today I want to present some of the circumstances, centering particularly on the Lee Wang Zin tragedy, but bringing up other numerous cases of what 1 believe to be administrative incompetence when it comes to saving human life.
In reply to my letter of March, 1980, both ministers indicated that they were engaged in an interdepartmental review of the co-ordination of rescue facilities between their two departments. In fact, Mr. Speaker, that review was commissioned by the former Conservative government under the then minister
January 16, 1981

of national defence, the minister of transport and the minister responsible for marine transport. That review was to have been completed in the spring of 1980 and I was advised by those ministers that I would receive copies of the review within weeks. Now, nine months later, I still do not have notice of the findings of that review.
The basic problem is that the principal administrators of search and rescue, the decision-makers and politicians here in Ottawa, are apathetic about this crisis and about the loss of human life, which usually takes place in cold water.
This is a very serious problem for the people of British Columbia, Mr. Speaker, especially those who make their livelihood on the Pacific coast waters or who use those waters regularly for recreational and other purposes. This includes fishermen, pleasure boat operators, the B.C. ferries, coastal cruisers, those engaged in shipping, towing and flying, to a large degree.
I want to make it clear this afternoon that it is not my purpose to accuse or criticize individual persons who operate the Rescue Co-ordination Centre in Victoria or those who man the search and rescue services generally. These people are doing an excellent job in many respects and have saved many human lives. We commend them for that. The problem is that they are governed by bureaucratic directives and orders from above. The system is at fault. The attitudes among senior decision-makers within that system is what 1 call the "admiralty approach" to search and rescue, rather than the blood and guts approach which is required in order to get to the site of a tragic accident in time to save the lives of people in the water.
I have here, Mr. Speaker, a report which summarizes the findings and recommendations of the jury at the inquest on the Lee Wang Zin sinking in December of 1979 when the lives of 30 Taiwanese crew members were lost in an overturned vessel. The Department of Transport did not attend the scene until 38 hours after the first SOS signal was received.
I should like hon. members to imagine themselves for a moment in the position of a young Taiwanese sailor just having left the port of Prince Rupert after loading ore, on his way home to Taiwan to greet his wife and children. He is awakened at five o'clock in the morning, notices that the ship is heaving and rolling heavily, not in its usual fashion, is suddenly thrown into a catastrophic overturn, his bedding thrown around the cabin. He worries and wonders whether a distress signal has been sent. He calls for his friends, searches around the lower reaches of the vessel for them, feels the heaving motion of the ship from the underside of the berth where he is trying to hang on for dear life. He grows fearful and cold, his teeth chatter, he grows numb while he wonders, waits and hopes. Nothing happens. He waits for an hour, maybe half an hour, maybe three hours, perhaps 24 hours. He grows more and more numb, sleepy and weak. He gradually subsides, never to see the light of day again.
That was the tragedy that the crew of this vessel faced, that the rest of us can pretend to ignore. They were trapped within the overturned hulk of a seagoing freighter on December 25, 1979.
Search and Rescue Services
Meanwhile, at the Rescue Co-ordination Centre in Victoria, the distress signal had been heard and reported. It was a clearly coded distress signal, "SOS-EEC". The men at the co-ordination centre, however, took almost an hour to identify the ship. This is not necessarily their fault because they did not have an up-to-date copy of the international directory of ships' call signs and so could not identify the vessel. The identification is important because that is the only way the ship's name could be determined and thus its point of departure and the course it was taking.
At the coroner's inquest which took place in January and February of 1980, evidence was presented that a coastguard helicopter located in Prince Rupert, only 60 kilometres from the scene of the accident, did not become airborne until three hours after the first SOS signal was received. It was not until Boxing Day, 32 hours after the mayday signal, that the first coastguard vessel arrived on the scene. It had been undergoing a refit and had to be put back together before they could proceed to sea.
No attempt was made by the Rescue Co-ordination Centre to seek the help of Rescue 15, a group of 40 volunteer boaters operating out of Prince Rupert. If they had been asked, they would have been willing to respond to the first mayday signal. Indeed, they did obey a coastguard directive in the book of rules which prohibits self-dispatching. They stayed home. What kind of directive is it that prevents people from going to the assistance of their fellowmen?
A tugboat, the Cindy Mozel could have responded within an hour of the mayday call, not 32 hours, but it was not called. In fact, no general mayday call was relayed on all frequencies after the signal had been translated.
At Canadian Forces Base, Comox, the Labrador helicopters are normally on two-hour standby. That is how long it takes to get them in the air during off hours. It is a policy dictated by Ottawa and applied across Canada. On that day, however, it would have taken three and one-half or four hours to get the aircraft up there and then they would have had to refuel at Prince Rupert. The helicopters were not ready. They are reported to have been under repair at the time.
Eventually the Rescue Co-ordination Centre called for a United States helicopter based in Sitka, Alaska, because the United States had the equipment and the trained search and rescue personnel available.
Why do I call for an independent inquiry, Mr. Speaker? It is in part because other startling testimony was presented to the inquest which is documented in the coroner's report. The duty watch officer was not called to testify. This testimony was given by the commanding officer. The coastguard maintained that the crew died instantly and that therefore any rescue attempt would have been futile. What kind of an attitude is that, Mr. Speaker, to decide the time of death before the facts are known? There was a long distance assumption that there would be no ship in the area and therefore the relay of the mayday message was deemed to be unnecessary. This was testimony at the coroner's inquest. The Rescue Co-ordination Centre decided to delay help on the assumption that conditions

January 16, 1981
Search and Rescue Services
were too rough. If you do not know where the vessel is or you only have a rough idea, how can you assume that conditions are too rough? The circumstances of the Lee Wang Zin are tragic indeed. 1 do not want to finger any particular individuals in these departments; the matter is in the past. But the threat of error rests in a whole series of problems, including inadequate equipment, delays in getting started, errors of judgment, procedural mistakes, refusals of offers of assistance from other vessels in the area, improper telephone numbers and communication problems.
These difficulties are not restricted to the Lee Wang Zin tragedy. They are common to many accidents in recent years on the west coast, most of which go unnoticed here in Ottawa because they involve fewer lives. But in any event, the problems are similar. They boil down to a question of distance and time. Can we get to the scene fast enough and do we have the required rescue equipment in order to get into the water to keep those people alive before it is too late?
This blood and guts attitude, characteristic of the British lifeboat system, of the volunteer system and of the Canadian Armed Forces personnel when they jump out of a helicopter into the water, and this eagerness of people to be involved in saving another person's life is what is important in mounting an effective search and rescue service. It has been characterized by one well-known and not too popular spokesman on the west coast that Canada's search and rescue operations are managed as follows: "They have one guy doing a job and ten guys slinging paper".
I want to tell you now about a 17-year-old girl named Sandra Klein. A year or two ago Sandra and her father were patrolling in the Gulf Islands. They were called to a scene of a burning sailboat. They were closer than any other vessel. She travelled single handedly in a 17-foot Boston whaler at speeds of 25 to 30 knots across 17 miles in 27 minutes. She arrived at the scene of the burning sailboat. There was no one on board. She spotted a floating form in the water. At the same time she noted adjacent to her on the scene there was a navy vessel, the YMR-4. This navy vessel did not have a small enough boat to launch into the water. The crew were clustered in the bow looking at the floating casualty. Sandra Klein jumped into the icy water. She supported the man and applied mouth-to-mout'' resuscitation and applied it continuously as they were both lifted from the water by the navy vessel. That is an act of valour. Subsequently Sandra's act of valour was acknowledged by the Governor General by the granting of an award to this 17-year-old girl for her efforts in saving a man's life while the navy looked on.
I think this speaks of the change of attitude which is required in the delivery of search and rescue, particularly on our west coast.
Just this morning Lieutenant-General K. E. Lewis, Commander Air Command responsible for search and rescue at a conference in Ottawa in response to a question said, "Search and rescue is a highly visible and high profile operation."
Therefore, decisions as to the involvement of Armed Forces Reserve units, or for that matter auxiliary assistance, were a matter of political consideration.
In his written presentation to the conference Lieutenant-General Lewis commended west coast search and rescue for assisting in the saving of 519 passengers' lives on the Prinzen-dam which burned in the Gulf of Alaska in Canadian waters last fall. His written presentation in part states:
It is of interest to note that 442 squadron was notified at 0500 on a Saturday morning and within 3 hours was able to launch two Buffaloes, two Labrador helicopters and a full medical team.
1 submit that two hours is not enough. It is too much time. When people are in cold water, particularly in winter weather, they are susceptible to hypothermia which is fatal within a half an hour, and a two-hour standby is far too long.
The government spent almost $3 million last year on west coast search and rescue to handle 4,200 rescue calls. That is approximately 12 calls each day year round, including winter time. The budget allows some $650 per incident in terms of funding for the main search and rescue exercise. The volunteers who are trying to organize along the lines of the British lifeboat brigade who use their own vessels and equipment are reimbursed $30 per incident.
These people recently approached the government requesting an increase to $70 per incident. That is one-tenth of what the gold-plated system consumes. They wanted only $70 per incident to meet the fuel expenses, to buy a radio, to provide rescue equipment on their private craft, but it was refused. These people are ready and willing to assist in search and rescue, but the government appears to provide very little assistance. Indeed, it treats these individuals as amateurs in some respects. Statements have been made. One individual was told when he was asked to stand down and not attend the scene of an incident that the taxpayer would rather have a government vessel do the work. That is typical of our society these days, isn't it, Mr. Speaker? Where is the spirit of voluntarism going?
Most individuals who arc willing to participate in these rescue efforts are experienced on the water, whether they are fishermen, salvagers, pleasure boat operators, ferry captains, tow boat operators or others. These people can provide a valuable service if encouraged. The reluctance of national defence, coastguard and rescue co-ordination centres to utilize the services of Rescue 15, a group of 40 volunteers in Prince Rupert on Christmas Day a year ago should be proof that something is wrong within the system. As I have already said, the coastguard has issued a directive ordering volunteers not to respond to calls unless they are dispatched. It might cost the government another $30.
1 had a most enjoyable week in Wales visiting British lifeboat stations, touring the watch stations, and the radio monitoring systems. Their rescue boats are maintained just as fire engines are maintained by a volunteer fire department. They polish brass, but they are there to provide beach watch and marine safety training to their communities. These stations are spaced ten to 20 miles apart along the coast. They
January 16, 1981

can get to the scene of an accident in ten or 20 minutes, not two to four hours. This closely linked network of volunteer operated rescue stations has to be developed in Canada on both coasts working in co-operation-not being obstructed- by the formal search and rescue services administered by the Department of National Defence and the Department of Transport.
We have just learned that a new rescue station is to be opened at Ganges on Saltspring Island. That station is 12 miles from the main shipping lane. It has cost over $400,000 in start-up capital. It is three miles from the open water and the main shipping lane is where most of our major and tragic marine incidents have occurred in B.C. Why was that station located 12 miles from the main shipping lane? That makes no sense. Why have we no float-equipped rescue aircraft with paradrop teams equipped with scuba gear available and on standby? Why do we have hovercraft that cannot move in a 70-mile-per-hour wind? Why do we have 100-foot cutters when we need more small fast boats with low freeboard to get to the scene of a floating person whose life needs to be saved?
I see that my time has come to an end. I wish the ministers were present today. 1 had been advised that they would be. However, I want to urge them to initiate an independent commission of inquiry, not another government review, into the whole state of the delivery of search and rescue services on the west coast where the city of Vancouver is located, the second busiest port in North America, second only to New York. We have in excess of 200,000 pleasure boaters, 5,000 or 6,000 commercial fishing boats, and many hundreds of thousands of people on the water the year round. Their lives are more important than the gold braid or anything else.


Raymond John Skelly: Mr. Speaker, first, I should like to congratulate the hon. member for Richmond-South Delta (Mr. Siddon) on an excellent presentation and on making some very valid points on a very worth-while motion. I certainly hope that there will be sufficient time to vote on this motion.
The question which we must address in terms of search and rescue and the outline which the previous speaker gave concerning the tragic events surrounding the Lee Wang Zin are certainly very pertinent. However, it is history, and what is important now is to learn the lesson and to try to rectify the situation which led up to the incident. I should like to suggest that the first lesson to learn with the Lee Wang Zin is that one ounce of prevention is worth a ton of cure. That was a rust bucket which was sent to sea out of Queen Charlotte after loading in conditions which should never have occurred. A flag of convenience was deliberately set up so that the owners would never have to compensate for an accident. The first thing to remember is that we have a long-term commitment to the prevention of accidents at sea and in the air. That is the first order of business.
The second major flaw in the Lee Wang Zin incident is the fact that that ship was 12 miles offshore, within easy reach
Search and Rescue Services
and flying distance of a helicopter. When the Department of National Defence, in spite of all their communication problems, launched their helicopters, they were unable to provide rescue service for those people. They went there simply to pick up the bodies, if they ever did get there. The first aircraft to go were the Buffalo. After three hours in the water, anybody found would be either dead or in very bad shape. You cannot rescue anybody out of a Buffalo. You have to be able to deliver a helicopter.
I suggest to you, Mr. Speaker, that the first priority on the coast of British Columbia is to distribute along the coast the five helicopters which have been committed to Comox in such a way that there is an hour or less flying time between that helicopter and any area where an incident might occur. Both Boeing-Vertol which produces the helicopters used by the armed forces and Sikorsky which produced the helicopter at Prince Rupert, state that the costs to locate those bases around the coast of B.C. and refit the helicopters to be operated on those bases would be well under $10 million. In a proposal which I submitted for comment, I suggested that three helb copters remain at Comox, one be placed at the Canadian Armed Forces station at Holberg at the north end of Vancouver Island, and one at the Canadian forces station at Masset, and the Sikorsky air force helicopter be refitted for marine rescue service, be seconded to the armed forces for crewing and be used as a helicopter primarily for search and rescue out of Prince Rupert, with an effective, trained crew on it. If that were done along the coast of British Columbia and southeast Alaska, it would mean that there would never be a marine incident or a medical evacuation less than one hour's flying time away.
I myself and most of the people I have spoken to in this business-and I have travelled from Alaska all the way up and down the coast of British Columbia and through the state of Washington looking at coast guard search and rescue facilities-believe that helicopters are the key. You have to be able to deliver a crew to the site who can effect the rescue and provide the services there.
Next, we must consider the business of volunteers. We use helicopters at Comox and Buffalo aircraft during the spring, summer and fall months for searches of downed aircraft, and this consumes thousands of hours of search time. Two summers ago two aircraft were lost, one between Kamloops and Vancouver, which is a massive area, a mountainous terrain, and the other one was lost somewhere in the Terrace area. These two aircraft were searched for by the Canadian Armed Forces aircraft and also by a group set up by the provincial emergency program, an air patrol.
Eventually they found the aircraft at an absolute fraction of the cost, with more aircraft in the air and trained people working under supervision of search masters, and they did an excellent job. The point made by my colleague, the hon. member for Richmond-South Delta, is valid, that, in addition to placing those helicopters along the coast of British Columbia, the hard edge of a rescue service is delivered within an hour.

January 16, 1981
Search and Rescue Services
The second point is that a volunteer service, particularly a province-wide civil air patrol which can participate, be organized. They can get on the job as soon as the ELT goes off, as soon as the emergency is put in. They can begin the search and they can start covering the territory. It takes the armed forces, in some cases, 24 hours before they get a ground base and a search pattern set up, the aircraft refueled and ready to go. Then there is the tremendous expense of those searches to be considered.
Mention was made of the Klein family, Horst, his wife and daughter. The points made about them were absolutely true and, in fact, understated the event to the nth degree. There was a number of difficult rescues in which that family had participated. It is astounding. They were the first people on the scene when the ferry, the Queen of Alberni, was grounded at Active Pass. They were the first ones there to render assistance, and what is amazing is that they did not receive any information from the rescue co-ordination centre. They picked this information off a commercial broadcast on CKNW and then wound up in Active Pass as the first people to render assistance on the scene.
Sandra has been involved in a number of diving exploits which, unfortunately, have not been as successful, but these were difficult and dangerous commitments for which she was awarded a medal of substantial merit. What is really required, of course, is a marine organization across the entire coast of British Columbia which is properly equipped and given adequate recompense for out of pocket expenses. You cannot run a 180 on $30 for an event. You need so much an hour to cover fuel, the wearing down of your engine, oil, maintenance, and what not. If the government were to realistically pay these people to go out on air and marine searches, it would save thousands of dollars.
Many of the pilots who engage in those search operations are former members of the armed forces. They are expert fliers and they have had tremendous experience in searching and mountain flying. They have the qualifications to do the job. The people who are involved in Rescue-15, in the group in the Queen Charlottes, in the group on the central coast out of Bella Bella, in Powell River, in Campbell River, in the north Island, in the Gold River, all the way up and down the coast, are represented by people with tremendous qualifications and experience in the marine environment, whether they are fishermen, tugboat personnel or experienced mariners.
Then there is this problem of adequately equipping volunteers. The Canadian Marine Rescue Association is in its formative stage. It has not jelled yet, but it is certainly under way. I think more consideration should be given to the kind of training, assistance and budget which the government could provide, and especially to the equipment given those people. If it is inadequate, they cannot do the job.
I will give you just one example. Most of the people who work out of Bella Bella are quite familiar with the marine environment and with their own area. The minute a problem comes up in the area, if someone is lost-and this happened in the middle of winter last year during the election campaignthey come to the rescue. We were stranded there because of freezing cold winds building up ice on the aircraft which, as a result, could not fly. A couple of people were lost. Those people managed to set up a search locally. They checked all the places where they were likely to be.
The armed forces sent a helicopter, but it was not equipped with a radio which would allow them to talk to the provincial emergency program on the ground. As a result, they searched the whole area which had already been searched and they were not able to check the places where it was likely the people were lost. It is an unfortunate situation, but in these cases the first priority is for helicopters. We have to distribute them along the coast in order to cut down the response time. The second thing we must do is strengthen our commitment and make an investment now to save thousands, if not millions later on, in the volunteer service there.
I have made some very definite statements on the events surrounding the Prinzendam. I think that anyone would admit that had the oil tanker not been there to provide a base from which the aircraft could operate, 500 people would have been lost at the bottom of the sea. It was a happy incident or coincident that an oil tanker was there to act as a helicopter platform to work from and to evacuate the people. That, in my opinion, was the only thing that saved the lives of the people on that ship. Otherwise they would have been at the bottom of the sea. The Lee Wang Zin incident is history and we have to learn from that.
Out of that Lee Wang Zin incident particularly we must learn, and I would congratulate the Minister of Transport (Mr. Pepin) for being open and frank in that regard. I think the hon. member for Richmond-South Delta was a little bit in error regarding the person in charge of the rescue co-ordination. He did not wind up having to testify. It was a junior coastguard officer who wound up testifying. The officer in charge was never exposed to a public inquiry at the coroner's inquest as to why this occurred. The Department of National Defence did its own in-house investigation. 1 attempted on many occasions to obtain that report. They refused to give it out. The Minister of Transport did make the report public as well as supplying staff to testify at the coroner's inquest. This gave people an insight into what had actually happened.
In the rescue services and marine pollution response of the coastguard of the United States, they have two kinds of interesting aspects and the first relates to helicopters. If somebody is missing, a boat is immediately dispatched to where they were anticipated to be. A phone search is made to make sure the missing person had not landed. This is immediately instituted. At that point, three people go out to the helicopter and the helicopter is warmed up. If there is not a firm response that those people have been found in 30 minutes, that helicopter takes off and heads off to the point.
That does not happen in Canada. We wait hours and hours sometimes before those things are launched. They should be on
January 16, 1981

24-hour standby and they should be looking at a 30-minute launch time or as soon as they can clarify a likely position.
The other thing the Americans have that we could learn from is their simulation exercise. The Lee Wang Zin accident was absolute chaos. They did not know whether they were punched, bored or chewed out by the rats as it came out in the final analysis. We could learn from those mistakes and we should learn from them.
I was not able to take part in an observation exercise in the United States, but I know they run simulation programs. They simulate an accident and bring in people who are involved from the coastguard, the navy, the air force and others from the public who have expertise. They examine the situation on closed video criticizing how the rescue program was handled and then make suggestions as to how they could improve this kind of response. This hones the edge to a very effective one.
In southeast Alaska and on the south coast of British Columbia, especially around Victoria and the southwest part of Vancouver Island, your chances are excellent of being rescued by an American helicopter if you run into difficulty, but your chances are not so good if you are being rescued by a Canadian helicopter which is probably stationed no greater distance away.
I should like to qualify those remarks. I know personally of events and incidents in which members of 442 Squadron at Comox have been involved. It is acknowledged even in the American coastguard that Canadians are capable of more activities than even they are. For example, if someone is in the water, no one from a U.S. coastguard helicopter will go into the water after him. You either get on the hook or you are in big trouble. They may get a navy diver to get in after you. The fellows in the 442 have training second to none in the world and their accomplishments have been excellent.
Our big problem relates to inadequate equipment. Resources applied to the program are inadequate. Consequently, the job cannot be done. This is basically a government problem involving helicopter distribution, response and the way we treat volunteers. We should invest in that very valuable resource, the people who want to participate.
The third priority is co-ordinating government resources. There are 14 federal government helicopters on the coast of British Columbia. There have been occasions when we could not get one into the air to look for someone. Even if we can get one into the air, often it cannot get to the scene in time.
On a beautiful night in the September before last, there were two people on a fish boat off the north end of the Queen Charlotte Islands, not too far from Prince Rupert. The moon was bright and the water was calm. One fellow fell overboard while trying to make a repair to the side of the ship. They radioed in and that was it. They never got a helicopter out and they never did find him. On that occasion, in beautiful weather, they were unable to respond.
We have 14 helicopters and something like 200 federal government vessels on the west coast of British Columbia, and we are not making effective use of those resources. I do not
Search and Rescue Services
want to beat on the issue any longer about the Canadian coastguard helicopter at Prince Rupert, but it is an excellent machine and, in my opinion, it ought to be converted immediately for search and rescue. It ought to be seconded to the Canadian Armed Forces to be used for coastguard purposes, except when there is a search and rescue emergency at which time it should go out on that, without question, with a fully trained crew capable of finding and rescuing people.
Let me make just a few more points before I conclude. A lot of people in British Columbia tend to have a very negative response toward these facilities because of fragmentation, poor use of resources, and the inability to deliver a rescue platform in an effective time and I suggest it stems from small things like this.
Two weeks ago there was a phone call from people responsible for assisting British Columbians during the time of disasters such as flooding. There were areas in my riding which could not be reached by this provincial emergency group. They phoned the Canadian Armed Forces and asked if it could send a helicopter because they were unaware of what had happened to the people in the area. All communications had been cut off, but they knew there were extraordinary flooding conditions. The first thing the people in the Air Force asked was: "Who is going to pay for this?" That was the first word out of that mouth on the phone: "Are you authorized to pay for this?" 1 pay for that helicopter, everyone here and everyone in this country pays for it. The reason we pay for it is to have it available to respond immediately to an emergency situation. The first thing that should be done is the helicopter should be airborne immediately, go directly to the area and later there should be consideration about the transfer of funds.
How do British Columbians feel about the federal government's rescue resources and the services provided? When that is the first question asked, we do not feel very good about it, especially if you have watched a number of people die unnecessarily in the water.
I have been beating away at this point for two years. I have produced two reports and a basic outline for discussion. I have also produced a study into helicopters and the cost of placing them out, again for discussion. 1 think over a period of time the government's attitude has been changed. The opinion of former minister Otto Lang was that rescue services at sea are voluntary services provided for centuries by other ships at sea. From that point, we have seen a change. The government has undergone a helicopter upgrading program. The government has made a commitment to buy a 170-foot vessel and a commitment to station a number of 21-metre vessels in the area. The government has put in place an inshore rescue boat program which has answered about one-fifth of the incidents which have occurred off the coast of British Columbia and has undertaken an education program directed toward that very area of prevention. The government has also involved more extensively its other resources. The vessel traffic management system is now an effective resource. All of southwestern British Columbia, with a combination of aircraft, hovercraft and vessels, has access to these services. So the government

January 16, 1981
Search and Rescue Services
deserves some credit. It is aware of this issue but not in the way Otto Lang was. I think it is seriously concerned.
However, this government has not gone far enough or fast enough. People are still in jeopardy because of poor rescue services. Helicopters and their proper distribution are vital, and the government has been receiving letters from every municipality and regional district along the coast asking that that program be put in place. The government must make use of voluntary services in order to make this program effective. Finally, we must get to the point where we are co-ordinating more effectively. We should not be empire-building in separate government departments. There should be more effective coordination. I suggest that would come about through a more efficient use of resources. There should be closer co-ordination between departments and the designation of another primary respondent other than the Minister of National Defence (Mr. Lamontagne). There should be simulation exercises in which members of the public and trained professionals participate so that they can criticize what is going on.
I will sit down in the hope that the proposal of the hon. member for Richmond-South Delta will be accepted.


Mr. Roger Simmons (Parliamentary Secretary to Minister of State for Science and Technology and Minister of the Environment):: Madam Speaker, I rise to speak on behalf of the Minister of National Defence (Mr. Lamontagne), who intended to be here, but was prevented from being here in the last couple of hours because of weather conditions in the part of the province of Quebec he is visiting today. 1 want to tell the hon. member for Richmond-South Delta (Mr. Siddon) that the minister had fully intended to be here, until a couple of hours ago.
I am pleased to rise on behalf of the minister and to make some comments in relation to the subject before the House. I think I have said on a previous occasion in relation to the exercise we are involved in now that I find the private members' hour to be perhaps one of the more valuable periods provided for in our Standing Orders. In the last 40 minutes, I have heard more thought-provoking suggestions from my friends across the floor than we hear in other debates in this chamber.
Let me say on behalf of the minister that any suggestion by a responsible citizen that any important government service, particularly one dedicated to the saving of life and the reduction of suffering, is deficient in its administration or operations is one which must be closely examined. The motion before the House certainly implies such a situation, and the reaction of the government is, of course, one of concern.
The Canadian forces, with their high readiness posture and ability to respond fairly rapidly in emergencies, are charged with the task of the operational co-ordination of rescue services. These services are provided from four rescue centres situated at Halifax, Trenton, Edmonton and Victoria. The Department of National Defence also furnishes air resources
to each region, including special aircraft, helicopters and trained crews. Other defence aircraft, the primary task of which is not search and rescue, frequently participate in searches as a secondary role, as do aircraft from other government departments and those provided by many civilian pilots across the country.
The Department of Transport is the other major partner in this activity. The coastguard provides marine specialists in the co-ordination centres and vessels for marine operations. Crews and vessels from other departments are also available as required.
I mention these details in order to show that search and rescue cannot be handled by any one organization but must, if it is to be efficient and not prohibitively expensive, take advantage of all suitable vehicles the owners and operators of which are willing and available to assist in the endeavour.
It is a matter of record that in the past 12 months the people at rescue co-ordination centres and in operational search and rescue units across the country have responded to about 10,000 requests for assistance. It is a tribute to the knowledge, experience and dedication of those personnel that such a job can be done, and done so well. Their jobs call for very rapid evaluations of situations, often involving scant details and committing valuable resources which could well be more urgently needed elsewhere at the drop of a hat and risking their own lives to save those of fellow human beings.
This is the daily lot of search and rescue practitioners because accidents at sea and in the air have an uncanny habit of occurring in the most forbidding terrain, on rough seas and generally in adverse weather conditions.
Accidental loss of life under any circumstances is tragic. However, we must face the reality that regardless of the number of resources assigned to our national search and rescue program, it is not always possible to save all the lives, as much as that is our objective.
It is with that sense of reality in mind that following a major government review of marine search and rescue in 1976 two major decisions were taken which are now proving their worth. The first of these was to form an interdepartmental committee on search and rescue to advise ministers on policy, planning, resources and effectiveness. It is jointly chaired by members of the Department of National Defence and Transport Canada and involves officials from a number of other government departments.
The second decision was that the government would embark on a rational, sensible and credible continuing program to improve substantially search and rescue procedures and resource availability right across the country.
In order that the government might control the management of search and rescue regularly, the committee was directed to provide for review by ministers an annual plan in which the need for primary search and rescue response is identified.
Since 1976, five such plans have been produced. As a part of their development, a detailed analysis of the needs of each region is performed by local specialists who are familiar with
January 16, 1981

prevailing conditions. These regional analyses are then reviewed by the appropriate departments of government, resulting in a consolidated national plan with recommendations for improvement. This plan is then reviewed by the interdepartmental committee to which I referred. It is ultimately referred to cabinet for decision.
Let me outline very briefly a few of the more important initiatives which have resulted from these two decisions I have mentioned since 1976.
First, the government directed an in-depth review of the co-ordination centres, which has recently been completed. A number of recommendations are already being implemented. I refer to such recommendations as functional relationships between Canadian forces and Canadian coastguard personnel in the centres, streamlining of procedures and changes to regional boundaries.
Second, the coastguard has developed an ongoing five-year acquisition and replacement program for search and rescue vessels, which is working out very well.
Third, while it is not possible to buy literally off the shelf a rescue helicopter which will meet particularly unique Canadian needs, in 1976 the government directed that the majority of the existing rescue helicopters be modified to provide improved foul weather day and night capability. The initial phase, involving improved communications, navigation equipment and external illumination, was completed three years later, in 1979. The second phase, which is now in progress, is providing longer-range capability for these helicopters, a much superior rescue hoist, radar to facilitate poor weather search and better radio communications with vessels. This will be complete by 1984.
Fourth, in 1977 the North American search and rescue business suffered a major setback when an unforeseen hazard surfaced in the batteries of the emergency locator transmitters.
These devices, which provide early warning of distress for both aircraft and ships, had to be withdrawn from universal use in the aviation community. As a result of persistent work by the interdepartmental committee, I have recently been advised by the Minister of Transport (Mr. Pepin) that he anticipates these devices will again be universally carried in light aircraft by the end of the present year. Provided regulations are rigorously enforced, this will be the single most significant factor in speeding up rescue in air distress. It will save lives and reduce suffering. It will also save flying hours expended each year searching for crash locations not pinpointed by the emergency locator transmitters to which I referred. This in turn will make crews and aircraft available to respond to other distress calls.
Fifth, Canada is participating in the international search and rescue satellite-aided tracking project. When emergency locator transmitters are in full use, this project will enable early warning of distress and quick localization of ELT signals. The system will begin testing and evaluation with the launch of the first satellite in 1982. When this ambitious
Search and Rescue Services
project becomes operational, it will reduce significantly the loss of life and suffering involved in air and marine disasters.
The Department of National Defence has examined the adequacy of air response to marine and air incidents across the country. While concluding that current location of resources, their numbers and state of readiness are adequate, certain areas for improvement have been identified. In April, when considering the 1982-83 plan, cabinet will decide how best these improvements can be made.
I should like to use my remaining time to address more particularly the concern raised by the hon. member for Richmond-South Delta. I thought it was important by way of general background to inform the House of some of the initiatives which the department, in collaboration with other affected departments, have been taking especially since these two important decisions of 1976 which underlie the present search and rescue thrust. Cabinet has been concerned with the situation on the west coast because the marine activity level is high and in the northern portion of the west coast there has been a small but significant concentration of marine distress incidents which is increasing annually. In December, cabinet approved a recommendation in the 1981-82 plan for a detailed review of the region. This will soon be conducted by members of the Canadian forces and the coastguard.
Our operational capability on the west coast is already high, and the following two examples clearly illustrate its flexibility. The first example has already been referred to by both previous speakers, the Prinzendam disaster from which 519 people were rescued without any loss of life in very adverse weather conditions. It is significant that in the southern portion of the region the coastguard hovercraft at Vancouver frequently responds to distress in United States waters. Similarly, Victoria can and does obtain the services of United States coastguard helicopters on standby at Port Angeles, Washington and Sitka, Alaska. This bilateral arrangement is both effective and economical.
On December 27 and 28 the squadron on Comox was asked to provide two helicopters to assist in the rescue of over 100 people caught in the flooding at Squamish, British Columbia. This work was hazardous, especially during the night. The rescue was successful because crews were available at short notice, because of their skill in aircraft handling under extreme conditions, and because of the competence of the rescue technicians who had to work in diving gear at the end of lifelines and in total darkness.
Also, I should mention at this point that the rigorous analysis of all factors involved in search and rescue incidents on the west coast has enabled the rescue organization to cope very effectively with unusually high peak demands over the last few years. In particular, I refer to the herring roe season when through a combination of education, prevention, and enforcement and judicious deployment of resources, we have been able to reduce considerably the number of lives lost during this relatively new and hectic activity. I believe this is

January 16, 1981
Search and Rescue Services
further proof that the administrative system instituted in 1976 is bringing concrete results by ensuring a flexible response to changing requirements and a better utilization and co-ordination of all available resources; not only those of the government but also private resources which happen to be in the vicinity of an emergency.
In spite of the high confidence the government places in the operational capability of the people and resources on the west coast, the Department of National Defence and the Department of Transport have examined independently the peculiar problem of northern British Columbia, in particular the Prince Rupert area, in so far as search and rescue are concerned. These examinations have confirmed that the assignment of dedicated coastguard vessels to this area this year and in following years will provide for effective responses to maritime distress.
We on this side of the House are not insensitive to the significant and tragic loss of life which has occurred off the west coast. At the same time, it has been determined that some of the loss could not have been avoided, even with unlimited resources. Nevertheless, a closer study of the requirements for air resources is necessary and will take place early this year.
The regular activities of the interdepartmental committee, the annual review of search and rescue by ministers, the significant progress achieved over the past four years by this process, and the record of achievements by search and rescue personnel, their vessels and their aircraft, do not reflect any need at this time for an independent commission of inquiry. On the contrary, current government policy is already ensuring regular, orderly and effective progress toward improving the probability of rescuing the passengers and crews of aircraft and vessels in distress situations. Therefore, the government must conclude that the proposed independent inquiry would be unnecessary, costly and disruptive to the continuous review and upgrading process 1 have described. For this reason I want to inform the members who have spoken in this debate that it is not the intention of the Department of National Defence to entertain such a proposal at this time.
In conclusion, the House will understand that my first responsibility during the past few minutes was to speak on
behalf of the Minister of National Defence (Mr. Lamontagne) and to inform members of the thinking of the Department of National Defence on the issues raised by the hon. member for Richmond-South Delta. If time would have permitted, I would have addressed myself, as a Newfoundlander, to the subject of search and rescue as it affects the Atlantic coast. There are a number of issues in that regard which need to be aired, but I decided to discharge my first responsibility and respond as directly as possible to the concerns raised by the hon. member for Richmond-South Delta and the hon. member for Comox-Powell River (Mr. Skelly). Let me assure both members that their concerns will be scrutinized by the Minister of National Defence and others who are concerned about this important subject. If something needs to be pursued, I assure these members that it will be.


Stanley Howard Knowles: Question.


Thomas Edward Siddon: Why didn't you listen?


Roger Simmons: It is curious that the only time one gets the attention of some gentlemen opposite is when they agree with what is being said. For the rest of the time for some reason they enter into unfortunate obstructive tactics.


Mr. Dinsdale:: You are filibustering.


Roger Simmons: I have never viewed the important subject of lifesaving as any partisan issue. We on this side of the House-and I hope we have the support of everyone in the chamber-intend to latch on to whatever-


Mr. Deputy Speaker:: Order.


Stanley Howard Knowles: Question, question.


Mr. Deputy Speaker:: The hour provided for the consideration of private members' business has now expired. [Translation]
it being five o'clock, this House stands adjourned until Monday at 2 p.m., pursuant to Standing Order.
At five o'clock the House adjourned, without question put, pursuant to Standing Order.

Monday, January 19, 1981