QUESTIONS

[Stage Direction]
(Questions answered orally are indicated by an asterisk.)

Mr. BROOKS:: 1.	What amount of money has been appropriated for the development of the Blissville airport, New Brunswick, for the year 1938-39?
2.	Is this work being done as a relief project under the Department of Labour?
3.	What are the names of engineers and foremen in charge of the work?
4.	Who is responsible for the employment and dismissal of the men, and what is the rate of wages paid the different employees?
5.	What machinery, such as trucks and tractors, is being used, and by whom is it furnished?


Mr. HOWE:: 1.	S40,000.
2.	No.
3.	Mr. E. C. Percy, district airway engineer, Moncton district, engineer in charge of work.
Cornelius Hageman, foreman in charge of work.
4.	Mr. E. C. Percy, district airway engineer, Moncton. Standard rates as per the fair wage schedule established by the Department of Labour for the district are paid.
5.	All machinery in use is the property of the Department of Transport, including: 3 caterpillar tractors; 2 Adams leaning wheel graders; 1 Brush-breaker plough; 1 road ripper; 5 Baker-Maney wheeled scrapers; 2 hydraulic scoops.


J. J. BOWLEN-NATURALIZATION
Mr. POOLE:: 1.	Did one J. J. Bowlen, of Calgary, Alberta, obtain naturalization papers as a British subject?
2.	If so, on what date were such naturalization papers granted?
3.	On what date was application made for said naturalization papers?
4.	Before whom was such application made?
5.	Who recommended the granting of naturalization papers to the said J. J. Bowlen?


Mr. RINFRET:: 1.	Certificate No. 6069, series D, in the name of John James Bowlen issued to him.
2.	Certificate issued March 21st, 1938.
3.	Application for this certificate made by applicant under date 17th March, 1938
4.	Based upon birth in Cardigan, King's County, Prince Edward Island, Canada, 20th July, 1876, and readmission to British nationality before His Honour Judge Warburton, a Judge of the County Court, at Charlottetown, Prince Edward Island, in or about 1904. Under the statute relating to naturalization in force in 1904, all naturalizations were effected directly by the court and not by the issue of a certificate from a government department. The application states that certificate was lost and that doubts had arisen in consequence. Therefore application was for

Questions

a certificate under section 6 and, in accordance with that section, was made directly to the department.
5.	Application submitted to department in ordinary course; and granted by Secretary of State.


VANCOUVER-YUKON AIR MAIL SERVICE
Mr. MacINNIS:: 1.	Has the government given a contract for an air mail service between Vancouver and the Yukon by way of Fort St. John and White Horse?
2.	If so, to whom has the contract been given?
3.	What was the date of the signing of the contract?


Mr. EULER:: 1.	Yes.
2.	"Ginger" Coote Airways Limited, of Vancouver, B.C.
3.	Contract not yet executed.


UNEMPLOYMENT INSURANCE-APPROVAL BY PROVINCES
Mr. NEILL:: 1.	Which of the provinces have indicated their
willingness to agree tb the proposed change in the British North America Act to allow unemployment insurance to come under dominion jurisdiction?	_	_
2.	Which of them have indicated objections,
and for what reasons?	_
3.	Which of the provinces have indicated approval of the draft measure to provide for unemployment insurance submitted to them by the Government?
4.	Which of them withheld consent, and for what reasons in each case?
5.	Will the government lay on the table the draft bill mentioned above, for the information of the house?


Mr. ROGERS:: 1.	Six of the provinces, Nova Scotia, Prince Edward Island, Ontario, Manitoba, Saskatchewan and British Columbia.
2.	The provinces of Alberta, New Brunswick and Quebec have not been willing to agree to an amendment.
The premier of Alberta stated in a letter dated March 15, last that he intended to submit the proposals to the legislature. No official communication regarding the attitude taken by the legislature of Alberta has been received, but the press has reported that the legislature adopted a resolution which declared :
"That the introduction of an unemployment insurance scheme does not require an amendment to the B.N.A. Act. This sovereign legislature of Alberta cannot agree to any amendment of the B.N.A. Act until the present unsatisfactory constitutional situation in the dominion has been cleared up to the complete satisfaction of all provinces."
The government of New Brunswick has forwarded a copy of a resolution adopted by
IMr. Kinfret.l
the legislature on April 14th, which, after drawing attention to the relation of the dominion government's proposal to the investigations of the royal commission on dominion-provincial relations, continued in these terms:
"Be it therefore resolved that in the opinion of this house the government of this province should respectfully urge upon the government of Canada the advisability of deferring further consideration of the said proposal until the report of the said commissioners is available, when the whole field of social services and any re-allocation of legislative powers in respect thereof may be given fuller study and consideration in the light of the findings and recommendations of the said commissioners."
The premier of Quebec has, thus far, not acknowledged the draft amendment which was communicated to him on January 20, 1938.
3.	The government did not submit a draft measure to provide for unemployment insurance to the provinces. What was submitted to the provinces was a draft of the proposed amendment to the British North America Act to give the dominion the necessary jurisdiction.
4.	Answered by No. 3.
5.	To lay on the table a bill which the government knew in advance to be ultra vires would not be in conformity with the government's view of sound constitutional practice. To publish a draft, which would not even be a bill, would appear to be open to even more serious misconstruction. The government feel that, before attempting to proceed with specific detailed proposals for legislation, it is essential that the necessary legislative jurisdiction should be vested in parliament.



QUESTIONS PASSED AS ORDERS FOR RETURNS


Mr. STEWART:: 1.	What amount was contributed by the Dominion of Canada under agreement with the province of Ontario, dated September 10, 1936, toward the cost of: (a) project No. 76, Broek-ville West, grading and culverts, 4 miles; (b) project No. Ill, Delta to Phillipsville, grading and culverts, 3-67 miles?
2.	What other contributions have been made by the Dominion of Canada to any works carried on by the province of Ontario, in the county of Leeds, in the years 1936 and 1937?
3.	Has the Dominion of Canada agreed to make contributions to any works in said county during the year 1938, and, if such agreement has been made, what are the particulars of such undertakings and the estimated amount of such contributions ?


DOMINION COAL COMPANY-BONUSES AND SUBVENTIONS ON COAL AND COKE
Mr. BROOKS:: 1.	What amount of money has been paid the Dominion Coal Company for shipments of

C.N.R.-Shop Employees
coal on different railways in Nova Scotia under the Maritime Freight Rates Act for the years 1935, 1936, 1937, and 1938 to date?
2.	What amount of money has been paid the Dominion Coal Company for shipments of coal on different railways in New Brunswick under the Maritime Freight Rates Act for the years 1935, 1936, 1937, and 1938 to date?
3.	What bonuses have been paid the Dominion Coal Company for the manufacture of coke for the above period?



PENITENTIARIES


[Stage Direction]
Right Hon. W. L. MACKENZIE KING (Prime Minister-for the Minister of Justice) moved that the house go into committee at the next sitting to consider the following proposed resolution:
That it is expedient to introduce a measure to incorporate a commission with power under the Minister of Justice to administer, control and manage the penitentiaries; to provide for salaries of the commissioners and assistant commissioners and to amend and consolidate the Penitentiaries Act and amending acts and repeal the same.
He said:	His Excellency the Governor
General, having been made acquainted with the subject matter of this resolution, recommends it to the favourable consideration of the house.
Motion agreed to.


[Stage Direction]
On the orders of the day:
Mr. VICTOR QUELCH (Acadia):: I should like to address a question to the Minister of National Defence (Mr. Mackenzie). In view of statements appearing' in the Toronto Daily Star of June 22 and the Montreal Gazette of June 23, is it true that the minister has definite information to the effect that the German spy ring which has been operating in the United States has extended its operations to Montreal; also that the minister has knowledge of the identity of one of these spies? If these statements by the press are correct, what action is being taken by the minister?


Hon. IAN MACKENZIE (Minister of National Defence):: As the question asked by the hon. member deals with matters concerning the secret service, it will be obvious to him, for reasons which he will appreciate, that I am not in a position, in the public interest, to make any definite reply to his question. But I can assure the hon. member that the public interest is being safeguarded.
51952-264J



BUSINESS OF THE HOUSE


[Stage Direction]
On the orders of the day:
Mr. E. J. POOLE (Red Deer):: In regard to a motion standing in my name on the order paper, it is quite satisfactory to me if the names are given and a resume of petition tabled as suggested by the Prime Minister and the leader of the opposition.


Right Hon. W. L. MACKENZIE KING (Prime Minister):: My hon. friend is referring to a motion for papers which will come up on another day. I think I understand what he has in mind.


Eric Joseph Poole: It is the one which was mentioned yesterday.



INQUIRY AS TO FURTHER LEGISLATION- MORNING SITTINGS

Right Hon. R. B. BENNETT (Leader of the Opposition):: I should like to ask the
Prime Minister (Mr. Mackenzie King) whether or not he has any statement to make to the house with respect to the business during the remainder of the session.


William Lyon Mackenzie King: I think the house now has before it on the order paper an indication of all the government measures that will be brought to the attention of hon. members before prorogation. There is one measure that relates to Canadian National Railways securities; there may be one or two other more or less formal matters, but I am unable at the moment to think of anything of importance that is likely to be added to the measures already known.
I have asked the clerk to place in the votes and proceedings notice of morning sittings to begin on Tuesday morning next. I am advising the house of this at the moment as I have thought were we to begin morning sittings next week it might be possible to bring the proceedings of the house to a close before July 1. The government however is, of course, entirely in the hands of hon. members in regard to the number and length of sittings of the house.



CANADIAN NATIONAL RAILWAYS


[Stage Direction]
On the orders of the day:
Richard Bedford Bennett: In common I suppose with many other members of the house I have
The Budget-Mr. Cahan

received communications in connection with the withdrawal from employment of a considerable number of Canadian National Railway employees at Fort Rouge and Transcona. I desire to ask the Minister of Transport (Mr. Howe) whether he would not take this matter up with the railway authorities to ascertain whether, in view of present crop prospects, it might be possible to find useful work for these employees until such time as the requirements of the service demand that they be employed on full time.


Hon. C. D. HOWE (Minister of Transport):: This is a continuation of the same subject brought up some two or three months ago of unemployment of railway shop men. At that time it was decided that the situation would be met by a reduction of hours. However, all the shop unions met in convention at Vancouver and decided in favour of a continuous forty hour week instead of a reduction in hours. This of course means a reduction in staff. This is a matter entirely between the management and the union. Every possibility is being explored of putting additional work in the shop to justify added employment; nevertheless the management feel that under the agreement with the union they are bound to abide by the decision of the union, now that such decision has been arrived at with all the facts of the situation immediately before them.



THE BUDGET


[Stage Direction]
The house resumed from Wednesday, June 22, consideration of the motion of Hon. Charles A. Dunning (Minister of Finance) that Mr. Speaker do now leave the chair for the house to go into committee of ways and means, and the proposed amendment thereto of Mr. Lawson, and the amendment to the amendment of Mr. Coldwell.
Hon. C. H. CAHAN (St. Lawrence-St. George):: Mr. Speaker, in resuming the debate on the budget I may be permitted to express my sincere regret that the Minister of Finance (Mr. Dunning) is temporarily absent, and to express the hope that he will soon be able to resume the duties of his office. This incident indicates the stress and strain which is imposed not only upon members of the government but upon the leader of the opposition and other members by the political and economic conditions under which our parliamentary labours are conducted at the present time.
On the whole one must commend the budget speech of the Minister of Finance as

a clear presentation of statistical facts relating to domestic economic conditions and to Canada's economic relations with the United Kingdom and the United States; but we may differ as to several of the conclusions to be drawn from a careful consideration of these statistics.
The paramount value and importance to Canada of sheltered markets in the United Kingdom are made clearly apparent by the trade returns cited by the minister. For the fiscal year ended March 31, 1937, our exports to the United Kingdom were $406,825,443 and our imports $129,507,885 in value. For the fiscal year ended March 31, 1938, our exports to the United Kingdom were $407,797,610 and our imports $144,978,493. Our aggregate export and import trade with the United Kingdom in the two years ended March 31, 1937, and March 31, 1938, were:
Exports	$814,623,053
Imports	 274,486,387
Excess of Canada's exports. .. $540,136,666


Mr. SPEAKER:: Order. I would ask hon. members to keep as silent as possible, in accordance with the rules of the house. It is very difficult to hear the hon. member who has the floor.


Charles Hazlitt Cahan: Surely a profitable trade with the United Kingdom to that extent should not be sacrificed by reason of any emotional or hysterical appeals for the improvement of our political relations with the neighbouring republic, as a basis for the establishment of peace throughout the world.
During the same two years, exclusive of gold, Canada's export and import trade with the United States was as follows:
Exports	$707,605,659
Imports	 881,049,642
Excess of Canada's imports . . $173,433,983
So in those two years, exclusive of gold, our trade with the United States showed a balance in favour of that country amounting to $173,433,983, as compared with a balance in favour of Canada in its dealings with the United Kingdom, for the same two years, of $540,136,666.
The existing trade agreement between Canada and the United States came into force on January 1, 1936. For the preceding calendar year 1935 the average ad valorem rate imposed on dutiable imports was 41-5 per cent in the United States, and from that high tariff level-the highest in the United States for decades, under the Hawley-Smoot tariff-the president of the United States proceeded to negotiate bilateral reductions in tariff rates under the conditions pre-

The Budget-Mr. Cahari
scribed 'by the United States congress; first, that no commodity subject to customs duty would be placed on the United States free list; second, that no rate of duty would be reduced more than one-half; and third, that the term of the agreement should be limited to three years.
The ad valorem rate of customs duty in Canada on dutiable imports in 1935 was only 27-4 per cent, so that in reducing the tariffs of the two countries percentage for percentage the United States ad valorem rate could be reduced to 20-8 per cent while the same reduction in Canada would leave an average ad valorem rate of only 6-6 per cent. So the president of the United States, from the beginning of these negotiations, has held the whip hand.
In the calendar year 1935, exclusive of gold, out of our total exports to the United States of $358,569,735 there were commodities to the value of $35,723,003 on which the United States customs duties were reduced under schedule II of the trade agreement which came into force on January 1, 1936. In the calendar year 1936, under the reductions made in the United States tariff, by schedule II of the existing trade agreement, these same commodities increased in volume in 1936 to $59,281,878, and in 1937 to $64,582,851, showing in two years, in respect of the commodities upon which specific reductions were made by schedule II of the trade agreement with the United States, a net increase of $28,859,858.
In the same two years, our total exports of commodities to the United States, on which no specific change was made in the United States tariff under schedule II of the trade agreement, increased from $312,846,003, in 1935, to $395,130,685, in 1937, an increase in two years of $82,284,682, thus showing conclusively that our exports of commodities to the United States, on which there was no specific change of duty, increased by $82,000,000, while the volume of our exports of commodities, on which the United States tariff was reduced under schedule II of the trade agreement, increased in the same two years by only $28,000,000. In other words, Canada fared more than twice as well in respect of exports on which there was no specific change in the United States customs duties than we did in respect of the volume of commodities on which reductions were made under schedule II of the trade agreement.
Canada's annual exports to the United States of commodities on which reductions in duty were made under schedule II of the trade agreement, increased foy $28,800,000, while the United States exports to Canada of commodities on which Canadian duties were reduced under schedule I of the trade agreement increased from $29,132,174 to $69,274,933, an increase of $40,142,759 in favour of the United States.
Taking the trade returns of Canada with the United States for the months of January, February and March of this present calendar year, 1938, we find from the finance minister's statement that Canada's total exports of merchandise to the United States were only $61,600,600, while our imports from the United States for the same three months period were $106,400,000, showing a trade balance adverse to Canada of $44,800,000 for the period referred to.
I commend the words of the finance minister, though they indicate a reversal of policy on the part of the Liberal party, that "Canada cannot give to-day and bargain to-morrow." And he added:
It is even more true, Mr. Speaker, in the world as it is to-day, that unilateral tariff reductions will not get the wider export markets which our products need.
We must not overlook the fact that there are bilateral trade agreements which are based on commensurate reciprocal concessions, and then there are trade agreements which are bilateral in form only, but the terms of which indicate merely the generosity of one contracting party in conceding tariff reductions without receiving compensatory advantages. The existing trade agreement with the United States is, in my opinion, of the latter kind, and I sincerely trust that all its adverse features may not be renewed.
In two years we obtained by our trade with the United Kingdom a credit balance of $540,000,000, while our trade with the United States showed a debit or adverse balance of $173,-
400,000,	which we covered by our exports of gold.
Moreover-
Says the finance minister, dealing with particular commodities-
-examination of exports of individual commodities to the British market for the last fiscal year as a whole shows such striking increases as 17 per cent in the case of bacon and hams, 33 per cent in the case of coarse grains, 86 per cent in the ease of tobacco leaf, 49 per cent in the case of fresh and canned fruits and 27 per cent in the case of iron and steel products.
The existing trade relations between the United Kingdom and the United States are not less unsatisfactory to the government of the United Kingdom.
It is stated in the Foreign Commerce Year Book for 1937, an official publication of the United States Department of Commerce, and
The Budget-Mr. Cahan

In closing, I wish to commend the statement of the finance minister that:
It is of little use to prime the pump of business enterprise with government expenditure, if, at the same time, we dry up the springs of private initiative which feed the well.
I was brought up in a country village, where almost every family depended upon its pump for one of the chief necessities of life. Pump priming was occasionally resorted to when the fittings of the pump commenced to loosen and to dry up. No efforts at pump priming ever increased the capacity of the well. The pump priming to which the finance minister referred should never be resorted to except possibly as a temporary expedient, but in any case its necessity clearly indicates the drying up of our industrial activities and the need for such remedial measures as will foster and encourage domestic industry.
Therefore I again heartily commend the following words of the finance minister:
If, therefore, the answers to the questions as to whether plants are to be built or extended, new houses are to be erected, and industry is going to expand or to stagnate, depend upon the decisions of tens of thousands of individuals who are free agents and not regimented sheep, it follows that governments must pursue policies which create confidence rather than fear and uncertainty, and which give leadership and guidance and encouragement rather than stifle initiative and paralyze new enterprise.
Therefore I am fully persuaded that if this government should maintain a stable monetary policy and adopt and pursue such stable trade and tariff policies as will create and maintain the confidence of the thousands of our people who are engaged in industry, then and then only will industry, and especially the manufacturing industry, so renew and extend its domestic activities as to solve for our time the problem of unemployment that now grievously perplexes not only the members of this parliament, but also the great majority of the Canadian people.


Hon. W. R. MOTHERWELL (Melville):: Mr. Speaker, every time it is my privilege to address this assembly in the budget debate I am filled with gratitude that long down through the ages someone has handed down to me the right to speak of the grievances of the oppressed in any part of Canada, and more particularly in my own constituency. I have also the further privilege of speaking favourably of the worthy budget recently brought down by a worthy man, a noble man who dares to do the right, but who is temporarily laid aside for a well-earned rest to resume, we all hope, his duties in this chamber in the course of a few days.

I am not going to carry on very long but I think I should say a word or two now lest I forget, about the two piffling amendments. One was well meant-I would not say anything unkind of the gentleman who is the financial critic of the opposition (Mr. Lawson) -but oh dear, how unlike the rugged, intrepid character of his present leader in this house, the right hon. leader of the opposition (Mr. Bennett)!
In passing I should like to say a word or two about the other amendment. Who will dare at this time to interfere with the buoyant revenues that we have available for taking care of the requirements of Canada? Does anyone think we could dispense with any of those revenues in safety at a time when the war clouds are hovering over us? Nothing but a piece of trickery was at the bottom of this subamendment. Do you think it will deceive anybody but the mover himself? It will not deceive me or my constituents or any sensible man in Canada. I despise such things on the part of men who pretend to be able to handle the affairs of Canada better than either of the old two parties. I hope I shall have a few minutes later on to deal further with the subamendment.
Now I come to another matter that I shall have to put on my glasses for. I hope I shall not need my auricular decorations but I have them on. I rather like interruptions, and I have a pair of ears beside me that will lend themselves to me to-day so that Hansard will not be full of interjections that I did not hear anything about. I do not think hon. gentlemen will do that, but it is well to be forearmed because I have had it done to me many a time.
In my morning paper, and you may be astonished when I tell you it is the Journal, I find the following extract, headed "Unable to say how many branch banks to close":
It is "impossible to say at this stage" how many bank branches are likely to close in Alberta, Sydney H. Logan, president of the Canadian Bank of Commerce, said to-day in commenting on yesterday's Calgary announcement that five branches will close within the next month.
"We will have to close more of them if we find the losses are too heavy. There are some small points out in the west where there is little business and the taxes make it impossible for such branches to pay."
Mr. Logan consulted records to show that of 221 branches 41 made profits and 180 were operated at an actual loss.
Well, I do not want hon. members to think what I am going to say is a brief for Mr. Aberhart. Heaven forbid that I should read a brief for that mistaken gentleman, but it is a brief against the president of the Bank of

The Budget-Mr. Motherwell
Commerce or any other bank at this critical time adding fuel to the flames in our western province of Alberta by closing branch banks, no matter how desirable it may be economically to do so. It would be most untimely at this time; and who is going to say what will happen if it is done? The Bank of Commerce closed a branch bank in my home village last Christmas, and if similar arbitrary methods are employed, I am going to show this chamber what is now proposed to be done in Alberta. Go out into Alberta, forsooth, and start closing banks! An outrageously arbitrary act such as that of Mr. Logan in my riding and in my own village extended to Alberta at this critical time would be a regrettable incident the results of which no man can foretell. I hope there is some means in the hands of the government of restraining or at any rate guiding or controlling Mr. Logan, but I understand there is not.
Before I go further with this matter I should like to read a summary of the correspondence between myself and the same Mr. Logan-the most pinheaded, antediluvian bank president on the face of the earth, that I know of. I should also mention before I go any further that, because he would not give us a hearing, I told him "I will make you hear us on the floor of the House of Commons," and that is what I am endeavouring to do now.
Here is a summary of the correspondence. First, my own letter and my last to Mr. Logan:
January 15th, 1938.
S. H. Logan, Esq.,
President,
Canadian Bank of Commerce,
Toronto.
Dear Mr. Logan:
Yours of January 8th has been received, and I was glad to note that at least on one important point we have arrived at the same conclusion. In speaking of the last few years' excessive drought here, you say:
"We regard this, as you do, as temporary and expect that the district will return to its former productiveness."
What a contrast that statement is to that which you made in your letter of December 23rd, when discussing the same theme, as follows:
"The fact is that conditions have been changing greatly for the last ten or more years all over the west, and Abernethy is no exception. Volume and income have been decreasing for causes which seem to be permanent."
And then he followed that by saying that it is only "temporary." Well, Mr. Logan is certainly a lightning-change artist on manufacturing alibis.
This is only one more example of the rapidity with which you can change and vary your [DOT]excuses for closing our bank here.
As several of our lettergrams and letters have passed each other in transit it occurred to me that a resume of the whole disappointing occurrence might prove both interesting and constitute a consecutive record of the major facts of the case.
On December 15th, 1937, all patrons of the branch Bank of Commerce at Abernethy received the following letter from the manager thereof, with such variations in wording as individual cases necessitated:
"We regret to have to inform you that it has been decided to close our office at Abernethy on the 31st instant,"
That is December, 1937.
. .as our experience has shown that the volume of business offering in the district is not sufficient to warrant our remaining.
Unless we hear from you to the contrary in the meantime your account will be transferred to the Balcarres branch of the Royal Bank of Canada on the 31st instant.
Interest will continue on savings accounts without interruption.
We wish to take this opportunity to thank you for the business you have entrusted to us in the past.
Yours truly,
Manager."
That is, the local manager of the bank at Abernethy.
Although I am talking specifically about this branch, my information is that there are scores-I will not say hundreds, but there are many-similariy situated and, I understand, dealt with in the same arbitrary manner, throughout Canada.
Thus it will be seen that after doing a real good business at Abernethy since 1905 till the world depression and drought struck us and even a fair business afterwards, as crops continued wonderfully good, except in 1931 and 1937, when the major crop, wheat, was anything but a failure, as per figures already supplied you, we are to be ruthlessly deprived of our own bank with not as much notice given of your intentions as the most humble monthly labourer is entitled to before dismissal.
This real "bolt from the blue" resulted in a hurry-up telephone call being sent out over the ten rural lines converging on this point, announcing a meeting would be held the same evening to consider possible action to be taken to avert if possible, such hasty and unwarranted action, by remote control, as if your patrons had no more right to be heard in their own behalf than so many inanimate chattels.
The meeting was well attended by a stunned and increasingly indignant people. A petition was drafted addressed to yourself and largely signed, praying that no further action be taken looking towards closing our bank until patrons thereof had an opportunity to be heard and show cause why such drastic action should not be taken, at least until all the facts bearing on the situation were disclosed. Realizing that a reply to this petition could not be expected inside a week or possibly more, a committee of ten was named to interview your superintendent at Regina on Friday of the same week, as that was felt to be the proper course to pursue even though he (the superintendent),
The Budget-Mr. Motherwell

might have little, if any, say in the matter whatever. Which indeed proved to he the case as it did with ourselves afterwards.
Our interview with your Regina superintendent was quite frank and I would say satisfactory as far as it went, but it was quite apparent from the outset that the place to seek redress was higher up, as we had anticipated by addressing the before mentioned petition to you.
I addressed all these communications to Mr. Logan as did the local committee also.
Among other things we discussed with your Regina superintendent was the heavy overhead cost of operating the Abernethy branch, due partly to the capital cost of a much larger building than was necessary and the maintenance of a seemingly expensive staff. It was also pointed out to your superintendent that so far as collecting old paper was concerned, your then branch manager was a dandy, but so far as holding many old and valuable farm customers was concerned, _ he was a dud, owing to his haughty and high-hatting attitude towards them generally.
I pointed out to your superintendent that his manager at Abernethy was really a round peg in a square hole, inasmuch as he might make an excellent city banker, his total lack of rural instincts or sympathies was bound sooner or later to help to put any small village rural bank more or less on the decline by driving away good customers _ altogether, while others went elsewhere for their loans.
Between December 16th and 29th several further lettergrams and letters were exchanged in which, to support your determination to close your Abernethy branch, you stressed first, that the volume of income so decreased in recent years that there was no alternative to closing. To this I replied, in effect, that if every institution and business whose volume of business and income had shrunk were to be on fifteen days' notice closed up and deserted, there would not be much of anything left open and running.
I dilated on that in my original letter, but I want to emphasize it as much as possible. What would have been left running if every activity which showed declining revenues had been closed out? This parliament would have been out; the railways, the churches, all the best institutions of our land, our foreign missions included, would have been shut down and out. And yet this was the specious pretext made by this gentleman banker.
I followed this up with the actual shipments of wheat from this point as per railway figures for the years 1934-35-36; being 390,000, 250,000 and 354,000 respectively.
While 1937, the worst year we have ever had, the shipments of wheat thus far were about 120.000 with an estimated 20,000 yet to ship, and also 20 carloads of live stock. To this you came back with the unhappy plea that it was not the drought or yield or grade so much as the question of area-ours being too small in your estimation to support a bank.
Well, even a layman would know that it is the volume of business rather than th,e size

of the area which would be the determining factor. But this banking expert puts up an excuse that a third rate clerk would be ashamed to put up to try to satisfy us.
Surely, Mr. Logan, you do not expect anyone to accept that paltry excuse, especially as I showed you in one of my letters that our area had really remained permanent in that any little that had been lost by grain deliveries at Gillespie, most of which went through Abernethy branch bank, was more than made up by the accounts of the two rural municipalities, Abernethy and Tullymet.
Your faithful superintendent at Regina seemed to have acquired a premonition about this time that you needed some support on the theory that it was the area rather than the density of production and population that counted, as under date of December 28 he wrote me, from which letter I quote the following, wherein he intended to show that the area was over-banked;
"The Royal Bank of Canada having branches at Balcarres and Lemberg, while Indian Head cuts directly into the territory from the south."
That was the biggest whopper of them all.
This statement that "Indian Head banks cut directly into our territory from the south" is pure fiction. Prior to the construction of the Brandon-Bulyea-Regina branch line railway the farmers around where Lemberg now is and north thereof, also Abernethy and Balcarres and north thereof, practically did all their marketing and banking at Wolseley, Sintaluta and Indian Head respectively, but when banks were established at Abernethy and Balcarres in 1905 it cut so directly into Sintaluta and Indian Head banking area that the bank at Sintaluta was closed and the three banks at Indian Head were reduced to one, with the deep Qu'Appelle valley as a distinct boundary between them, thus lessening the bank competition from the south, instead of increasing it as alleged.
If this gentleman could get away with this kind of dope, well he deserves to; but as long as I have my voice and my general health to back it up he is going to hear from me. Talk about dictators; you do not have to go to Italy or Germany for them, we have *them right here in Toronto-and not Toronto particularly; we have them right here in Canada.
But why dwell upon all these-many of them petty and fictitious-alibis for closing down our bank when the real reason is given in your favour of December 28, in which, after reciting a number of other minor reasons why banks were being closed in the west and east also, you state as follows:
"In this present instance Abernethy was interlocked with other points, the Royal Bank and ourselves having arranged saw-offs involving nine places in all where a similar condition existed."
He must have thought that I was easy, when, our bank was valued not on the business that was being done but as a trade-off

The Budget-Mr. Motherwell
for something else. Who could not be a banker if such qualifications as this went at par?
After all this pretence at reviewing and reconsidering the pending fate of our branch bank you now admit that it was all prearranged with the Royal that Abernethy was to be one of the victims of an admitted deal in which merit on our part made us all the more valuable as a pawn in your "saw-off" bickerings with the Royal.
I have nothing in the world against the Royal bank-
In fact I have nothing against any bank, but I have a lot against this loganberry banker who to our sad misfortune and mischance has apparently been raised to the high eminence of president of a great bank, the Canadian Bank of Commerce. I do not know much about banking; they have always treated me well, but I know this guy from the ground up.
-indeed I have had very satisfactory business dealings with it for many years, but to be bargained off to it or any other bank on a miserable fifteen day notice smacks altogether too much of the old massa and slave days of yore for a free people to accept with quiescent complacency.
Well, I am not going to accept it. Any man bom of Irish parentage on one side and Yorkshire on the other and who carries a Scotch name cannot be held quiet under such diabolical treatment as we have received from that bank president. Though the heavens fall I shall have my say. It is coming to me, not by privilege but by right. I gave them notice last New Years that it would come, and it has been fermenting here within every day since, waiting patiently to be let out, and out she comes now. There is more correspondence yet:
The always doubtful practice of "saw-offs" in dealing with election protests was quite common up to twenty-five or thirty years ago, but largely frowned down upon in more recent days. But with the Bank of Commerce at least saw-offs seem to be yet quite the right thing in determining which bank is to be continued and which closed, and with the same cavalier disregard for their patrons' interests as if they had been so many cattle.
Perhaps it shows disrespect to the cattle in making such a comparison.
At the beginning of this protest we did think that if we succeeded in presenting our case fully and had sufficient time to do it in, our branch bank with a business record behind it for thirty-two years which we have good reason to believe few village banks excelled, might yet be saved. But when we read your "saw-off" letter, we then knew what we had formerly only suspected, that our good old bank had not the chance of a corpse on the dissecting table.
Merit does not figure in it at all. Did you ever hear of such a condition of things?
Did you ever think that would or could happen in Canada? I did not; and when I awoke to the fact that it was there as a stem reality the Irish and the Scotch and the English in me rose to the highest pitch in my life-and they have had some rises. Now I am giving vent to my feelings, Mr. Speaker, at your pleasure. I had better hurry up, or the forty-minute time limit will be called on me. I wonder how many minutes I have left. Who is the timekeeper in this parliament anyway?
May I conclude by drawing your attention to your several references to our and my interview with your Regina superintendent. The reason we urged so strongly that either he or a responsible bank inspector should visit Abernethy was to meet your various customers at that point who had taken their bank accounts elsewhere, at some inconvenience to themselves, rather than meet your local manager personally and go through the nondiplomatic and repelling experiences to which hitherto they had been subjected. And these customers are some of our very best farmers in good circumstances, whom we desired your Regina representative to meet and size up for himself. But ye would not.
Yours truly,
W. R. Motherwell.
Well, there it is; and on inquiry I find that there is no official redress available and that the government has no power to act. I find that I have eleven minutes left. Heaven be praised; I feel like a new man, with all my garments on. But I am interrupting myself; I am full of appreciation of the kindness that has been bestowed upon me from all sides. I have a little more to say, but my few notes have taken wings elsewhere. I understand that there is no redress that can be accorded by the government or the parliament of Canada; in other words, this is a huge monopolistic banking institution-a free lance-to do as it pleases as above set forth. Through you, Mr. Speaker, I am going to address myself to the Canadian Bankers' Association. I want them to call off their dogs, to call off their autocratic presidents from entering Alberta at this untimely time. For fifty-six years I have been living in my farm home, building up the little village adjoining, and this is the sort of treatment I get from on high-not from on high; from below, from the depths of hades. Why should a man have his whole life-work interfered with by a ruthless bank outsider who knows nothing and apparently cares less about the rural areas of the country? Is it any wonder I am furious and indignant? And then there is no redress. I am addressing myself to you, Mr. Speaker, and through you to the bankers' association. There are many noble, fine, Christian men- not like this man-at the head of our banking
The Budget-Mr. Motherwell

affaire, and I feel that if they are appealed to they will see that some remedial action is taken. I am going to see that they get copies of this Hansard, I am going to see that it is sent to them, and I am going to depend upon them to correct this growing evil all over Canada. Is that not democracy? The Lord be praised for those who went before, who have given me this privilege of free speech on behalf of the oppressed.
I have only one further word to say, Mr. Speaker, to those who have listened to me so patiently. If the banks will not correct this-situation, what am I going to do? There is a great flexibility about our parliamentary system. I can remember when we had no law governing our grain trade; in that case the difficulty now is that we have a law but it is so difficult to get it carried out honestly. That, however, should not deter us from having a bank law and setting up a board of bank commissioners. Oh, that would be thought terrible. I suggested that to one or two in Ottawa, and I thought they were going to take a cat-fit. Why not? We have boards controlling almost all other institutions, and, in the light of the letter I read, who needs such control more than at least some of these banks? I am going to suggest to the Minister of Finance, the Prime Minister, and all the government, that they take into careful consideration the desirability of having a board of bank commissioners, so that when a bronco banker like this one breaks out, a snub twitch or a lariat can be put upon him. Do you think Canadians should have to submit to such tyranny? I do not.
I would be ashamed to think that Canada had degenerated to that extent. Freedom? Yes, there is a lot of nonsense spoken about it, but here is a real case where freedom has been usurped and authority flouted, almost equal to the case of the Canadian Manufacturers' Association with regard to farm implements.
That brings up another matter to which I should like to refer, since I have three or four minutes left, and it concerns the hon. member for Rosetown-Biggar (Mr. Coldwell), who is a very capable representative of that constituency. I only wish his capabilities could be turned to better purposes than pin-pricking annoyances such as this subamendment to the Tory amendment, which itself did not mean a thing. Neither the amendment nor the subamendment is worth enough paper to light a kitchen fire with, though if there is any choice between them the subamendment seems to be the worse. The hon. member wants to give away .all the tariffs that we inherited, which at the time of the Dunning budget of 1930 we had down to the lowest

point since confederation. He wants to give away all those remaining high tariffs which the present government inherited in 1930 with nothing in return from the United States. I want to use those tariffs as the basis of an agreement with the United States, in order to get something valuable in return in the form of more markets for Canadian products. That is the point. Is the hon. member for Rosetown-Biggar (Mr. Coldwell) not a good-natured fellow? A leader in agriculture wants to give away this chance. He says, "I do not want anything in return." Oh, Lord forgive him; he knows not what he says. How could he, when he would say that? Perhaps he thinks that would foe a cracker jack campaign issue to carry around. Well, I will see that it is not. I will spike it if possible before it gets out of the shell.
I think I have two or three minutes more, but perhaps Mr. Speaker will turn a blind eye to the clock this time. Speaking of shells: The hon. member for Rosetown-Biggar is so anxious about agriculture and so anxious for immediate reform that he cannot wait a few months for one of the most wonderful proposals about to come out of its shell. I remember the early days, and the old reciprocity treaty of '54-'66. Why should I not be friendly towards everything that will promote trade between us and our southern neighbour- and much more so, the prospective trade agreement now pending between the United Kingdom, the United States and Canada, these three great democracies? But Mr. Rosetown-Biggar wants to give it all away for the purpose of doing a Little pin-pricking at the Minister of Finance. Ah, my dear young man, it will rebound on you, just the way the Saskatchewan musketeers drove the Aberhart invasion back into the lairs and kennels of the foothill country, and to the land of the breezy Bow. That is what we will do with the next invader. That is the way we will handle the C.C.F. at the first opportunity.
But this is not banking. I think I might very well terminate my speech right now. I could prolong it, but I am perspiring freely this hot day, and I want to retire to my drawing room and wardrobe.


Mr. J. EMILE FERRON (Berthier-Maskinonge):: Mr. Speaker, with your permission I shall begin my remarks by paying a tribute to the whole population of the constituency of Berthier-Maskinonge, whose representative I have the honour to be in this house. I feel proud of those people, most of whom are farmers and. workmen, and I take pleasure in honouring them. I rise on their behalf in order to express their appre-

The Budget-Mr. Ferron
ciatioa of the Liberal government's achievements, and to make what they believe to be timely suggestions.
To be sure, in my constituency we are perhaps unable to juggle with figures as cleverly as the hon. member for York South (Mr. Lawson), but we do know that it is much better to strive after a balanced budget than to show huge deficits, as happened under the former government. We are no outstanding mathematicians, but we consider that we are not indulging in any whim when we prefer a deficit of a few million dollars to those of hundreds of millions which our critics have brought about and experienced.
Our knowledge of economics is still quite deficient; but we feel justified in stating that, on the whole, conditions have improved in every field af activity. Statistics show that unemployment has decreased to a certain extent in our country and, what is more comforting, confidence and hope are everywhere more noticeable. There is more confidence on the part of the farmer who acknowledges the goodwill which the government has shown towards him since they took power, in lowering to 7i per cent the duty on farm implements which formerly stood at 25 per cent. He feels more confident, as I say, because he knows that the different trade agreements which were negotiated have made it easier for him to sell most of his products; for instance, butter, which was selling for 22-8 cents a pound in 1933 and 24-7 cents in 1935, rose to 28-1 cents in 1937 and to 35-3 cents in February last.
Again, there is more hope among workmen who, in 1935 through the policies of our opponents, were under the threat of being discharged by the owners of the factories that employed them, for those factories would have to be closed, they said, if our party came into power. This we did, but those same factories are still in operation and giving employment to our workmen. In the case of the textile industry-a case in which the town where I come from is especially interested-it is now obvious, as a result of the inquiry which was held in connection with those companies, that they were not affected as they claimed to have been by our policy, but that they could pay better salaries to their employees.
The salary of men employed in lumbering and log driving operations has been raised because the market for forest products is now better than it was in 1935. Therefore we take pleasure in congratulating for that achievement, both the hon. the Minister of Finance (Mr. Dunning) and the government of which he is a member.
After those congratulatory words, I am unfortunately constrained, Mr. Speaker, to make a few remarks and suggestions which might seem to border on criticism-which is not to my liking-but I am in duty bound to make them.
I will certainly support the budget on which we will soon be called upon to vote, but I should do it much more willingly if the millions of dollars intended for my province as a contribution towards the relief of the unemployed and needy were, in future, used more fairly than they have been in the past.
In 1936, and again last year, I had the opportunity of seeing the results of works done on the basis of cooperation. I am referring to projects 78A and 78B carried out in Louiseville, and to the Sainte-Genevieve road, between Berthier and Pointe-du-Lae. I did all I could to urge upon the authorities the principle of letting municipal councils choose workmen among the more needy of the locality, so that justice might be given to all, liberals as well as conservatives. Not only was my request turned down, but, on projects 78A and 78B there were foremen, or representatives of theirs, who did not hesitate to say to good unemployed labourers who wanted work in order to buy food: "You are not yet good enough tories to be given work here." The choice of workmen was made by political organizers, and I can assure you, Mr. Speaker, that the only thing about which they made no mistake was the political persuasion of the applicants. In spite of my protests, cases of political patronage and of glaring injustice have followed one another.
On the highway between Berthier and Pointe-du-Lac there have been injustices just about similar. In conection with that project, the Board of Railway Commissioners did something which, in my opinion, should not pass unnoticed. They found it expedient- I do not know for what purpose-to provide in conjunction with the Canadian Pacific Railway and out of moneys appropriated for the elimination of railway crossings, over 8400,000-that is nearly one half of the value of such work-after which they applied their unemployment relief conditions to about one third only of the project. As a result, almost all along that road, people in wretched circumstances were ignored so that employment could be given to political friends of the Quebec government. I ask again whether the Board of Railway Commissioners acted in good faith in that matter. If so, let me suggest that they are easily deceived.
The Budget-Mr. Ferron

Yes, Mr. Speaker, how much more willing would I be to vote these millions if, at least one half of that money was to be used a little more fairly.
As regards our old men and women, our unfortunate blind people and our youths, the vote of thousands and thousands of dollars will soon be sanctioned, so that their life conditions may be improved. I must say, that if, in this respect, the Quebec authorities deal with other parts of the province as they are dealing with my constituency, we may again expect numerous cases of abuse. There again, equal and fair treatment is unknown. Aiter having discussed the subject with the hon. the Minister of Finance, I realize how difficult it is for the federal government to interfere with such matters, but I wish to know if, after a thorough inquiry, such facts should not be brought to the attention, perhaps none too heedful, of the authorities in my province.
Mr. Speaker, dealing now with another subject, I wish to draw the attention of the hon. the acting Postmaster General (Mr. Euler) upon the rural mail carriers and to request his support on their behalf. I know that he is quite sympathetic to them and I hope that before long a reasonable and uniform salary will be paid to them, in spite of the difficulties which such action may involve.
Before I conclude, may I say a word about unemployment which, although less acute, is still existent. No class of the population has suffered more from the depression than the plucky labourers of our villages and small towns, where direct relief is unknown and cannot reasonably exist.
I have always been and still am of the opinion that governments should direct towards the land their efforts to end this sad state of affairs. Would it not be advisable gradually to reduce the grants for direct relief and transfer the difference to agriculture? But, let us not forget to begin by the beginning. We should in the first place seek to retain on the land those who are still there. We should strive to inculcate in the youth of the country the love of the soil, and the best way would be, in my humble opinion, to make grants for the encouragement of farm accounting. When books of account are kept in every farm house, the farmer's son will come to realize that farming is not what he had thought it was. He will be able to compare his income with the wages of labourers and factory-workers, with the salaries of store and bank clerks, and he will certainly find that farming is preferable to these other occupations.
Such a result, however, will not be obtained by conferences and fine speeches. It will

never be attained if, in the home, the child hears farming referred to only in words of disdain, and if means are not taken to make him find out for himself the truth of what I am advancing. He must be made to realize that the professional man without clients, the unsuccessful merchant, the unemployed workman may have to go without food, but that the soil of our country never withholds the means of subsistence from those who till it properly.
Yes, Mr. Speaker, let us direct our efforts towards the land. Let us seek to retain on the farm those who are there now, and their children. Let us try to return to the land those who have thoughtlessly left it, and the desired equilibrium will soon be restored. Let us not look for happiness in the newer and easier doctrines. God has said: "Thou shalt earn thy bread by the sweat of thy brow," and also: "Thou shalt love thy neighbour as thyself."
Let us rather return to the old doctrines which are and will ever remain true. If we always preach them and practise them, happiness will assuredly return to every Canadian home.


Mr. C. E. JOHNSTON (Bow River):: Practically every dollar of that revenue will be obtained from the common people. They pay the customs duties and the sales tax. They pay the excise duty, because that is added by the manufacturer to the cost to the consumer. They pay a large part of the income tax. The estimated grand total revenue is put at $501,700,000. Such a statement should not be applauded; it should be looked at with a great deal of dissatisfaction. We expect to get that much revenue this year, and yet the deficit is put at $13,775,000. That means that we are going into debt that much more. There is another thing that should be mentioned because we heard so much about it a few years ago. It was said that conditions were going to be so much better and the Liberals were going to make it their earnest endeavour to bring about
that state of affairs. When we compare the budget of last year with the one of this year we realize that there is something like $62,538,000 more to be collected. It is not very consoling when you realize that that increased amount will have to be taken from the people in the form of taxation. It will mean a lower standard of living, and the people are certainly not going to be content when they see their standard of living being lowered year after year.
We see the results of this all over the country. We saw it in Vancouver and in Winnipeg, and it is evident in Ontario. A thousand men have been laid off in the Canadian National Railway shops in central Ontario. If nothing is done, these men will be organizing themselves into unemployed strikers. We will find the same thing spreading over the whole country. These men will be forced to organize and when they are organized they probably will be able to obtain some results. That is what will happen if we keep on in this slipshod manner. The main and supplementary estimates this year call for total expenditures of $524,600,000. This amount, which included the expected deficit of $13,775,000, will either have to be collected from the people or borrowed. If we borrow the money, then we must pay interest. Our national debt at the present time is over $3,500,000,000. I intended to bring down with me figures showing the increase in the national debt from the year 1912, but I am sorry I have not them with me at the moment. The gross debt in 1912, as I recall it, was something like $483,232,000, and on that we paid roughly $12,605,000 of interest. Out of every dollar of revenue collected there was about 7-7 cents required to pay interest on the debt. In 193637 the debt had increased to something like $3,542,000,000 with a total amount of interest of $137,410,000 and we had to pay for interest 30-30 cents out of every dollar of revenue collected. That is a tremendous amount to pay for interest. There must be some end to this ever increasing debt. In order to raise the necessary money we had either to borrow directly from the banks or to float loans. I had intended to bring down figures on that this afternoon, but speaking from memory, the cost of these loan flotations ran into millions and millions of dollars every year. Included in the expenses of the flotations were travelling expenses, bank fees, solicitors' fees, brokerage fees and many things of that nature. This is something which the government should take into consideration, and which they promised to take into consideration in the election campaign of 1935.
4182	COMMONS
The Budget-Mr. Johnston (Bow River)
I noticed when the budget speech was being delivered that there was a great deal of applause from the Liberal benches when it was stated that interest rates had been slightly reduced. It is quite true that they have been reduced, and the government deserves commendation and encouragement in that respect. In that connection I want to read from page 3902 of Hansard, where the Minister of Finance said, speaking of the interest rate on the debt:
On the other hand the average rate of Canada's debt outstanding as at March 31, 1931, was 4-98 pe"r cent, and to-day the corresponding rate is 3-53 per cent, a decrease in the ease of Canada of 29-1 per cent.
That is very commendable, and as I say, the minister's statement brought a great deal of applause from the Liberal benches. That is one thing that should be carried further, and I should like to make this point:	If
the rate of 4-98 per cent was too high and we were able to lower it to 3-53 per cent, why not lower it still more? True, 3-53 per cent is better than a higher rate, but the evil is only lessened in a small degree. I think we should recognize that fact and be consistent in our thinking and reduce interest rates, as we in this group have advocated on every occasion, or eliminate interest entirely; because there is no logical reason for borrowing money and paying interest on it. Rather, as was said by the Prime Minister in his election speeches, we should issue money in terms of public need.
At page 3903 of Hansard the Minister of Finance makes a statement in which he ridicules the contention of the social crediters that debt free money should be issued. He said:
There are some, of course, who appear to believe that the government should not pay interest at all or, indeed, should issue debt free money to finance its expenditures or to retire its interest-bearing debt, or to do both of these things. It is incredible that this hoary fallacy should persist after so many historical demonstrations of its devastating possibilities.
The Liberals thought it was all right to reduce the rate of interest on the debt from 4-98 to 3-53 per cent, and yet the Minister of Finance condemns those who advocate issuing debt free money.


Mr. DUFFUS:: Did he use the words
"social credit"?


Charles Edward Johnston: No, but there was no doubt to whom he was referring, because he looked straight over here and said

that for the last two or three years this fight had been going on. Listen to this and we will see if there is any doubt about it:
The government is of opinion, after watching developments during the past two years, that it is highly undesirable and very much against the national interest that there should be continued political controversy with respect to the constitution of the bank itself. It is for that reason that, in addition to maintaining the control which t'he government now has through a substantial majority on the board of directors, the government should acquire the whole of the ownership of the shares of the bank. This has been suggested on more than one occasion by members on all sides of the house, and the government hopes that it will dispose once and for all of political discussion relating to the constitution of the bank itself.
Political discussions! I am afraid the political discussions will not be stopped merely by the nationalization of the bank. While that is very commendable, and I have no bone of contention to pick with the minister in that respect, the mere nationalization of the bank will not do what the voters intended should be done when they voted the Liberals into power. It was not only the nationalization of the bank that they asked. What they asked for was the issuance of currency and credit in terms of public need, and as the hon. member for Vancouver-Burrard (Mr. McGeer) said the other day, everyone expected that that was to be done, not by borrowing, but by issuing our own money and credit. But that has not been done. This party has consistently stood fast by the principle of nationalization of the bank if nationalization was necessary. We have supported that and have no dissatisfaction with that proposal at all. We think that if it was necessary it was the proper thing to d,o. But we contend that mere ownership is nothing, that unless the bank is controlled and directed by parliament then all talk of democracy is idle and futile. These words were never more true than when they were spoken by the Prime Minister himself. The Prime Minister listened, I think, very intently to the hon. member for Vancouver-Burrard speaking in this house the other day, and acquired a great deal of knowledge he never had before in regard to banking. It is not only the Bank of Canada we have to watch, but the chartered banks. They are the ones who control the issue of money. They are the ones who are responsible to a great degree for the poverty that exists in this country. These conditions are not due to any lack on the part of the producers, manufacturing, or agricultural, because we have an abundance. Those are responsible who sit in control of finance, and who are

The Budget-Mr. Johnston (Bow River)
now very highly lauding the budget that was presented this year. They are the ones who are responsible, and they should be made to answer directly to parliament.
The unemployed, when they read the budget will find small consolation. They will realize that this government intends to do little for them. Certainly the thousand men who were laid off the other day from the Canadian National shops will not, when they read the budget, find in it a great deal to be proud of. The men in Vancouver, in Victoria, in Winnipeg, and those who were in Calgary not so long ago, will find nothing whatever to look forward to, but everything to their detriment, when they read over this budget. Some of them get a small relief allowance, part of which we immediately take back from them in the form of a sales tax, increased to eight per cent, on everything they buy with the proceeds of that allowance. If -they buy sugar they have to pay an added tax; on almost anything which they buy they have to pay excise tax or custom duty or sales tax or some other kind of tax. In that way their standard of living is being continually lowered. I think this is a matter to which we should give the most serious consideration. Now is the time to do it; we should no-t wait until there is a recurrence of what has just happened in Vancouver.
I am astonished that the government has not given more attention than it has to the situation of these unemployed young men. The other day I received a letter regarding a young fellow who, married two years ago, had steady work and just managed to get by until a few months ago. His mother wrote to me and asked, "What is he going to do? He is out of work." I personally know this man; he is as fine a man as I have ever met, a personal friend of mine. Yet he is going to be in the class of those unemployed men who are now striking. Can you blame them? All they are asking for is a chance to work at a decent wage. I do not suggest that strikes or relief riots or any action of that kind will get them what they desire, ibut I say that we down here are the ones to blame, we are the ones who should shoulder the responsibility, and if we would do what the Liberal party said they would do, issue money in terms of public need, one of our greatest difficulties would be overcome.
I believe that when the farmers review the budget they, too, will not have very much ground for satisfaction. It is true that they have been granted a little reduction on 51952-265
gopher poison, but all the gophers were poisoned before the budget came down this year, so they have not much to look forward to in that respect; and next year probably the tariff will be changed. Then there is a reduction on harness. But in the west harness is becoming obsolete; the farmers are using tractors, but there is no reduction in the duty on tractors or on farm implements. This is one of the matters to which a great deal of consideration should have been given. We had a committee sitting here for I do not know how long, investigating the prices of farm machinery. They brought in a very good report, yet nothing has been done.
On the whole the budget is a great disappointment to thousands upon thousands of the Canadian people. So far as I can see, the only ones who will benefit from it directly or Indirectly are those who are in control of finance, those who are continuously making huge profits, running into millions of dollars each year, out of interest rates. I notice that the interest rate was cut. I also noticed in the return-I am sorry I have not it here-that every year without exception the amount of money we pay to the bondholders on our funded and unfunded debt has increased. It is all right to lower the interest rate as we have done. But on the other hand our national debt has increased so that we have to pay more money by way of interest each year. That is a thing which must stop. When people cheer the reduction in interest rates they do not know what they are doing. If they look more carefully at the return which was brought down in this house they will find that they are paying more money out of revenue in interest than was ever paid before, because our national debt is going up faster and higher than the interest rate is being lowered.
I do not intend to take much time, because I know the house is anxious to get through with this debate. When the Bank of Canada bill comes down I should like to see a great many changes made in it, so that the common people of this country will be given a chance, so that the young men and women who are depending upon work for wages will have a decent chance of a livelihood, that they will have a Canada of which they may well be proud. Although the budget has not provided for it, there can well be provided in the Bank of Canada bill what the Liberals promised, namely, the issuance of credit and currency in terms of public need.

The Budget-Mr. Farquhar


Mr. THOMAS FARQUHAR (Algoma East):: I wish to make a few observations which have come to me as I have sat in this house and listened to the debates for the past three years.
As this is the first time I have risen to speak in the house, may I, Mr. Speaker, impose on your good nature to the extent of saying a few words in regard to the constituency of Algoma East, which I have the [DOT] honour to represent.
First, let me say that I live on Mani-'' toulin Island,-the island of one hundred lakes, the largest island in fresh water, one of the beauty spots of the province of Ontario, which is fast becoming one of the most attractive tourist resorts in Canada. Mani-toulin Island, however, though one hundred miles long, is a very small part of the constituency of Algoma East.
To give you some idea of the size of the constituency of Algoma East, let me say it covers an area of 17,700 square miles, and is as large as all of the following constituencies combined-you will note in making this comparison I have left out all the larger centres and have confined my comparison very largely to rural constituencies:
Glengarry Haldimand Halton
Hastings South Huron North Huron-Perth Kent
Lambton West Lincoln
Middlesex East Middlesex West Norfolk
Northumberland Ontario Oxford
Peterborough West Prescott
Prince Edward-Lennox
All of these thirty-five constituencies could be comfortably placed within the boundaries of Algoma East constituency.
I am sure, when you fully realize and appreciate the amount of work involved in keeping in touch with and looking after the needs of my constituents, you will agree with me that in fairness to my constituents, the Minister of Transport (Mr. Howe) should supply me with an aeroplane. Nevertheless, if I were asked to-day what part of my constituency I would be prepared to give up when the next redistribution bill comes down,
I would find it very difficult to decide.
I think a great deal of my constituents.
I have much reason to think a great deal of

them. Let me tell you what they did for me in the election of 1935. Algoma East has always been very closely contested-Liberals in one term, Conservatives in the next; no member was allowed to represent it very long at any time. In the election of 1935 I had three opposition candidates-Conservative, Cooperative Commonwealth Federation and Reconstructionist-each and all of whom lost their deposits. I had a substantial majority over all three combined. I was sorry to see my opponents lose their deposits. They are splendid fellows. Since the election two of them have joined the Liberal party, and we are expecting that the third will be working with us before the next election. I am not telling this to try to give the impression that I am popular in my riding, not at all; I am doing it to indicate that Algoma East to-day is decidedly Liberal. The reason for this of course is that they appreciate what has been accomplished by the present administration and have confidence in them.
When I hear hon. members making the statement that the present government has done nothing, all I can say is that they have no regard for the truth. I am not going to try to enumerate the accomplishments of the present government; I do not think it is necessary. I just wish to say there has never been a government in Canada that has reduced the tariffs so much in the same length of time, as the present government, nor has there ever been a government that has brought about so many trade agreements and treaties with a view to opening up markets for our products. While the government have not gone as far in the way of reducing tariffs as I should like to see it go, still we must agree that it is on the right road and going in the right direction. It is true that we on this side of the house do not always agree on questions of this kind; therefore hon. members opposite have said that as a party we are not united. But I point out that that is one of the privileges we enjoy in being Liberals; we are allowed to do our own thinking and give expression to our own thoughts. In this connection I quote the statement made by the Prime Minister, speaking to a group of newly-elected members, of whom I was one. He said: Your first duty is to be true to yourself, true to your own convictions. That is Liberalism. Of course we differ among ourselves; it is through honest differences of opinion that we arrive at sound conclusions.
A good deal has been said in this house and outside of it in regard to the spread of com-
Russell Simcoe East Simcoe North Stormont Waterloo North Waterloo South Welland
Wellington North
Wellington South
Wentworth
York East
York West
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York North
Brant
Durham
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The Budget-Mr. Fdrquhar
munism and fascism in Canada, and what we should do to prevent it. There is only one way in which the spread of such organizations as these can be prevented, and that is the way pointed out by the Minister of Justice (Mr. Lapointe), speaking in this house last year. He said: We must remove the cause. What is the cause of the spread of these movements in Canada? To my mind there are two principal causes. One is the poisonous literature that is being manufactured in this house from day to day, false statements made by hon. members and broadcast throughout the dominion, the free postage privilege being used for this purpose. Anyone who reads Hansard from day to day must agree that most of the criticisms made in this house are destructive and a very small percentage indeed constructive. This is doing more to poison the minds of the Canadian people and create a feeling of dissatisfaction and discontent than anything else that has happened in Canada. It is causing men to lose faith in a democratic form of government. Fair-minded members of this house resent the detestable and cheap method of political propaganda which some hon. members of the opposition continue to carry on from time to time, for no other reason than to create a feeling of suspicion and hatred. Any hon. member who allows himself to descend to this low level of destructive criticism is to my mind an enemy to the cause of democracy.
The other cause of the spread of these movements in Canada is the determination of the capitalistic classes to continue to enjoy their high dividends and excessive profits at the cost of the sacrifice of the great masses of the people who work on the farms and in the factories and who are to-day having such a struggle for existence. I know we have a class of people who are not anxious to work, who say that the world owes them a living; this class however is comparatively small, and it is not the class to which I refer and at whose expense the capitalistic classes enjoy their high dividends and large profits. I refer to the great army of honest toilers, struggling under serious disadvantages and making great sacrifices for those dependent on them, denied the advantages, many of them, of a proper education, and robbed of many of the necessities of life, while others live in luxury and enjoy the wealth which the toilers have produced. This has been proven by many investigations which have been made during the past number of years. If ever a dictatorship form of government should come to Canada, the moneyed in-51952- 265J
terests carrying on under this system of grefed and selfishness would be one of the direct and principal causes of its coming. There are no truer words than those of Burns, who said;
Man's inhumanity to man
Makes countless thousands mourn,
I have been very much interested in the discussions in this house from time to time with respect to farm problems. One thing on which I am sure we all agree is the fact that we cannot have prosperity in Canada unless the farming industry, the basic industry of Canada, is placed on a profitable basis. We must admit that it is far from that to-day.. I have heard many suggestions in this house' as to what wouid help the farmers, such as, reduced tariffs, reduced taxes, reduced transportation rates, freer access to the market's of other countries, and so on. These will help, but to my mind neither any one of them in itself nor all combined will'solve the farrti problem. The farm problem will never [DOT] be solved so long as farmers continue to work under their present system. Farmers must learn to do their own business, and not depend on others who are virtually conducting [DOT]the farming business to-day, not for the benefit of the farmer but for their own benefit and profit. Why should not farmers own their cheese factories, their creameries, dairies, cold storage and packing plants, abattoirs? The farming industry will never be on a profitable basis as long as private interests control [DOT] the sale of farm products. This must be removed from the control of private interests and a system of cooperative buying and selling adopted, a system which ; is working so satisfactorily in such countries as Denmark and Sweden. This cooperative system was not easily brought about, but followed a long and continuous struggle with the moneyed interests who fought so hard to prevent the farmers from getting together in a cooperative movement. This has been the history of every country where the farmers 'have undertaken to organize for the purpose of working co.-operatively in any branch of the farming industry. In this regard Canada has been no exception, and our Canadian farmers, in undertaking cooperative organization work, must be prepared for a long, continuous struggle; for it will take some years to bring about this cooperative farm movement unless the government will come to their assistance; which I am hoping it will see the necessity of doing. If the farmers of countries such as I have mentioned can make a success of the cooperative farm movement, as they have, surely there is no reason why the intelligent farmers of Canada cannot make a success
41S6
The Budget-Mr. Furniss

of it. I am thoroughly convinced that there is no way in which the government can be of more assistance; in helping solve farm problems than to encourage the farmer with financial assistance so that he may become properly established.' in a cooperative marketing system. Either that, or the government should take over all the plants handling farm products and operate them in the interests of the farmer.
When the control of the marketing of farm products is taken out of the hands of private interests and operated in the interests of the farmer, then, and only then, will we have a satisfied and contented farm population in Canada. Then we will have something to attract the young and rising generation to the farms instead of crowding into the cities, as they are doing to-day, and our farm problems and to a very great extent our city relief problems will be solved.


Mr. S. J. FURNISS (Muskoka-Ontario):: of the world- and buys in the protected market, how much will he have left to buy for his wife the half-dozen new dresses a year that she so rightly deserves? The farmer pays for the dresses when he buys the shoes, but the shoe merchant's wife wears them. This applies not to shoes alone, but - to almost everything the farmer purchases.
-[DOT] Reading on in the speech of the right hon. leader of the opposition, to which I referred, we find what he proposes as a solution of the problem of unemployment. He says:
* I suggest to hon. members that in a country with a population so sparse, inhabiting an area so vast, that with an -urban population so great relatively to the rural population, subject to the conditions I have imposed as to quality and price, the tariff should be such as to give to the Canadian producer in factory and mill the business of his own country. I have never hesitated for a moment to say that I apply that principle also to agriculture.
. That is the same policy as was adopted ia- 1930 when the hon. gentleman was elected t,o office, only more of it,-even carrying it to a point of exclusion. But we must remember that Canada is primarily an agricultural country and if her farms are properly occupied and worked as they should be, our products will be in excess of home requirements for years to come. We must therefore seek outside markets for our surpluses.
-	If, as under the policy enunciated by the right hon. leader of the opposition, we will not buy, then we cannot hope to sell, and the result is restricted markets for our farm products, a glut on the home market, lower prices, less purchasing power by the largest consuming class. of manufactured goods, and more unemployment until the latter condition is worse than the former.
-	It appears to me as a farmer that the policy of high protection of the Conservative party is designed to commence at the top and build down, to make the towns and cities prosperous first with the hope that some ih.easure of prosperity will trickle through to the- primary producer. But so far this has been a forlorn hope. In contrast to this, the Liberal policy is to commence at the bottom find build up, by seeking to trade with nations who are willing to trade on more equitable tefms. It aims first to make the primary producer prosperous, thereby securing a more evenly balanced population, and assuring a greater measure of prosperity for all.
1 Between these policies it seems to me a serious question is involved. Is this dominion, Of which we are all so justly proud, to be the home of many thousands more of happy * (Mr. Furniss.] ' '
families, contentedly tilling the soil as nature intended, producing enough and to spare; or on the other hand, is our rural population to be restricted by the needs of the towns and cities within our borders only? Let us pay heed to what has taken place in the world in the last few years. Let us endeavour to people our country as it should be, lest we too fall a prey to the covetous eyes of nations who are not so favourably situated as we are.
There is another aspect to the farm problem about which I wish to speak. I often wonder if those who are not engaged in farming ever realise the position that agriculture holds, relative to the other industries that make up our economic system. Let me use a simple illustration, so simple that I feel like offering an apology for it, but I know of none better and so am going to use it to serve my purpose. It is nothing more than a direct application of the underlying principle of all business, which at some time or another is applied to adjust prices by the various industries that make up the round of our industrial life. Might I ask hon. members to indulge their imaginations for a short time and think of me as a farmer raising hogs on an extensive scale?
Some years ago, just before a sharp rise in freight rates took place, I sold a carload of hogs to be delivered two weeks hence f.o.b. shipping point. In the meantime the increase in freight rates had gone into effect. When the meat packer received the hogs he found his freight bill was up $50, and likewise the freight on all his other shipments of hogs was up corresponding amounts. He immediately gets busy and says, "Here, my hogs are costing me more money; I must have more money for my products." He marks up his prices accordingly. He passes on the increase. He sells his products to the retailer who receives them over the same transportation system. The retailer finds that his invoice is marked up, as well as the cost of his freight or express. He gets busy and says, "My goods are costing me more; I must mark up my prices." He marks them up accordingly and passes on the increased cost. A housewife comes in for her weekly supply of foodstuffs and discovers that prices are up. When she goes home she says to her husband, "I will have to have a larger allowance next week because I find that groceries and other necessities have gone up in price." Her husband meets with his fellow workmen to talk over the matter, and finally they decide that since their living costs

The Budget-Mr. Fumiss
have gone up they must ask for more wages. Their employer being a reasonable man, he grants their request. They pass on the increased cost to their employer.
Suppose this employer is a manufacturer of farm implements. When he looks over his payroll he discovers that it has gone up ten or fifteen per cent. He says, "My labour costs are up; I must mark up the price of my implements," and he does so accordingly. He passes on the increase.- I may need a new set of implements -the following spring. When I interview the agent I find that prices are up fifteen or twenty per cent. As I must have the implements I buy them. If the cost of my implements is -up, I must have more money for the next car of hogs I send to market. However, when I try to pass on my increased cost, what happens? I am just as likely to have to take less for my hogs as I am to get more. I am lucky if I break even in a comparison with the previous year's prices. That is the position which agriculture occupies as compared with other industries in our country. Farmers to-day are working eighty, ninety and one hundred hours a week for less wages than the urban worker receives for a forty-four hour week. That is why people are leaving the farms and flocking to the cities.
With our present system there has to be some industry -that bears the burden of any readjustment in prices. In our case that industry is agriculture because it cannot count any increased cost of production as a factor in setting its selling price. I have taken you around -the circle and shown that even though agriculture has not contributed to the increased cost, yet it has had to bear that additional burden. I had to pay the additional cost for my implements, but I had no way to recoup myself. That being so, then the only thing that can be done is to make -the burden as light as possible. I complain only of unjust burdens, and I named the most vicious -one when I referred to high tariff protection. There are many others which I shall not attempt to mention, but let me say here that I consider anything for which no value is given as an unjust burden.
I would refer particularly to profits on watered or common stock which do not represent a single dollar of cash investment. One has only to refer to -the Turgeon report on the textile industry, or to the report of the committee on agricultural implements, for glaring examples of this. I might refer also to the artificial prices placed upon real estate for which no value is given, but which must be paid by some person. These are some of the burdens that eventually have to
be borne by the farmer. Until they are removed from our system, our farmers are doomed to be hewers of wood and carriers of water for the other organized interests in the country.
One other way in which agriculture can be helped, is in the marketing of its products. Hitherto the activities of our departments of agriculture have been along the lines of increasing production, but I am pleased to see that, the present Minister of Agriculture (Mr. Gardiner) has initiated an aggressive program of marketing. I trust that this will not stop short of assisting in the cooperative processing of our live stock. We have one plant fashioned after -the Danish system which is operating successfully in Ontario at the present time. I believe this is the only solution to be found for the problem which has been referred to this house on several occasions.
There are other things about which I should like to speak in connection with my constituency, such as reforestation and the tourist trade, but they must wait for another occasion.
Just a word about the unemployment situation. I have listened -to many speeches in this house with regard to unemployment, and I have come to the conclusion that some people think all this government has to do is to wave a magic wand, say "presto", and the problem of unemployment will vanish overnight. This problem has been too long in the making to be cured in one year, in three years or in ten years. For tens of years the best brains of the country have been employed in the discovery and invention of labour destroying machines without a single thought being given to the effect on our economic system. Now our best brains will be required for many years to find a way out of this difficulty in order that we may maintain our individual freedom and our democratic form of government.
Let me, say in conclusion that I do not believe man can create any condition which he cannot redeem if he sets himself diligently to the task of finding out the cause and resolutely applying the remedy. That is the task which confronts not only this country, but every other nation- in the world. If this problem cannot be solved, then civilization as we know it, is doomed to perish.


Mr. H. R. FLEMING (Humboldt):: Mr. Speaker, it is with a certain degree of trepidation that I rise in my place in this house to make a few remarks on the budget that was presented to the house last Thursday. I must say, Mr. Speaker, at the outset of these brief words how deeply I feel for the absence of
The Budget[DOT]-Mr. Fleming

the Minister of Finance (Mr. Dunning) from this house on account of illness. The. Minister of Finance is one of my oldest and closest personal and political friends. I have known him intimately from my early years in Saskatchewan. He has always given the best of his time and his energy for the welfare of his adopted country. I hope that his recovery will be rapid and that he will soon be back in his place in the House of Commons where he occupies a position of such eminence in this new country.
I was pleased as I sat here and listened to the fine exposition of the Minister of Finance concerning the financial affairs of the country. I listened also with considerable pride to the degree of improvement that has been made in our financial position during these difficult, trying, and troublesome times. The financial management of the country has been good, but I was dumbfounded when I found no measure of relief in the way of tariff reductions for the people of the western plains and the people of the constituency that I have the honour to represent in this House of Commons. I must offer, in my humble way, my protest.
I returned just a short time ago from the election battle in Saskatchewan, and during that campaign I addressed, with my fellow-members of this House of Commons, a great many meetings. At these meetings men and women of all shades of political thought and political beliefs were gathered together to listen to the problems to be discussed, and at all these meetings I found that the people we were addressing were one in asking for some relief from the troubles they were enduring. I personally addressed some thirty-five meetings in the time I was absent from this house, and the one question that was uppermost in their minds was that the government of Canada should do something to alleviate in some small way the distress under which they were labouring. At nearly every meeting questions would be asked, and the question that was always asked was: What is your government going to do in the way of removing duties on agricultural implements?
I told them that if they would be reasonable; if they would wait for a short time, I was sure that when the budget was presented this year some measure of tariff reduction would be contained therein. I told them that it was a Liberal government under the leadership of the late Sir Wilfrid Laurier, in 1911. that brought to them the first measure of tariff reform. I told them that it was the Liberal government under the leadership of

the present Prime Minister (Mr. Mackenzie King) that brought, in the Dunning budget of 1930, the second great measure of tariff reform to the people of western Canada.
But many of these people asked this question: Why do they wait until election year to do these things? I, in my implicit faith in Liberal governments, in Liberal policies, in Liberal doctrines, said to them: Send Liberal representatives to the parliament at Regina who will foe in favour of lower tariffs, and if you do this I can return to my place in parliament and say with strong united voice: "Lower those tariffs, Mr. Dunning. We still trust you. We still believe in you as one of Saskatchewan's great premiers."
But, Mr. Speaker, when I find that nothing has been done in the matter of tariff reductions on farm implements or on anything else, it is difficult for me to support a policy of this kind. The Liberal party had its rise in the natural impulse of the people toward greater freedom, and in all its history it has never lacked witness to the fundamental truth which that word has come to mean. Liberalism means more to me than a passing fancy. I have always believed that in the Liberal party there was the greatest measure of freedom of thought and freedom of action. But the other day, within the hallowed walls of this house of parliament, I happened to ask for some information from one of the ministers of this government, and he turned upon me and said that this Saskatchewan bunch was so-and-so, and that he would not support the wheat board if we did not support the budget. Mr. Speaker, let me tell this house, and let me tell this government, that as long as I am a member of this House of Commons I will not be intimidated by any minister of the crown. I come from a race that has never admitted defeat. For seven hundred years the Irish people fought the might of imperial England, and I as a member of that race will never be coerced by any ministerial threat, whether it comes from privy councillor or governor. This is supposed to be a democratic government, and no party whip will snap me into action.
I resent the intejection that was made during this debate a few days ago by the hon. member for Northumberland (Mr. Fraser), when he said in a sneering way that we, the members from western Canada, would vote for the budget. Let me tell that hon. member; let me tell this house; let me tell this government, and let me tell this country, that I believe in the Liberal policy and in the Liberal platform. I believe in a united

The Budget-Mr. McGeer
Canada. Too long have we, the people of the western plains, been sacrificed upon the economic altar of St. James street. I believe in national unity; I believe in confederation, and in a strengthened confederation at that, but I believe that the conflict between dominion and provincial powers has reached a point where we may have to decide between a strong federal government and a redivision into provinces and sovereign states. Personally I believe that national unity is essential. Western Canada has contributed much to our national unity and to our national economy.
I mentioned in a former address in this House of Commons that we had been discriminated against by transportation rates and by tariff walls under various federal administrations, but that we had never openly advocated secession. We have always relied upon the good will and understanding of other parts of this great Canadian country which have profited by the new markets which the development of our western lands has opened up to them. But we have now reached the point when something must be done to help the people in those great areas of western Canada. Whatever may be the outcome of our difficulties, I am confident that our destiny lies in confederation, and I am convinced that the way leads through the Liberal party. If there ever was a danger to the west's position, it is through that political appendage of industrialism, the Conservative party.
I cannot vote for the amendment, nor can I vote for the subamendment, because one would mean a Conservative policy, and the other would mean that in order to bring those things into effect it would have to be done through a Conservative government, and we know what that would mean because it is the party of higher protection. The socialist or Cooperative Commonwealth Federation amendment is simply adding a few words to the Conservative amendment, and it in no way modifies or changes the Conservative amendment.
Mr. Speaker, we are an intelligent people. If we gave as much time to the consideration of the broad principles of distribution of the benefits of our progress as we do to much squabbling over inconsequential items of routine administration, the people would have more confidence in us as their leaders. Let us face the future fearlessly. Let us walk with dignity and with pride into the future. Let us believe in the character of our people. Let us believe in the legitimacy of our dreams. Let us return to the principles of Liberalism, those principles that were taught to us by the great leaders who have gone
before, those principles of orthodox Liberalism that I learned at my mother's knee. I think, Mr. Speaker, the government should promote a policy of the technique of transition :-
So in the long hereafter this Canada shall be The worthy heir of British power and British liberty-
Spreading the blessings of her sway to her remotest bounds,
While with the fame of her fair name a continent resounds;
True to her high traditions, to Britain's ancient glory
Of patient saint and martyr alive in deathless story,
Strong in her liberty and truth to shed from shore to shore
A light among the nations-till nations are no more.
Mr. Speaker, after thinking the question over, after communing alone with myself, I have decided that there is no solution that I can offer to this problem which I have been debating with my inmost self, but that I must support my own distinguished leader the Prime Minister of Canada (Mr. Mackenzie King) and will vote for the budget.


Mr. G. G. McGEER (Vancouver-Burrard):: May I tender my regrets and message of sympathy to the Minister of Finance (Mr. Dunning) in the unfortunate break in his health at this critical time? I sympathize with him the more because I feel that under the course which he is following it is utterly impossible for any Minister of Finance to retain his own health, much less the health of the public purse of the nation.
We have been listening to budget statements for a great many years, and they are all attended with a great deal of justifiable optimism. Apparently that optimism must come from the fact that "hope springs eternal in the human breast," because on every single occasion, whether openly acknowledged or ingeniously concealed, our budgets have consistently shown a deficit that has continually mounted as the impossible and unpayable debt burden of the nation.
If you examine this budget, Mr. Speaker, you will find it strangely similar to every other budget which has ever been introduced in this house. It indicates the persistent rise in the ever-increasing dominion, provincial and municipal taxpayers' load of debt, which is now over $7,000,000,000. The fact is that the Conservative party was elected in 1930 on a promise that they would cure unemployment with an appropriation of $20,000,000 of public funds, and that our national debt has increased by over $1,000,000,000 since 1929, and is still increasing without any real solution being offered of the unemployment problem
The Budget-Mr. McGeer

in Canada, notwithstanding some measure of success. Why is it that a nation as rich as Canada cannot have progress without that progress being overshadowed by unpayable increases in existing unpayable debts? To-day, notwithstanding that the budget shows the highest revenue ever collected in the history of the dominion-and similar expressions are coming from cities and municipalities-investment in city property from one end of Canada to the other is practically a liability. Under the blight of existing taxation business in Canada has come practically to a standstill. Our public service lags far behind twentieth century standards, and unemployment not only continues but is again rising.
I do not want to be one who has not hope for the future. But I read to-day that in the Canadian National Railway shops some thousand men are being laid off until the fourth of July, and Mr. Kingsland, one of the vice-presidents, announces that we shall have to w'ait until then to see what is going to happen. In my own province of British Columbia we had hopes that the war in Asia would not last very long and that there soon would be a revival of Asiatic trade. To-day, as a result of there being little or no hope of an immediate conclusion of that disastrous conflict across the Pacific, some industries have been hit with almost the same force that the drought conditions struck the farms in southern Saskatchewan. I suggest to the government that it will be a serious mistake for this house to rise without some more ample provision being made for the emergency possibilities of unemployment during the coming year than exists at the present time. It may be unfortunate, but I understand that neither Ontario nor Quebec is willing to cooperate in guaranteeing the loan which this government has made to municipalities for the purpose of preventing unemployment through the promotion of self-liquidating enterprises at a two per cent rate of interest. I know there is no possibility, with the amount of money which would be our share in the province of British Columbia and in the city of Vancouver, of meeting the problems that I feel reasonably satisfied we are going to face before the coming winter is over.
At six o'clock the house took recess.
After Recess
The house resumed at eight o'clock.


Gerald Grattan McGeer: Before recess I had drawn attention to the fact that under our present system progress seems to suffer under the inevitable stalemate of debt. But worse than

that, every sane person must acknowledge that a system which taxes us into depression and prevents progress and prosperity, where there is every reason for believing that prosperity and progress both can and should exist, does not contain the remedy for the most important of all Canadian problems, namely that of financing greater Canadian expansion and development, and more widespread and general prosperity. The time approaches when we must all come to the conclusion that our present and previous budgets indicate that those who have the responsibility of administering public affairs must give much more real thought and study to theories and practical details of monetary policy than has been the case in the past. If there is one outstanding feature of our whole economic program to which public men, whether they be in municipal life or provincial or national life, give little or no attention, it is the actual details of our monetary system. Such thought would go very far to disclose that the root of much of our present economic difficulty will be found in our overcautious attitude towards public administration of national currency and credit. We seem to be afraid as public men to grasp and take hold of that all-important problem. Worshipping at the shrine of orthodox finance we ignore the truth that our government is poor simply because parliament has given away its power to create money to those who have made the cost of financing government prohibitive. The result is that while the government exerts great and ingenious efforts to balance the budget, a little thought would disclose that in reality it is vainly trying to budget on a balance. That is, we are trying to budget the affairs of the nation on the inadequate balance of the nation's money power which the taxpayers can afford to borrow from the private hoardings of accumulated savings and from the owners of our privately owned credit system.
The absurd and impossible situation of being taxed into depression exists simply because we have followed the thoroughly unsound proposition that sovereign governments have no access to public spending power other than by collecting taxes from and maldng other levies on the people and by borrowing from accumulated savings. That this proposition is thoroughly unsound is no longer open to question. Ever since the Minister of Finance for Canada has acknowledged that we in this country have adopted a monetary system based on "a managed paper standard" under which "the value of our currency is determined by the principles of demand and supply," we in parliament, by the adoption of that

The Budget-Mr. McGeer
policy, have made the lawmaking authority of parliament the source of supply of Canadian money. Therefore, unless the government has given away its power to create money through law, or does not know how to manage national currency and credit in the service of the nation, parliament has the power to create and circulate the medium of exchange in the volume that is needed to sustain Canadian progress with orderly advancement. Unfortunately we in parliament have given away, not to the Bank of Canada but to the chartered banks, the power to create Canadian money. Surely every member of this house and every citizen of Canada must, at one time or another during the last few years, have asked himself or herself, From what source are other nations securing the power to finance progress to the extent that it is being financed in other nations, as well as to finance what is unfortunately more costly than progress, the enormous war programs which are under way in practically every nation in the world? This parliament, due to its affiliation with the League of Nations has a right to review what has been said by the director of the international labour office at Geneva. He summarises the world situation in these words:
But perhaps the most outstanding lesson of the slump is to be found in the profound change it has produced in ideas about monetary policy. In this field more than in any other lies the key to economic prosperity and social progress. The demonstration that in one country after another the upturn of business and employment coincided not with the reduction of wage rates, the cutting of costs or the deterioration of working conditions, but with the abandonment of deflation and She adoption of monetary expansion, has made a deep impression on the world.
Surely this experience the world over proves that the time has gone by when men can acorn controlled inflation and monetary reform and dismiss it idly as something unworthy of consideration. Nations the world over have found a new lease of national strength and new recovery of internal prosperity in the management of their own currency, the acceptance of this conclusion is not dependent upon the evidence which may be found in the monetary experiments of the dictatorships, Russia, Japan, Germany or Italy, or in the pump-priming program in the United States, although the successes and failures of their fiscal policy should not be ignored; for such countries, bankrupt a few years ago, irrespective of whether they are using their financial resources effectively or otherwise, are no longer short of money. People say -that the Roosevelt program of
expenditure has failed. Let me ask any member of this house what would have happened in 1933, 1934, 1935, if the national government of the United States had not undertaken such expenditures. Even to-day those who scorn Roosevelt's attempt to conquer poverty for the people of the United States are-forced to acknowledge that if the national government of the United States failed to go forward with a further spending program, the inevitable result would be a disastrous depression of unparalleled dimensions.
But quite apart from the dictatorships or the Roosevelt administration in the United States, there is ample evidence to support the significance of monetary reform to be found in the recovery program of the British isles, where under a completely revolutionized monetary outlook, human and national need policies are being projected and financed upon entirely new theories of financial and political economy. The epochal British revolt against orthodox finance and classical economy was engendered by sheer necessity, and arose directly from the failure of the deflationary policy launched in 1925 by Winston Churchill, the then chancellor of the British exchequer. Under that policy Mr. Churchill hoped to restore international -trade and, in turn, internal trade in Britain by reducing public expenditure, salaries, wages, working conditions, living standards and the cost of industrial production, accompanied by whatever increases in taxation were necessary to balance the budget. Under that misguided policy, which I am afraid we are continuing to pursue in Canada, the national credit of Great Britain was almost destroyed. The resulting collapse of her national credit and security forced -the British government to repudiate orthodox finance and classical economy and stake her whole future on inflation.
What has happened in England is simply this: The government has taken the control of currency and credit away from irresponsible bankers and placed it where it properly belongs, under responsible government. From the point of view of human well-being this revolution against banker rule is just as important as and more far-reaching than Magna Charts; for through it the government has found the means of financing the public services that are essential to orderly progress. The old days of laissez-faire are over in England; the day when the government can be indifferent to industry and the wellbeing of the people has passed. Now the British government moves to protect the standard of living of the humblest and to
The Budget-Mr. McGeer

guard and protect industry in all its ramifications. The first great step in the emancipation of Britain from the slavery of orthodox finance has been taken, and other steps are certain to follow; for this money revolution in Great Britain was not born of blind selfishness or class hatred but had its genesis in the evolution of intelligent understanding. It has been fostered by outstanding industrialists, the London Chamber of Commerce and men of high finance such as Reginald McKenna, war-time Chancellor of the exchequer, who financed the war on a managed currency basis. As chairman of the Midland bank, on January 27, 1934, he laid down this basic rule for all governments to follow:
Nothing in monetary practice is more certain than that contraction of the volume of money, or even failure to secure an adequate increase, tends both directly and indirectly to put a brake upon business of every kind, and to produce the very troubles-unemployment, unremunerative commodity prices, unbalanced budgets and general depression-which have been apparent in almost every country of the world in the past four years. "With expanding population and production we need expansion in the supply of money, or it will inevitably follow that consumption will not keep pace with production."
The support of McKenna for the new British policy was quickly followed by the endorsement of John Maynard Keynes, who pointed out:
The creation of legal tender has been and is a government's ultimate reserve; and no state is likely to decree its own bankruptcy or its own downfall so long as this instrument remains at hand unused.
Thus we accept Mr. McKenna's contention that an expansion of credit is the key to the situation. But we conclude that if whilst an increase volume of bank credits is probably a sine qua non of increased employment, a program of home investment which will absorb this increase is a sine qua non of the same expansion of credit.
What we have done in Canada is to create an abundance of credit, but we have not provided that adequate program of home investment which puts that accumulation of credit to work for the Canadian nation and the Canadian people. This problem of public spending presented by Keynes is in reality the one that the British government has solved, and I think it has been solved in this way. If the people owning savings fail or refuse to exchange their savings for treasury notes or other governmental securities offered on terms fixed by the government to provide the government with funds needed for new enterprise or to balance the budget, then the banks are called upon to absorb such securities by expanding bank credits which are placed at the 
disposal of the government in the form of bank deposits. Therefore the British government always has at its disposal a plentiful supply of money on its own terms. By investing such credits in social services, public works, the development of trade, and the national defence, the British government is able to keep circulating the medium of exchange needed to increase the production, distribution and use of wealth, to raise the standards of living of the people, to enlarge the national income, to increase the volume of trade and the stability of commerce, to supply the means of paying taxes, to maintain all public services and to make more secure the defence of the United Kingdom and its world-wide interests. The British government, by spending national credit, is now fulfilling "its most conspicuous and sacred responsibility," namely that of supplying the circulation of consumers' buying power which is the economic blood-stream of the commerce and industry of the capitalistic democracy that it is charged to sustain.
In avoiding the evil consequences of inflation the British government first limits its expenditure to what it thinks are the practical, economic, social and national needs of the day. It also maintains a scheme of high and widespread taxation on income which prevents the accumulation of an excessive volume of issued buying power medium of exchange. It also maintains a definite leadership in the regulation of prices, wages, working conditions, production and distribution, taking particular care to prevent the development of speculative booms in securities and commodities. Expenditures on social service in Great Britain are no longer feared as burdens of the state but are now being recognized as essential not only to those in need but to the general going-concern activity of the business of the nation. For the same reason the British government now spends freely in granting financial aid to housing and slum clearance programs; to shipping and industry; to the development of electrical energy; to the recovery of fuel oil from coal and the nationalization of coal mines; to agricultural production and, through other channels, to all phases of national development.
Under this practical perspective of currency management the British government now meets the entire public cost of unemployment relief, unemployment insurance and health services, old age pensions, mothers' pensions and aid to children; and through grants in aid has assumed much of the liability of the poor laws and many other obligations which formerly fell upon the taxpayers in counties and municipalities. In pursuance of her policy of relieving the owner of improved property under

The Budget-Mr. McGeer
local government from the burden of excessive taxation by local authorities, the national government Of Great Britain now pays some sixty per cent of the cost of education and fifty per cent of the cost of local police services. In addition to these continuing obligations she goes forward with a tremendous program of national rearmament.


Richard Bedford Bennett: On borrowed money.


Gerald Grattan McGeer: Well, I did not hope to
get that obsession out of the mind of the right hon. leader of the opposition (Mr. Bennett), but I am hopeful of getting it out of the mind of the Prime Minister (Mr. Mackenzie King).


Richard Bedford Bennett: She floated a loan of
5400,000,000 just the other day.


Gerald Grattan McGeer: Yes, I read about it very
carefully.


Richard Bedford Bennett: It looks like it.


Gerald Grattan McGeer: Now that my right hon.
friend has raised that question, let me deal with it. In addition to pouring out money for those in need through her inflationary policies, she is also able to pour out, to those who have accumulated savings, an income via the interest route; but if my right hon. friend will be patient for a little while, I shall deal with the reason for that and I think he will agree with me, because probably he knows more about it than I do. But there are men in the old country who agree with me, and I am going to quote one now. For instance, in connection with the controlled inflation program of the British government, in his annual statement to the shareholders of his bank in 1935 Mr. McKenna pointed out that the adoption of controlled inflation was the first essential to the recovery of British commerce and industry, and he then stated:
The quantity of our money is no longer governed by the fortuitous supply of gold and the degree to which hoarding is practised by central banks and others. The quantity of money is subject now to pure management with first regards to the needs of commerce and industry.
I venture to say that the experience and record of the Right Hon. Reginald McKenna, both as chairman of the Midland bank and as chancellor of the exchequer place him in at least as high a position of authority as that held by the right hon. leader of the opposition in the Canadian House of Commons.
In the May 21, 1938, issue of The Economist, which I have no doubt the right hon. gentleman reads, we are also told:
There are distinct signs that the policy of aheap plentiful credit is being continued and intensified so as to combat the recession, and also so as to facilitate the financing of rearmament. Such a deduction is not at variance with the occasional reaffirmations of monetary policy which from time to time have emerged from official quarters.
That the British system of managed currency is directly under the control of the government was positively declared by Mr. Neville Chamberlain, then chancellor of the British exchequer and now Prime Minister, in his address at the Mansion House on October 7, 1936. On that occasion he stated:
Sterling is still free. It is unlinked to gold or any other currency. There is no alteration in the credit policy which is necessary to preserve the internal prosperity of this country or of the other countries of the British empire. "Our improvement is principally due to two causes, both of which arise directly out of government action. The first is the system of very moderate protection which we have established, and the second is the maintenance of low rates of long term interest. We have not in contemplation any change in either of these two branches of our policy."
Here is the chancellor of the British exchequer taking full responsibility on the part of the British government to regulate the rate of interest on long term credits in the British isles. When I mentioned this fact to the house the other night I thought it well to quote it again, because it impressed me so much. I believe I have nearly committed it to memory. When I heard the governor of the Bank of England acknowledge that the government had the unqualified cooperation of British bankers, and that the government was in complete control of the money system, I was amazed. However these are his exact words:
Those for whom I speak welcome the freedom which we have in comparison with those in many other markets, but we wish to use that freedom in the only proper way it can be used, and that is in harmony with the government's policy. I assure the ministers that if they will make known through the appropriate channels what they wish us to do in furtherance of their policies they will at all times find us willing with good will and loyalty to do what they direct as though we were under legal compulsion.
Here is a British chancellor of the exchequer declaring a policy of government control, and the head of the Bank of England, speaking on behalf of the bankers, declaring that "we, as bankers in England, agree with that program."
The Budget-Mr. McGeer

We have a little different attitude in Canada because the statement of the governor of the Bank of England stands out in marked contrast to the statement of the deputy governor of the Bank of Canada who, speaking on March 28 in Ottawa to the junior board of trade, said:
In many countries the policy of the government [DOT] is the policy of the central bank; certainly no respectable central bank would accept a policy from its government with which it differed fundamentally.
Of course that was the rule when Mr. Osborne was imported by the leader of the opposition (Mr. Bennett) from the Bank of England to come to Canada to run our bank; but it no longer prevails in any respectable democracy; for now in respectable democracies the governments and not the bankers rule the nation's currency and credit. British economic and national power to-day gives final refutation to those who have parrotlike repeated the shibboleth that a nation cannot spend her way to prosperity and security. Proportionately to her population, national income, wealth and debt load, Great Britain is spending annually not as much as Germany or Russia, but slightly more than Roosevelt is spending annually in the United States, and at least double the amount we are spending annually in Canada.
If Great Britain were to reduce her budget to the basis we have adopted as safe and sane for Canada, she would cut her annual expenditure in two. What would be the result? Her national defence would be destroyed; her foreign trade would be lost, and her internal economy would stagnate in a welter of bankruptcy, destitution and revolution. We would have conditions in England such as unfortunately we have to-day in Vancouver.
The present plan of Great Britain may be criticized as being far from perfect. I know they are still borrowng unnecessarily, and I know they are still paying interest unnecessarily, but it can be said -that much of the public financing has been reduced to the lowest rate of interest in history, and the government is in control. But the great thing about British policy is that Great Britain is no longer short of money. It .must be remembered that this new plan is only seven years old. It dates from the bankruptcy of Great Britain in 1931, when she collapsed under the gold standard, orthodox finance and classic economy.
It must also be remembered that it is being carried out by a government which represents the Conservative minority in England whose respect for the wages of money is still higher than its regard for the wages of men, and 
whose worship of the institutions of accumulated wealth overshadows its concern for the well-being of individuals other than those possessed of interest bearing bonds, and those who live by the sweat of other men's faces. What a great thing it would be for this Dominion of Canada if the right hon. the leader of the opposition would take as much interest in the wages of men as he takes in the conditions of those who collect interest on government bonds 1
To the government may I say this, that continued indifference to the financial needs of provinces, cities and people, and to Canadian progress, prosperity and security will not command the respect of the majority indefinitely, who I believe are beginning to feel that the time has come when we should be moving along the lines of currency management which other nations are successfully developing.
^ Along the course of controlled inflation that Great Britain has taken to success we in Canada must not be afraid to follow; for through her new' monetary system developed under the British empire currency policy of 1933, to which Canada is a party, Great Britain now has billions for unemployed relief, pensions, education and other social services; billions for reconstruction of home and city; unlimited billions for the promotion of trade and commerce and the maintenance of empire defence, and billions for the betterment of the world at large.
How is it that that little country, with her limited natural resources, her tremendous obligation to maintain the value of her buying power in the world's markets, and in view of the relation she has to import trade, can do all she is doing under managed currency, when we still are afraid to move-with . so little done, so much to do and so much to >
do with? There is no reason why Canadian development cannot go forward in the light of the experience of other nations, which demonstrates the facilities that can be used for development.
What I wish to point out to the house is this, that we have adopted inflation, and we adopted it under the right hon. the leader of the opposition, when he was Prime Minister, at the time when he put into effect the British empire currency policy at the Ottawa conference in 1932. That was the development which followed the collapse of the world economic conference in London of that year. We adopted that policy first in 1930, second in 1932, and then what did we do in 1933?
To make it effective in our dominion coined gold was withdrawn from circulation; the right of the free export of gold was cancelled; -the

The Budget-Mr. Bennett
price of gold was raised from S20 to $35; the right to secure the conversion of paper money and bank deposits into gold on demand was wiped out, and we established a virtual government monopoly over the purchase and export of gold. The issue of a stabilization fund of $250,000,000 to maintain the international value of our dollar was authorized by an act yet to be proclaimed, presumably because our favourable balance of trade has been so satisfactory that it was not necessary, which is a fact.
In 1934 parliament, recognizing the need for currency and credit expansion in Canada, which the new policy contemplated, enacted the Bank of Canada Act containing provision for the reduction of gold reserves for currency purposes to 25 per cent, and it also provided for the complete suspension of gold reserves by order in council in case of national emergency.
Parliament also amended the Bank Act to permit chartered banks to create and issue bank deposits on a five per cent reserve of Bank of Canada bills. By these laws this parliament reduced currency and bank deposit legal reserves and extended the limits of inflation so that our banking system could provide the government with the use of the nation's credit in almost unlimited volume. Parliament in addition did everything necessary to permit our banks to extend to our dominion, provincial and civic governments the plentiful supply of money that a managed currency system is designed to supply, which, under public control of currency and credit, is now available to the governments of Great Britain, Germany, Italy, Japan, Russia and many other nations.
The cardinal features of these laws, which every member of parliament should know if he is performing his full duty, are very simple. They are to be found, first, in section 26 of the Bank of Canada Act, 1934, which permits the Bank of Canada to issue full legal tender money on a 25 per - cent gold basis, which means that it can expand gold into four to one of legal tender currency. This section gives the Bank of Canada the exclusive right to issue all Canadian full legal tender cash in the forrp of currency bills and, as I said a moment ago, on a basis of expansion of four to one.
Under section 27 of the same act, and under subsection 4 of section 59 of the Bank Act, 1934, the chartered banks are authorized to issue bank credit in the form of alleged bank deposits on a five per cent reserve of Bank of Canada bills. Therefore, for every five dollars of Bank of Canada bills which the Bank of Canada may issue, our chartered
banks are authorized by parliament to create bank credit in the form of bank deposits up to the value of $100, which they can create with a bookkeeping entry and use to purchase government bonds and securities. While these enactments hardly justify the statement made by the Minister of Finance (Mr. Dunning) in this house on March 8-


Walter Edward Foster: I am sorry to have to interrupt the hon. member, but he has exhausted his time.


Gerald Grattan McGeer: I have taken up very little of the time of the house during the last two years.


Some hon. MEMBERS:: Go on.


Some hon. MEMBERS:: Time.


Walter Edward Foster: There does not seem to be unanimous consent, so I shall have to ask the hon. gentleman to resume his seat.


Richard Bedford Bennett: Mr. Speaker, I do not rise to address this chamber on the budget. I had intended to make a few remarks, but on account of the regrettable absence of the Minister of Finance (Mr. Dunning), which I trust will be but for a very few days, I shall defer what I have to say until his return. My remarks would have to do with questions connected with the balance sheet as presented the other day, and I shall not trouble the house in that regard at this time. However, I desire to make a few observations with respect to the amendment to the amendment which has been submitted by my hon. friends to my left.
I well recall the circumstances under which the present Minister of Mines and Resources (Mr. Crerar) so brilliantly and powerfully sought the support of the electors in western Canada on promises that were not unlike those contained in the 1919 platform of the Liberal party. Those of us who recall the election of 1921 and the attitude of the Progressive party of that time with respect to matters mentioned in the subamendment, as well as the attitude of the present government in the presentation of its platform, will well remember the picture that was painted as to what was to happen if they came into power. They succeeded in 1921. The subamendment directs attention to the fact that they disregarded the pledges contained in their platform of 1919, of two years previously.
I am bound to say that I cannot find it possible to express regret that they did disregard their pledges. I rise merely for the purpose of directing attention to the fact that it is hardly fair to blame those of us who opposed that platform and who pointed out

The Budget-Mr. Mackenzie King
what would be the inevitable consequences of its being adopted in practice, if we do not to-night give our support to that subamendment. It will be a matter of curious interest to us all to observe the attitude of some of those who assisted in the preparation of that platform. Many of them were not members of parliament at that time, but there are many who attended the great convention of the Liberal party held in this city in 1919 at which that platform was prepared and at which those promises were given to the electorate. We did express the view that if those promises were given effect to; if they were promulgated in the form of policies; if they were enacted as statutes, the result would be disastrous to Canada. It is a matter not of regret but of satisfaction to know that those who now sit upon the treasury benches have seen fit, as evidenced by their conduct, to admit that the position which we took was sound and that their promises were made, shall I say, in error.
There remains, therefore, nothing for us to do but to dissociate ourselves from the amendment to the amendment; not to express regret, but to express our pride and satisfaction that the government, by reason of their appreciation of conditions having recognized that to have given effect to these pledges would have been disastrous to the nation, have seen fit to do the exact opposite. They have thereby given my hon. friends to my left an opportunity to ask those who promulgated those promises publicly to express their disapproval of the promises they made and of the platform they promulgated by voting against the resolution which expresses regret that they have not kept those promises.
Mr. Speaker, I repeat that I rose merely for the purpose of expressing, not regret that the promises made were not kept, but satisfaction that they were not. Despite all the promises that were made and the speeches with which this country was deluged; despite the literature that was spread from one end of this country to the other; despite the votes that were secured and the great and powerful campaign carried on by my hon. friend who was the leader of the then Progressive party, he now finds 'himself associated with the government in forgetting those promises. I congratulate them warmly upon this state of affairs. I congratulate the country upon the fact that we have a government with, shall I say the courage to disregard its promises, with such a high and fine sense of its responsibilities to the people as to forget these pledges were ever made and to wish that they had not been made.


William Lyon Mackenzie King: Mr. Speaker, like the right hon. leader of the opposition (Mr. Bennett) I had not intended to say anything at the present time in this debate. However, since the right hon. gentleman has pointed out to the members of the Cooperative Commonwealth Federation group how anxious he is to dissociate himself from them, perhaps I should point out to them that about all they have succeeded in doing by this amendment is to associate themselves with him. When they come to support their own amendment I hope they will realize that they are endorsing the Conservative party in its amendment. This is how the amendment of the Cooperative Commonwealth Federation begins.
That the amendment be further amended by adding the following thereto:
In other words, they have left intact the amendment moved by the spokesman for the Conservative party, and in supporting their own amendment they will be linking themselves through its amendment with that party.


Miss AGNES MACPHAIL (Grey-Bruce):: Mr. Speaker, the question is on the amendment. I had not intended to speak, but the right hon. the leader of the opposition (Mr. Bennett) pointed out that his party felt they could not vote for the subamendment on account of the fact that they had always been against the principles expressed; fortified by the further fact that the party which brought those principles into being were against it; and further, that he was followed by the Prime Minister (Mr. Mackenzie King), who pointed out to the groups in this corner that we ought not to associate ourselves with the Conservatives since they were not pleased to associate themselves with us, I feel moved to speak. I believe that the group in this corner are following the policy which we have used for many years, that of voting with any group which states our ideas, so in a moment it will not trouble us at all to vote with the Conservative party.
May I point out to the Prime Minister -what he may not have noticed-that the Conservatives have just voted with the Liberals; or, shall we put it the other way, that the Liberals have just voted with the Conservatives?
Mr. LAPOINTE (Quebec East); This is our budget.


Agnes Campbell Macphail: Any thoughtful person in Canada has known for a long time, certainly since that marvellous speech the Prime Minister made on the night of the election of 1935, that we have one great Conservative party in Canada. It is true that it has two parts, one called Liberal and the other called Conservative. But it is quite obviously a conservative party, with a small "c." Many people in Canada, and possibly many in the Conservative ranks, are somewhat worried over the lack of success of the Conservative party throughout Canada. May I point out to the Conservatives in this house that the reason why they are not more successful is that Canada does not need two Conservative parties. Having one that is so overpoweringly successful, we do not need another. As a word of advice and encouragement to the Conservative convention about to convene, I would say that the only way I see that they can attain power is by becoming liberal, because Canada certainly stands in need of liberalism. The group in this corner has stood by the ideas in which they believed in voting for the Liberal platform of 1919, a platform the principles of which have been reaffirmed by Liberals many times since 1919.


Mr. MacINNIS:: At election times.

The Budget-Miss Macphail


Agnes Campbell Macphail: Yes, and at convention times. They have said over and over again that they believed in the principles for which we have just voted. So it has now come to the place where the only Liberals who sit in the house are those who sit in the southeast corner and the hon. member for Portage la Prairie (Mr. Leader) whose courage I admire. What Canada needs very much and in time will have again is a strong people's party, and when that time comes the sentiments expressed in the amendment on which we are now going to vote are likely to be fulfilled. It must have been hard on some of the Liberals to vote against their own program. I was astonished at the hon. member for Huron North (Mr. Deachman) after his eloquent speech the other day, which would have convinced me had I needed it, but I agreed with him to begin with; it surprised me to see him following the leadership of the Conservatives in the House of Commons.


William Lyon Mackenzie King: All I wish to say to my
hon. friend who has just spoken (Miss Macphail) is that I did not for one moment say to the hon. members of the group to which she belongs how they ought to vote. I did point out what they had succeeded in doing by their subamendment, namely that as a party they had placed themselves as an appendage to the Conservative party. I may have made a good many mistakes in my life, and I know I have a good many limitations, but one thing 1 have not done is to tell any lady how she should behave.


Mr. LENNARD:: I was paired with the hon. member for Brant (Mr. Wood). Had I voted I would have voted for the amendment.


Mr. HAYHURST:: I was paired with the hon. member for Cape Breton North-Victoria (Mr. MacLean). Had I voted I would have voted for the subamendment and for the amendment.


Mr. HYNDMAN:: I was paired with the hon. member for Northumberland, (Ont.) (Mr. Fraser). Had I voted I would have voted for the amendment.


Frank Exton Lennard: I was paired with the hon. member for Brant (Mr. Wood). Had I voted I would have voted against the motion.


William Hayhurst: I was paired with the hon. member for Cape Breton North Victoria (Mr. MacLean). Had I voted I would have voted against the motion.


Alonzo Bowen Hyndman: I was paired with the hon. member for Northumberland, Ont. (Mr. Fraser). Had I voted I would have voted against the motion.



WAYS AND MEANS


[Stage Direction]
The house in committee of ways and means, Mr. Sanderson in the chair.
Resolved, that it is expedient to introduce a measure to amend the Special War Revenue Act, chapter one hundred and seventy-nine of the Revised Statutes of Canada. 1927, and amendments thereto and to provide:
1. That schedule III to the said act being the list of articles exempted from the consumption or sales tax be amended by adding to the said schedule the following:
Materials for use exclusively in the manufacture of gopher poison;
Harness for horses and complete parts therefor and articles and materials to be used exclusively in the manufacture thereof;
Feeds for fur-bearing animals whose pelts have commercial value;
Articles and materials for use exclusively in the equipment or repair of boats used by fishermen in the fisheries;
Bricks; building tile, building blocks and building stone; plaster; lime; cement; stucco and stucco dash;
Lumber; sash; doors; shingles; lath; siding; stairways; balustrades;
Plaster boards, fibre boards, wallpaper, building paper, and materials manufactured wholly or in part of vegetable or mineral fibre for wall coverings or building insulation;
Paints, varnishes, white lead and paint oil;
Prepared roofings;
Shower baths, bath tubs, basins, faucets, closets, lavatories; sinks and laundry tubs, not including pipes and pipe fittings;
Glass for buildings;
Furnaces for heating buildings;
Builders' hardware, namely: locks, lock sets, butts, hinges, pulleys and window fasteners.
Hon. J. L. ILSLEY (Minister of National Revenue); Before this paragraph of the resolution is discussed, may I state that I have an amendment adding two paragraphs which I shall ask one of my colleagues to move. The amendment is;
That paragraph 1 of the said resolution be amended by adding thereto at the end thereof the following:
"Structural steel to be used exclusively for the framework and support of buildings and bridges.

"Articles and materials to be used or consumed exclusively in the manufacture or production of the aforementioned building materials, but not to include materials consumed by waste or wear or abrasives, lubricating oils, fuel oils or non-permanent plant equipment."
This amendment would be added at the end of the list of building materials which are to be exempt from the sales tax.
Richard Bedford Bennett: Notice should have been given in votes and proceedings because this amendment will have material effect upon the exemption provisions.


Mr. ILSLEY:: It does. The first paragraph of the amendment deals with structural steel. That is simply an addition to the list, although it is important. The second paragraph provides for the exemption of articles which enter into the manufacture of building material, and is a very important provision. I hope it will not be necessary to delay consideration of this by reason of the addition of these two items. I would suggest that since this applies only to the exemption of building material, and since there are a few other changes in the Special War Revenue Act which come before this, we might deal with the others first. The first item is, "Materials for use exclusively in the manufacture of gopher poison."


Richard Bedford Bennett: I think, Mr. Chairman, that would be an admirable way in which to take the resolution.
Materials for use exclusively in the manufacture of gopher poison.


James Lorimer Ilsley: Gopher poison as a finished product has been exempt from sales tax for some years. No provision, however, was made in respect of the materials used in its preparation, although the ingredients constitute the main item of expense in making gopher poison. Administrative difficulties in the past have made it impossible to effect the exemption in respect of ingredients inasmuch as they were purchased from so many different sources, and at times through retailers possibly many times removed from the manufacturer of the ingredients, who under the law is responsible for this portion of the tax. The manufacturer was not able in most instances to certify that any particular portion of, say the strychnine sold, found its way eventually into gopher poison. Recently it has been found that more than 75 per cent of the gopher poison used is of one brand, and this concentration of supply makes the exemption administratively feasible.


[Stage Direction]
Item agreed to.

[Stage Direction]
Special War Revenue Act
Harness for horses and complete parts therefor and articles and materials to be used exclusively in the manufacture thereof.
James Lorimer Ilsley: Farming machinery generally and farm equipment of many specified kinds are exempt from sales tax, and it is found that this general exemption might properly include harness. It has been estimated that about 95 per cent of all harness made is used by farmers, and accordingly the exemption is made general rather than limited to the particular use by farmers. Parts and materials used in making harness are also exempt from sales tax, following the existing practice which obtains in respect of parts, machinery and equipment and materials.


Richard Bedford Bennett: That would include buckles and copper rivets?


James Lorimer Ilsley: Yes.


Richard Bedford Bennett: And the wax ends used in sewing, I suppose?


James Lorimer Ilsley: Yes.


Richard Bedford Bennett: I have been asked whether it would include collars. Should not also the wording of the item include mules, which are used in some places quite extensively for farming?


James Lorimer Ilsley: I am informed that it is construed as covering harness for mules.


Richard Bedford Bennett: If that is so, all right. I just wanted to know.


[Stage Direction]
Item agreed to.
Feeds for fur-bearing animals whose pelts have commercial value.
James Lorimer Ilsley: The existing exemption in respect of animal feed specifically mentions fox feed. Calf, cattle, hog and poultry feeds are also exempt, and the specified list of particular kinds of stock feed are exempt. Under the existing wording, however, no exemption is allowed in respect of feeds for fur-bearing animals other than foxes, as for example, minks. To remove this ambiguity it is proposed to allow an exemption in respect of feeds for all fur-bearing animals whose pelts have a commercial value.


Richard Bedford Bennett: That was what was
originally intended, anyway.


[Stage Direction]
Item agreed to.
Articles and materials for use exclusively in the equipment or repair of boats used by fishermen in the fisheries.
James Lorimer Ilsley: At present an exemption exists in respect of ships licensed to engage in the Canadian coasting trade and in respect of boats purchased by individual fishermen
for their own personal use in the fisheries. Furthermore, materials used in the construction, repair, or equipment of ships are exempt, also articles and materials used in the manufacture of boats owned by individual fishermen for their own personal use. It will be noted that with regard to these exemptions no mention is made of articles and materials used in the equipment or repair of the boats. This is an anomalous situation, and the proposed amendment removes the anomaly by extending the exemption to cover all articles and materials for use exclusively in the equipment or repair of these boats.


Mr. NEILL:: This was asked for by the fishermen on the Pacific coast, principally the small boat owner. They will appreciate the amendment made. I should just like to have it made clear that the boat will not have to be registered to get the benefit of this exemption.


James Lorimer Ilsley: It will not.


[Stage Direction]
Item agreed to.
Bricks; building tile, building blocks and building stone; plaster; lime; cement; stucco and stucco dash.
James Lorimer Ilsley: The amendment which I have proposed adds structural steel to the list of building materials. Structural steel is in competition with cement, and since cement was in the list it seemed to toe desirable to add structural steel. Then came the question about the materials that enter into the manufacture of these exempted building materials. If they had not been added to the list, it would have meant the tax would have been transferred from the finished building materials to the taxable elements which enter into their manufacture, and that would have reduced the effective exemption from eight per cent in some instances to a considerably smaller amount. Since the budget was presented last Thursday, a great many representations have been made by persons interested and others, from which it was apparent that serious administrative difficulties would arise. For example, a manufacturer who manufactures taxable building materials and materials [DOT] that hereafter would be exempt from sales tax would find it very difficult to separate the raw materials into those which were to go into the tax exempt finished product and those which were to go into the taxable finished product. That is one of the administrative difficulties which arises, and for that reason and others it was felt desirable to add this to the list of exemptions.
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It means, of course, that the eight per cent will now be completely removed without deduction for the tax on the materials.


Richard Bedford Bennett: Mr. Chairman, with respect to the item dealing with bath tubs, et cetera, not including pipes and pipe fittings, it means that the accessories to the various items mentioned here will pay the tax, even though they may be chromium plated, whereas the bath itself and the shower will be free from tax. Is that a sound provision having regard to the fact that we are now dealing allegedly with the construction of homes? It must be remembered that we are supposed to be making exemptions here to help the man who is building a house, and clearly there are pipes connected with the introduction of a bath into his home, some of them chromium plated but coming under the head of pipes, because a bath tub as it comes from the factory has no accessories attached to it at all. Before it is put into place you attach the various accessories; very often nowadays they are plated with chromium. But as this item reads, even these pipes would not be free from the sales tax.
There is this further point to which I desire to direct the minister's attention. After all, structural steel does not enter into any cheap houses. Structural steel has practically nothing to do with the kind of houses we have been discussing, and the provision regarding it cannot be taken as any incentive except where the larger construction in cement does touch the smallest and lowest priced house. I can understand the desire to make the items complementary, and the action is thoroughly understood in that regard. But when you come to say, " articles and materials to be used or consumed exclusively in the manufacture or production," you have all this machinery. Take, for example, the grinding of white lead. What are you going to do about it? These articles are used exclusively for that purpose. I do not think the minister had that in mind, but surely that is what it means in a court of law where ultimately it would have to be construed.
Articles and materials to he used or consumed exclusively in the manufacture or production of the aforementioned building materials, but not to include materials consumed by waste or wear or abrasives, lubricating oils, fuel oils or non-permanent plant equipment.
"Non-permanent plant equipment." You see it does not include non-permanent plant equipment; therefore it would include permanent plant equipment. That would be the construction which I know the minister would say should be put upon it by a judge. The
[Mr. lisle;'. 1
very fact that it does not include non-permanent means that it does include permanent. I did not see the amendment until a moment ago, but I do not think the minister had in mind the machinery used, for instance, in grinding white lead or in preparing linseed oil. I notice that the words " paint oil " are used. That, of course, involves the use of an inferior product instead of what has usually been the standard product in connection with matters of that kind, but I take it the minister had good reasons for doing that. The cheaper oil makes an inferior paint. Linseed oil is used in the higher standards of paint, white lead being the basis of it. The minister, I am sure, does not mean to free the machinery, shall I say, or any parts of it that are permanent in their character, from the sales tax. I am not quite sure, but I think the clause is drawn in such a way as to leave it open to an ambiguous construction.


James Lorimer Ilsley: The wording is that at present used in the act to cover materials, and it has not before been argued, although the-


Richard Bedford Bennett: The necessity has not arisen.


James Lorimer Ilsley: -right hon. gentleman has
argued it very well, I think, that " articles " may, perhaps, literally taken, mean machinery; "articles ... to be used or consumed exclusively in the manufacture or production" of these products has always been construed by the department and held to mean materials or something that actually goes into the product, and not the machinery, and the reason "non-permanent plant equipment" is inserted is to make it clear that this non-permanent plant is not included under " materials."


Richard Bedford Bennett: I realize that.


James Lorimer Ilsley: It is often argued that nonpermanent plant of certain kinds is material.


Richard Bedford Bennett: Oh, yes, I know.


James Lorimer Ilsley: That is the reason for
that.


Richard Bedford Bennett: I realize fully why that
is inserted, but I dii'ect attention to a possible ambiguous meaning of it.


James Lorimer Ilsley: It is now suggested that
when the words "non-permanent plant equipment" are used, an implication arises-


Richard Bedford Bennett: The minister is an excellent lawyer, and he remembers the rule of law that if you mention the one you exclude the other.


James Lorimer Ilsley: Yes. There is no objection
to putting it beyond doubt by saying "nonpermanent or permanent plant equipment."

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Richard Bedford Bennett: Yes. I think that would overcome a possible difficulty.


James Lorimer Ilsley: I think it is better to put
both words in than to leave both out.


Richard Bedford Bennett: Quite. One or the other.


Mr. STEVENS:: Unfortunately we have no copy of this amendment or any information about it at all except what we have heard read. I may be wrong in what I have caught from the words of the minister. Might I suggest that instead of using the word "articles," the word "materials" or "ingredients" should be inserted, because that is all that is involved. It is materials or ingredients which enter into the manufacture of these things, and obviously not an article that is used in the manufacture; yet the amendment, I understand, says, "articles to be used."
Before the minister answers me, may I point out this, which I gather has been considered by the minister in the last few days. I understand, as regards this list of items entering into the construction of houses, building construction, the resolution as it is at present drawn will create a chaotic condition among those who are manufacturing these articles. I notice the minister referred to subseqent items in this group, so I shall also do so. Take for instance:
Builders' hardware, namely: locks, lock sets, butts, hinges, pulleys and window fasteners.
Have representations been made-I understand they have-by the manufacturers of these goods, and, if so, have they been given full consideration? I am informed that if the resolution passes in its present form, it is going to create a serious condition, the objection being that under the law as it has been worked for many years the original parts which enter into a finished article are not taxed at all, but the finished article is taxed. Now, if the finished article is exempted, it leaves the manufacturer of the primary part taxable. That, of course, was never intended. I do not think the amendment will correct that situation.


James Lorimer Ilsley: It is intended to.


Henry Herbert Stevens: I have just received a
*copy of the proposed amendment. It reads:
Articles and materials to be used or consumed exclusively-


The CHAIRMAN:: Order. I do not want
to interrupt the hon. member, but I think, to keep the record clear, this amendment should be read. It has not yet been read from
the chair, and it has been suggested that there should be some change. It is moved by Mr. Power:
That paragraph 1 of the said resolution be amended by adding at the end thereof the following:
"Structural steel to be used exclusively for the framework and support of building and bridges.
"Articles and materials to be used or consumed exclusively in the manufacture or production of the aforementioned building materials, but not to include materials consumed by waste or wear or abrasives, lubricating oils, fuel oils, permanent or non-permanent plant equipment."


James Lorimer Ilsley: Quite-"permanent or nonpermanent."


Henry Herbert Stevens: I do not wish to seem to quibble over this matter, but as I read the proposed amendment it refers to building materials. What does that include? Would it not be necessary to classify under one group all the materials affected by that proviso? There is one item here:
Bricks; building tile, building blocks and building stone-
And a number of items, all of which go into buildings. Am I to understand that this amendment will apply to all those items?


James Lorimer Ilsley: Yes.


Henry Herbert Stevens: Does the minister think that is sufficiently clear?


James Lorimer Ilsley: Yes, it will be placed at the end of a paragraph containing that list.


Henry Herbert Stevens: I suppose that will appear clarified in the bill?


James Lorimer Ilsley: Yes.


Henry Herbert Stevens: Is the minister satisfied that this completely covers hardware, for instance?


James Lorimer Ilsley: No; only the hardware
named.


Henry Herbert Stevens: Builders' hardware, namely: locks, lock sets, butts, hinges, pulleys and window fasteners.


James Lorimer Ilsley: It covers locks, lock sets, butts, hinges, pulleys and window fastenings, and the materials going into the manufacture of those are exempted now by the amendment.


Henry Herbert Stevens: Will that include, for instance, screws and bolts-


James Lorimer Ilsley: No; it does not include anything except that named in the list. It does not include all builders' hardware but includes only the builders' hardware named in the item.
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Henry Herbert Stevens: In looks there are a certain number of screws.


James Lorimer Ilsley: If they are included in the locks, they are exempt.


Henry Herbert Stevens: It will include those?


James Lorimer Ilsley: Yes.


Henry Herbert Stevens: It is claimed by manufacturers that this will introduce an atmosphere of confusion impossible to overcome. I simply wish to be assured that this point has been considered by the department officials and the minister and that they are satisfied that this amendment will meet the situation.


James Lorimer Ilsley: Yes; those representations were received and carefully considered, and the amendment will, I think, do away with practically all the difficulty anticipated by the manufacturers.


Mr. GOLDING:: Will that cover furnaces for heating?


James Lorimer Ilsley: Furnaces are listed.


Richard Bedford Bennett: Furnaces for heating buildings only.


William Henry Golding: Furnaces for buildings are exempt, but the raw material that goes into those furnaces, that is the steel, was not exempt. Now that will be cleared up?


James Lorimer Ilsley: Yes, exactly.
Mr. MeCULLOCH: Is sewer pipe to connect the building with the sewer exempt?


James Lorimer Ilsley: No; pipes are not exempt. That is not building tile.


William Henry Golding: The hon. member for Wellington South (Mr. Gladstone) has a letter here which covers the situation to which I have referred. In the plant with which I am connected we manufacture the steel boilers that this heating firm uses, and I am interested in this.


Richard Bedford Bennett: This clearly covers furnaces for heating purposes only.


James Lorimer Ilsley: Yes.


Mr. MACDONALD (Brantford):: That is, boilers of all kinds?


Richard Bedford Bennett: No; furnaces, not boilers.


Mr. GLADSTONE:: Information has come to me from a circular that may have gone out to the customs officers giving a list of goods exempt from tax; "hot water and steam boilers, cast-iron and steel, used for heating buildings; bungalow heaters used for heating

buildings; warm air furnaces, steel or cast-iron;"-and then this note: "Note carefully: materials used in the manufacture of exempted items formerly not subject to tax are now taxable."


James Lorimer Ilsley: The amendment changes that.


William Ross Macdonald: In heating buildings with hot water or steam, a boiler is an essential part of the heating equipment. A building could not be heated by steam or hot water without a boiler. I think the question raised by the hon. member for Wellington South (Mr. Gladstone) was whether the boiler would be exempt under the amendment.


James Lorimer Ilsley: If it is part of a furnace, it will be.


William Ross Macdonald: The boiler is certainly part of the heating equipment, but I do not know whether they call it a furnace.


Richard Bedford Bennett: This does not cover heating equipment; it covers only the furnace for heating purposes, and that has a well known trade meaning.


William Ross Macdonald: For the provision to be effective with regard to heating equipment it would surely be necessary to include the boiler that goes with the furnace.


James Lorimer Ilsley: Not all heating equipment is exempt. For example, radiators or stoves are not exempt.


William Ross Macdonald: Practically all buildings of any size that are being constructed to-day use either hot water or steam heating. I cannot see why a steam or hot water heating plant should not be exempt as much as a hot air furnace.


James Lorimer Ilsley: All I can say is that, if it is part of the furnace, it is covered by the amendment.


Mr. CLARKE (Rosedale):: I have not been able to get a copy of the amendment; therefore I cannot tell what is exempt. Is expanded metal, wall sheeting, metal sheeting, metal roofing, flashing and sheet metal that would go into a cheaper house or a farmer's bam included?


James Lorimer Ilsley: If the hon. member will name those articles one at a time I will tell him.


Harry Gladstone Clarke: Expanded or corrugated metal for sheeting, galvanized iron and tin and sheeting used in the construction of houses and bams.

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James Lorimer Ilsley: When used as siding or
roofing they would be exempt.


Mr. LEADER:: Just a moment ago we
were speaking of furnaces, and I was wondering if this should not include cooking ranges, for this reason: In some of the smaller houses they have not made provision and perhaps will not make provision for furnaces. About all that such houses will have will be cook stoves or ranges, and it seems to me it would be the part of wisdom to include cooking ranges as well as furnaces. I should like to ask the minister if he will consider that point.


James Lorimer Ilsley: The line has to be drawn somewhere, and the moment one gets into stoves he has to consider electric ranges and then other electrical equipment for the house. It was not thought desirable to go into that phase of it.


William Ross Macdonald: Also
electric fans.


Harry Leader: I should like to say a word in regard to that. I still think it would be only a matter of justice if cooking ranges were included as well as furnaces. In regard to equipment such as electric lighting plants, it seems to me imperative that this provision should apply also. I am thinking now of the farmers out in the country who have not access to hydro power; indeed I know of many farmers who have the hydro running past their doors, but because of the cost of reducing stations and so on they are unable to take advantage of it. Some of these farmers, interested in bettering their home conditions, have purchased little power plants to make their own electricity. It seems to me it would be only a matter of justice and, if I might call it that, a gesture to the farming community, if farm lighting plants were exempted also.


James Lorimer Ilsley: Electric fixtures are not included in this list of exemptions.


Harry Leader: I was going on to deal
with that. I should like to suggest that farm lighting plants be exempted from the sales tax. If you have a farm lighting plant, of necessity you will have some lighting equipment, and I would suggest that the lighting equipment entering into not only the homes of farmers but also the homes of those in the cities be exempted from the sales tax. I feel that this would give a real stimulus to better home conditions, and now that we have gone this far it seems to me that we should go all the way in that regard and remove
lighting equipment and farm lighting plants from under the sales tax. I think we should also include ranges along with furnaces.


William Ross Macdonald: Members of the committee have not a copy of the amendments. I should like to know whether or not the materials that go into the manufacture of paint, varnishes, white lead and paint oil are exempt from sales tax.


James Lorimer Ilsley: Yes.


William Ross Macdonald: And also the raw materials that go into the manufacture of furnaces for heating purposes?


James Lorimer Ilsley: Yes, for heating buildings.


Richard Bedford Bennett: How are you going to determine that when you are in your foundry casting them? That is what the hon. member for Kootenay East pointed out, namely, that it is too complicated.


James Lorimer Ilsley: Just let me meet that point. If part of the furnaces are taxable, the materials are free; and now for these furnaces that are not taxable the materials are being made free, so there is no difficulty.


Richard Bedford Bennett: How are you going to differentiate between materials for a given purpose that are free, and materials that are not? For instance, in this steel item we are freeing structural steel for bridges. Clearly that has nothing to do with the building program; but it is quite obvious that if you are going to do that, you should also free reinforcing steel, which might enter into a concrete building, whereas the other might not have anything to do with building at all.


James Lorimer Ilsley: I am informed that it is included in structural steel.


Richard Bedford Bennett: This is the first time I have ever heard of that. If you go down to the customs house and try to get it through, you will find that it is not. Just take your bundle of rods down there and try to get them through; then take your structural steel and try to get it through, and see whether they are in the same class.


James Lorimer Ilsley: The item is " structural
steel to 'be used exclusively for the framework and supports of buildings and bridges."


Richard Bedford Bennett: Exactly, and that is
structural steel; that does not cover reinforcing rods.


Harry Leader: I do not wish to appear insistent, but I should like the minister to give me a definite opinion in regard to the suggestions I have made.
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James Lorimer Ilsley: My feeling is that this is quite a long list as it is, and the matter of where the line should be drawn has been very carefully considered. The hon. gentleman has suggested that we should move into the realm of stoves, which would get us into electric ranges and even, as one hon. member suggested, electric fans and electrical equipment generally. It is not considered desirable to do that; it would take us into too large a field of exemption. The other request of the hon. member was that lighting equipment for farmers' houses should be included; but I would point out to him that there is no exemption of electrical fixtures or any lighting equipment, so far as I can see, and while it would be very nice not to pay sales tax rather than pay it on a wide range of articles, still I do not see why we should extend this list.


Mr. COLD WELL:: I should like to support the hon. member for Portage la Prairie. I believe that if the minister will consider the matter from this point of view, that rural houses must have electric lighting equipment, such as the Delco lighting system-


Richard Bedford Bennett: Largely sold in the west.


Thomas Miller Bell: Yes; it is sold largely in the west. I take it that this scheme for the construction of lower priced houses is designed to assist not only the people who live in towns and cities but also those who live in the rural communities.


James Lorimer Ilsley: The town dweller does not get any exemption on his lighting equipment.


Mr. COLDWELL:: But the town dweller simply runs a wire into his house.


James Lorimer Ilsley: But he pays for his lighting, and that charge covers the cost of some lighting equipment on which there is no exemption.


Major James William Coldwell: Nevertheless the additional outlay in regard to the lighting equipment in the rural house is almost prohibitive, and when the sales tax is added it greatly increases the cost of installation. I agree with the hon, member for Portage la Prairie that people living on farms are entitled to consideration because of the disadvantages which they suffer in regard to the hook-up that is necessary to connect them to the hydro or, as in Saskatchewan, to the lines running out from the steam plants in the cities. In my opinion the request of the hon. member for Portage la Prairie would be simply a matter of justice to a large number of people who suffer many inconveniences that most of us do not suffer. I think the same applies to heating equipment. The cheaper houses, particularly in the country 
places, are often, on account of fuel difficulties, heated by stoves, and I think the rural population is entitled to consideration in this regard. I would very strongly support the hon. member for Portage la Prairie in his request, not that action be taken to-night but that the matter be considered carefully before a definite answer is given.


Mr. TAYLOR (Nanaimo):: I am disposed
to agree with the hon. member for Rosetown-Biggar and the hon. member for Portage la Prairie. If people in isolated houses want these advantages, they are compelled to pay about nine times what they would cost an individual in an urban area, where he can get his lighting connection for an expenditure of about $30 or $40. The farmer has to pay about $400 or $500 for equipment which would bring about the same results. That point really requires some consideration.


James Lorimer Ilsley: I understand the point of
view taken by the hon. member, but I do not think we can possibly do what hon. members are asking without exempting the whole range of electrical fixtures and lighting equipment generally. I do not see how we can possibly draw the line where the hon. member suggests it should be drawn. Certainly it would entail a very serious loss of revenue. We would go from electrical fixtures to lamps and lanterns, and everything pertaining to lighting.
With regard to stoves I must say that they are not part of a building. They are not fixtures, whereas furnaces are. Furnaces are installed as part of a property, and it seems to me that for the reasons I stated before it would be very difficult to draw the line.


Harry Leader: May I point out again
that the minister would not be entering the realm of lighting fixtures if he were to exempt a lighting plant. The sale of a lighting plant is something entirely by itself, and includes an engine and installation. That is all they charge for.


Major James William Coldwell: And batteries.


Harry Leader: Yes, if you need batteries. The engine and batteries constitute the lighting equipment. Anything else would be extra, and it would not come under the heading of lighting. So, if the lighting plants were exempted on farm houses, it seems to me we would simply be carrying out a matter of justice. I can speak from experience. I have been used to electric lights on the farm, and I know, when we installed one about twenty years ago, before we got through with the installation it cost about $1,600 to get the plant. On the other hand, as one

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hon. member has pointed out, in the city all one would have to do would be to attach a wire. Upkeep, refueling and that sort of thing cost a considerable amount of money every year; I know whereof I speak.
At the present time one can buy the Delco lighting plant for $647.50, and that is just the start of the expense in connection with the equipping of farm houses with electric lights and electric power. I have risen to say that we can certainly draw a distinction between a lighting plant and lighting fixtures. Again I say it is only a matter of justice that farm lighting plants be exempted from the sales tax.


Mr. THOMPSON:: Are the lightning rods
used on rural buildings exempt from the sales tax?


James Lorimer Ilsley: No; they are not included.


Mr. ROSS (St. Paul's):: Would this include metal as well as wooden sash? I notice we mention metal lath as well as wooden lath.


James Lorimer Ilsley: It includes both.


Douglas Gooderham Ross: Then there should be some change, and metal siding should be included as well.


James Lorimer Ilsley: It includes all lath and
sash.


Douglas Gooderham Ross: Why are pipes
and fittings not exempt? They enter very largely into the hot water heating systems of houses.


James Lorimer Ilsley: Because they are put to so many other uses. That is the reason why they are not included.


Douglas Gooderham Ross: Then the commercial heaters which are used to such a great extent in England enter into the picture, so far as small houses are concerned. I believe they are manufactured, by the McClary Company. They take the place of furnaces, and are permanent fixtures in houses. Cannot something be done to have more than furnaces included?
All these houses have hot water heating equipment, and that equipment is just as much a part of the building and is just as necessary a part as is the furnace. Surely hot water heating equipment is part of a building, and it seems to me it should be included in the exemptions.


Mr. STREIGHT:: I think the term "furnaces" should be clarified right now. The use of the word "furnace" is not sufficient. Probably it should mention hot air furnaces and hot water furnaces. I would not suggest
steam equipment, because it is used only in the large plants, and is not necessary in the smaller type of houses it is here intended to help. But hot water furnaces are being put in small houses of the type indicated, and are installed for about $350.


James Lorimer Ilsley: Hot water furnaces are
included.


John Everett Lyle Streight: With pipes, complete?


James Lorimer Ilsley: No, no pipes or radiators.


John Everett Lyle Streight: Pipes are not included?


James Lorimer Ilsley: No.


John Everett Lyle Streight: Are you putting down hot water furnaces only?


James Lorimer Ilsley: All furnaces.


John Everett Lyle Streight: All furnaces, without
pipes?


James Lorimer Ilsley: Yes.


Douglas Gooderham Ross: I think something should be done about the matter of furnaces. For instance, every house has a domestic hot water heating plant. Every large building has that type of heating plant. They are very expensive, and the sales tax on such a plant amounts to quite a large sum. I should think it would be just as important to eliminate the sales tax on that plant as to eliminate it on any other building material. I think, further, that in order to make the matter clear we ought to mention metal sash and wooden sash.


William Ross Macdonald: No; that would limit it.


William Hayhurst: I should like to add my voice to what was said by hon. members in this part of the chamber and by the hon. member for Portage la Prairie with regard to the lighting system in farm houses. I believe farmers will feel that discrimination has been exercised against them if they are not given the same consideration. We distinctly wish to help farming communities and to make living conditions on the farm worth while. If they did not take advantage of the situation, it would be their own fault, and they would have themselves to blame. I believe the government would be well advised to consider the farmers, and to eliminate the eight per cent sales tax so far as lighting systems in farm houses are concerned.


James Lorimer Ilsley: Nearly everything which
enters into the construction of a farm house is covered by this list. It includes lumber, sash, doors, shingles, paint, glass and so on.
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Major James William Coldwell: The lighting system is something which is very necessary on a farm. Although conditions may be different in the east, I know that in western Canada, and particularly in Saskatchewan, very few farm houses are adjacent to power lines. Consequently, modern installations in new houses require systems of the type we have been discussing. If the minister could see his way clear to recommend the addition, I am sure it would be greatly appreciated.


Mr. HEAPS:: Do the exemptions in the
schedule apply for any purpose whatsoever.


James Lorimer Ilsley: I do not understand the
question.


Abraham Albert Heaps: I am asking if the goods exempted in the schedule can be utilized for any purpose whatsoever?


James Lorimer Ilsley: Yes.


Abraham Albert Heaps: I notice that an exemption is allowed only for glass used for building purposes, but it would seem that other goods so exempted could be used for purposes other than building.


James Lorimer Ilsley: Does the hon. member refer to furnaces?


Abraham Albert Heaps: Hardware such as locks and hinges do not necessarily have to be utilized for building purposes.


James Lorimer Ilsley: Most of these can be used only in connection with buildings, for example, roofings.


Abraham Albert Heaps: Pulleys would not have to be used on buildings, and there are other items of hardware that could be used for other purposes. Why should this exemption not apply to items used for other purposes?


James Lorimer Ilsley: The bon. member is not suggesting that we should exempt glass dishes, for instance?


Abraham Albert Heaps: Glass can ibe used for many other purposes, and I do not see why we should exempt it for buildings only.


James Lorimer Ilsley: Glass has so many uses that it is necessary to restrict it.


Mr. BARBER:: That would include plate glass?


James Lorimer Ilsley: Yes.


Joseph James Duffus: A few days ago a deputation of four or five large manufacturers of builders' hardware came to Ottawa and made mention of several items that had been left
[Mr. Ilslcy.)
out of this list which they considered were just as essential as some of those that are included. Have those items been included?


James Lorimer Ilsley: No. I think those manufacturers of builders' hardware suggested that the enumeration should be left out and that all builders' hardware should be exempted. That covered such a tremendous range that we did not think we could do it. Their main difficulty was in connection with materials, and that is covered by the amendment.


Joseph James Duffus: If I remember correctly, the list does not include handles used for raising window sash. In other words, one can get the window down but would find it impossible to get it up. That leaves one in a rather awkward position.


Robert William Gladstone: I have not a copv of the amendment before me, and I should like to understand exactly what it covers. Hot water and steam boilers are now exempt from this tax. Would that apply to old buildings as well as to new?


James Lorimer Ilsley: Yes.


Robert William Gladstone: Radiators are not
exempt from the tax. Are all the materials entering into the manufacture of steam boilers and radiators exempt from the tax?


James Lorimer Ilsley: All that enter into the construction of furnaces for the heating of buildings. Radiators are not exempt.


Robert William Gladstone: Previously materials entering into the manufacture of radiators were exempt from the tax.


James Lorimer Ilsley: Radiators are taxable.


Mr. HAMILTON:: Would the minister care to express an opinion as to whether reinforcing steel used to reinforce concrete in constructing buildings and bridges will come within the term "structural steel"?


James Lorimer Ilsley: All I can say is that it is intended to be included. Before the bill is brought down, I shall consult with the officials to see that there is no doubt about the point.


Henry Sidney Hamilton: I want to thank the government for bringing in this amendment.


Mr. STIRLING:: Now that bridges have been added to the resolution is it quite clear that this item will cover all steel used in the construction of a bridge, such as foundation steel, main girders, cross girders and bearers?


James Lorimer Ilsley: I would think they would all be included.

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Mr. WALSH:: I understand instructions have been given to cancel licences which have been granted to manufacturers of paint and to those engaged in the industrial trade. The result is, except in connection with certain items, that manufacturers of paint will have to pay the eight per cent sales tax on their ingredients.


James Lorimer Ilsley: Materials are exempted by the amendment.


William Allen Walsh: The paint manufacturers have been granted a broad licence which covers practically all their primary products. The amendment now specifies certain primary products used in the paint manufacturing business, so that all others will be subject to the eight per cent sales tax.


James Lorimer Ilsley: The amendment takes care of the situation referred to by the hon. gentleman. Was the hon. gentleman in the chamber when we were discussing the amendment?


William Allen Walsh: I have been here all evening.


James Lorimer Ilsley: The amendment covers all materials entering into the manufacture of paints, varnishes, white lead and paint oil.


William Allen Walsh: All the primary products of a paint manufacturer will be free?


James Lorimer Ilsley: But not to include materials consumed by waste or wear or abrasives.


William Allen Walsh: Materials entering into the manufacture of paint?


James Lorimer Ilsley: Yes.


William Allen Walsh: An industrialist who buys large quantities of paint may still have his licence to buy that paint free from sales tax? For instance, a manufacturer of a household article may buy a large quantity of paint to use in finishing his product. Will he still be able to buy that paint free of the eight per cent sales tax?


James Lorimer Ilsley: Yes.


William Allen Walsh: His previous licence has not been revoked?


James Lorimer Ilsley: He will not need to use his licence, because hereafter all paint is to be free.


William Allen Walsh: Even though it is not used in connection with building?


James Lorimer Ilsley: It is free for any purpose.


Mr. VTEN:: I communicated with the
minister to ask that rock asphalt should be included in the items to be exempted from the sales tax. This material is being used in the construction of concrete buildings and for
the fire-proofing of buildings. The minister told me that this matter would be considered, and I should like to know if it is covered by the amendment.


James Lorimer Ilsley: Will the hon. gentleman let that stand until I find out just what is rock asphalt?


Mr. McLEAN (Melfort):: I notice that builders' hardware is exempted, but no mention is made of nails and spikes. They are a most important item, especially in building small buildings. A small building can be constructed without a furnace or radiator, but it would need a considerable quantity of nails.


James Lorimer Ilsley: They are used for so many other purposes.


Malcolm McLean: The two and a half, three, four and even six inch nails are practically all used in building construction. I wish the minister would consider this item.


William Allen Walsh: A paint manufacturer sells probably 65 per cent of his production to the industrial trade, the balance going to the retailer. Will he have to charge the eight per cent sales tax on what he sells to the retail merchant?


James Lorimer Ilsley: Paint is free for all purposes.


William Allen Walsh: It has not been in the past.


James Lorimer Ilsley: That is what we are doing now.


William Allen Walsh: What is going to happen to the retail merchant who may have stocked up a month previously? The public are naturally expecting a reduction in the price of paint, but the retail merchant has already secured his supply and paid his eight per cent sales tax. Will any consideration be given to the retail merchants in that position from one end of Canada to the other? They have prepared for the season's trade and paid the eight per cent sales tax, and customers coming in wanting to buy paint will say, "Why should not paint be lower by eight or ten per cent, now the budget has gone through?" Will any allowance be made for the stocks on hand in the retail stores, or will anything be done to meet that situation?


James Lorimer Ilsley: That was very carefully considered, and it was thought that we could not provide for any refund. When the sales tax was being increased there was an appreciation in the value of retail stocks, and the retailer got the advantage of that. Now that the taxes are reduced, there are instances where he will suffer a depreciation of his stock.
Special War Revenue Act


Mr. DEACHMAN:: I venture to suggest, Mr. Chairman, that the retail merchant is already provided for, because when prices are brought down by the removal of the tax there will be an increased volume of trade which will amply provide for the additional profits the retailer desires to secure. The retail merchant will also receive an additional volume of sales as a result of the building program which this parliament is putting through.


James Lorimer Ilsley: Yes. I think the retailers of builders' supplies will be glad to have this done, for the reason mentioned by my hon. friend, even though they may have stocks on hand on which they may have paid the tax.


William Ross Macdonald: Do I understand there will be no rebate of sales taxes which have already been paid?


James Lorimer Ilsley: There will be no rebates.


Mr. TAYLOR (Norfolk):: With regard to furnaces for heating buildings, there are in my constituency buildings for the curing of tobacco which are heated by furnaces. Will these furnaces be exempt?


James Lorimer Ilsley: They are for the curing of tobacco.


William Horace Taylor: But also for the heating of the building. There was also an appeal to the minister for the exemption of the sales tax on oil burners used for the same purpose, and I was wondering if he had given consideration to that.


James Lorimer Ilsley: Consideration has been given.


Mr. ESLING:: If structural steel used in bridges is exempt, is it also exempt in the construction of industrial plants?


James Lorimer Ilsley: For buildings and bridges.


William Kemble Esling: Perhaps one of the most essential things in a low rental house is the electric wiring and the fuses and switches that go with the wiring. These are just as essential as the paint. Is provision made for their exemption?


James Lorimer Ilsley: There is no provision made for exempting wire. Wiring has a very wide range of use, and it was not thought desirable to include it.


Joseph James Duffus: I am still of the opinion that there are certain items of builders' finishing hardware which it is essential to include in the exemptions. Would the minister be good enough to let the item stand over until the next sitting?


James Lorimer Ilsley: The question can be raised
on the bill. This is merely the resolution, and there will be a bill before us later.


William Kemble Esling: In every community there is a wall paper business. Just to clarify the item, would the minister say whether that is included?


James Lorimer Ilsley: Wall paper is included in the list of exemptions.


[Stage Direction]
Item agreed to.
Amendment agreed to.
Paragraph as amended agreed to.
2.	That schedule II to the said act be amended by striking out the following words in paragraph three thereof:
Provided that the tax hereby imposed shall not apply to the goods mentioned herein, when sold to or imported by manufacturers of automobiles or chassis for the original equipment of such automobiles or chassis under the following conditions:
(i)	If less than ten thousand automobiles or chassis are manufactured or produced per annum and at least fifty per centum of the factory cost of manufacturing or producing them, exclusive of duties and other taxes, is incurred in the British Empire;
(ii)	If ten thousand automobiles or chassis or more are manufactured or produced per annum and at least sixty per centum of the factory cost of manufacturing or producing them, exclusive of duties and other taxes, is incurred in the British Empire;
Provided, however, that effective April 1st, 1938, the words "sixty-five" shall be substituted for the word "sixty" in this paragraph, and substituting therefor the following:
Provided that the tax hereby imposed shall not apply to the goods mentioned herein when used exclusively for the original equipment of such automotive vehicles.
Richard Bedford Bennett: Would the minister explain just what this section means before we proceed with it in detail?


James Lorimer Ilsley: At present tires and tubes
are taxable, tires at two cents a pound and tubes at three cents a pound. If they are original equipment on automobiles that have a certain empire content, no tax applies. If the number of automobiles manufactured is 10,000 or under, the empire content has to be 50 per cent; if the number is over 10,000, the content now has to be 65 per cent, formerly 60 per cent. That provision is in one of the schedules of our Special War Revenue Act, and it was to offer an incentive to get a larger empire content. The manufacturers of automobiles that did not have that content, and with tires as part of the original equipment, have to pay on the tires and tubes two cents and three cents a pound. At the time that schedule was drafted it was thought that this

Special War Revenue Act
tax would apply to tires on imported automobiles, but it was discovered that it was not applicable to them.


Richard Bedford Bennett: Because they were covered by the automobile as a whole.


James Lorimer Ilsley: That is correct, but there
is another reason too. The result was that the tire manufacturers in Canada found themselves at a great disadvantage in trying to sell tires for imported automobiles.


Richard Bedford Bennett: Because they already
had the tires on.


James Lorimer Ilsley: The imported automobile
came in with the foreign tires on tax-free, so there was no reason why it should have a Canadian tire. This provision gives the Canadian manufacturer of tires a chance on that business.


Richard Bedford Bennett: When you import an
automobile with four wheels, it has four tires, I should think. It would not come in as an automobile without the tires on the wheels?


James Lorimer Ilsley: Oh, yes, it is a business practice to import automobiles without tires. There is a guarantee which is of value that goes with Canadian tires, and Canadians want Canadian tires.


Richard Bedford Bennett: This would have to be computed at the end of each year because it is the yearly production of 10,000 or more.


James Lorimer Ilsley: We do not have to concern ourselves with that now. We did have to concern ourselves with it, and that was an administrative difficulty which is now removed.


[Stage Direction]
Paragraph agreed to.
3.	That subsection two of section fifty-eight of the said act be amended to provide that the excise tax payable upon the sale, transfer or assignment of any share at a price or valuation of one dollar shall be one-quarter of one cent per share.
Paragraph agreed to.
4.	That any enactment founded on this resolution shall be deemed to have come into force on the seventeenth day of June, one thousand nine hundred and thirty-eight and to have applied to all goods imported or taken out of warehouse for consumption on and after that date and to have applied to goods previously imported for which no entry for consumption was made before that date.
Richard Bedford Bennett: There is a difficulty about section 4, because of the amendment which was made in connection with steel. Is that to be covered also? Under section 3 of the resolution, the rate is a quarter of a cent. What was the old rate?


James Lorimer Ilsley: This affects only shares of exactly one dollar. The present rate is one-tenth of one per cent. This is one-quarter of a cent.


Richard Bedford Bennett: As regards steel, I am thinking about the question of rebates that was mentioned by the minister.


James Lorimer Ilsley: I think it can be administered if we leave the date the seventeenth day of June, even for structural steel.


Richard Bedford Bennett: I take it that there will have to be a rebate.


James Lorimer Ilsley: Adjustments will have to be made.


[Stage Direction]
Paragraph agreed to.
James Lorimer Ilsley: The resolution is carried, I
believe.


Richard Bedford Bennett: Yes.


[Stage Direction]
Resolution agreed to.
Resolution reported, read the second time and concurred in. Mr. Usley thereupon moved for leave to introduce Bill No. 163, to amend the Special War Revenue Act.
Motion agreed to and bill read the first time.
On motion of Mr. Mackenzie King the house adjourned at 10.56 p.m.
Friday, June 24, 1938