[Stage Direction]
Mr. G. A. ORUICKS'HANK (Fraser Valley):	On a question of privilege, Mr. Speaker, at page 1540 of Hansard for yesterday the hon. member for Moose Jaw (Mr. Thatcher), speaking of the imposition of the 25 per cent excise tax, said it was done:-
-in a manner, which, in my opinion, is contrary to the laws of this country.
If it is contrary to the laws of Canada I should like to know by what authority the hon. member for Moose Jaw charged me the 25 per cent tax on a toaster I bought last December.
Mr. W. R. THATCHER (Moose Jaw):: I should like to answer the hon. member. If he believes what the Minister of Finance (Mr. Abbott) said last night, no taxes have been imposed as yet.


Mr. CRUICKSHANK:: Why did you
collect the tax from me, then?


Wilbert Ross Thatcher: Naturally my firm could not refund a tax which has not yet been imposed; but if the hon. member wants his money back I suggest that he vote against this resolution.



HONG KONG


Right Hon. W. L. MACKENZIE KING (Prime Minister):: I should like to make a statement to the house regarding certain questions which have been raised with respect to the Hong Kong inquiry.
On January 29 the leader of the opposition asked if I would now table a letter from Mr. George A. Drew which the government had been asked to table on July 14, 1942.
Subsequently, on February 9, the leader of the opposition gave notice of a motion which appears on the order paper "for a copy of the evidence taken before the Duff commission in connection with dispatching Canadian armed forces to Hong Kong".
I informed the house that to comply with either of these requests it would be necessary, among other considerations, to ascertain whether the government of the United Kingdom was now prepared to withdraw its objection to the publication of certain communications, which had been made available to the commission on the express undertaking that they would not be made public.
On Friday last, February 20, I informed the house that a reply had been received on the previous day from the United Kingdom government. The reply is to the effect that if the Canadian government wish to publish the telegrams relating specifically to the dispatch of the two Canadian battalions to Hong Kong, the United Kingdom government would raise no objection, provided the telegrams were paraphrased to avoid compromising the secret cipher. However, as regards the telegrams which related to the international situation in the far east, the United Kingdom authorities regret that they cannot agree to the publication of any of those on the ground that they belong to a class of communication framed on the basis that they would not be published. The United Kingdom authorities express the opinion that the whole system of full and frank communication between governments of the commonwealth would be prejudiced if telegrams of this nature had to be prepared on the basis that they might eventually be published.
The communications relating to the international situation in the far east which the United Kingdom authorities are still unwilling to have published were at the time of the investigation considered so secret that they were seen only by the commissioner and by counsel in a conference of which it was understood that no record was to be kept. The copy of the evidence taken before the commission does not therefore include any of the communications to the publication of which the government of the United Kingdom continues to object.
These communications, however, form an integral part of the material on which the commissioner, Sir Lyman Duff, the then chief justice, based his report. This is clearly indi-
1550

Hong Kong Inquiry
cated in the report itself. I quote the following extract from page 4 of the report of the commissioner:
I had the advantage of reading a number of dispatches from the government of the United Kingdom, which I an not at liberty to reproduce, as well as 'a dispatch from the Canadian military authorities in England, which is reproduced in part, dealing with the probabilities concerning war with Japan, and my conclusion is that, having regard to the information of which the government was in possession, derived from the best sources of information open to them, nothing emerged before the departure of the expeditionary force on the 27th of October which could have been considered to be a justification for the withdrawal by Canada from the responsibility she had undertaken.
The written record does contain telegrams to the publication of which the United Kingdom takes no exception. These telegrams cannot, however, be made public in the actual form in which they appear in the evidence. To avoid' compromising the secret ciphers they must be paraphrased. In this particular, what would be produced would necessarily be an approximation to the record rather than the written record of evidence itself. It is important that this should be clearly understood.
A word now as to the letter from Mr. George A. Drew. As the house is aware, the government was asked to table this letter in 1942. On the advice of Mr. George A. Campbell, K.C., of Montreal, counsel for the government in the Hong Kong inquiry, the request was not complied with at that time. Mr. Campbell's opinion was given to the house. It will be found in Hansard for July 15, 1942, at page 4254. I quote the following extract from Mr. Campbell's opinion:
At the conclusion of the hearing for the taking of testimony in this matter, and some days before the date fixed for completion of the hearing of oral argument, all counsel concerned received notice from the commissioner requiring them on the day of the final hearing of oral argument to deliver up to the secretary of the commission any and all transcripts of evidence, exhibits and copies thereof, written arguments and copies thereof, notes of evidence and any and all other writings and documents relating in any way whatsoever to the matters in question.
It appears from Mr. Drew's communication that it purports largely to be based upon his written argument to the commissioner, of which presumably therefore he retained a copy in his possession. In his letter he gives a number of verbatim quotations from the transcript of evidence and exhibits.
Mr. Drew's letter purports to give the effect of a number of confidential communications received by the government of Canada from the government of the United Kingdom, the disclosure of which was only consented to by the government of the United Kingdom subject to a specific condition that the disclosure was to be limited to the commissioner and counsel only, and solely for the purpose of the inquiry;

and the commissioner was not permitted to reproduce these communications in his report. Any disclosure, therefore, even to the House of Commons, would in my opinion be a violation of the substance of that condition.
If, therefore, Mr. Drew's communication is tabled by you before the House of Commons I am of the opinion that you will be violating a condition under which the government of the United Kingdom consented to the disclosure to the commissioner and counsel of those telegrams.
Hon. members will see from Mr. Campbell's opinion, that, apart altogether from the ordinary rules of courtesy invariably followed in relation to communications between governments, there was a specific obligation on the part of the Canadian government to secure the consent of the United Kingdom government before a decision could be reached respecting the publication of Mr. Drew's letter.
May I remind the house of the circumstances in which Mr. Drew's letter was written. The royal commission made its report on June 4, 1942. Some weeks later, on July 11, 1942, in a lengthy letter addressed to me as Prime Minister, Mr. Drew took exception to the findings of the commissioner. In this letter, as Mr. G. A. Campbell's opinion shows, Mr. Drew discloses information which he had been informed had been imparted by the British government to the commissioner on the express understanding that it would not be made public, a condition Mr. Drew accepted by continuing to participate in the inquiry.
Mr. Drew's letter has now been examined in the light of the reply of the United Kingdom government respecting the publication of the secret communications made available by the United Kingdom government to the commission. The letter has been found to contain several references to the contents of one of the telegrams which the United Kingdom continues to be unwilling to have made public. In view of the undertaking on which this telegram was made available to the commission. the Canadian government has no choice but to decline to table the letter.
Mr. Drew may decide for himself whether he wishes to break the confidence reposed in him and to disclose information which the government of the United Kingdom wishes to have kept secret. So far as our government is concerned, we intend to have no part in any such breach of faith with the British government. Equally we do not intend to invest Mr. Drew's letter with any kind of privilege by tabling it in the House of Commons and thereby making it a public document.
As regards the tabling of the evidence, the government is of the opinion that it would have been more in accord with the feelings

Hong Kong Inquiry
of the Canadian people if the Hong Kong matter had not been revived. The report of the commission of inquiry speaks for itself. The report was made by the then Chief Justice of Canada after hearing all the evidence and all the arguments. However, as a request for a copy of the evidence has been made by the leader of the opposition, and a refusal on the part of the government to comply with that request might occasion misunderstanding and misrepresentation, the government is prepared to table the written record of the evidence. In so doing, however, it will be necessary, for reasons of security, to paraphrase the texts of cipher messages, and, for reasons which will be obvious, to make available only to the leaders on the opposition side certain confidential reports on officers and units not selected for the Hong Kong force, and certain reports or communications based on sources outside the armed forces of Canada, in cases where such reports or communications were made on the understanding that the information was to remain confidential.


Mr. JOHN BRACKEN (Leader of the Opposition):: Mr. Speaker, I am sure the house has listened with interest to the statement of the Prime Minister (Mr. Mackenzie King) with respect to certain incidents arising out of the Hong Kong affair of some five years or more ago. I am aware that on an occasion such as this we are not allowed to debate the matter. On the other hand the practice has grown up of the government at the opening of the house making statements of this kind, at which times Your Honour has permitted brief observations by hon. members on this side of the house who may feel they have some comment that should be made.
I wish to say only three things, and to say them briefly. One of the basic rights of democracy is that parliament must know, if it wishes, what is going on or what has gone on behind the scenes. We gave up that right during the war, when the nation was in danger. Now that the war is over we think we are entitled to know the factg. The Prime Minister has indicated that certain facts will be made available. To that extent I am sure the house will be pleased.
My second observation is this: In connection with this whole Hong Kong affair I do not suppose there was any other instance in world war II where untrained and unarmed troops were sent into battle. As to who wag responsible for that, the Canadian people are entitled to know.
The Prime Minister has referred to codes uged in communications used between two countries. I am sure there is no one in the 5849-99J
house who would wish or ask that information such as that should be divulged. I think that what the house wants, and what the Canadian people want, could be given without divulging any such secrets between two nations. But if there has been incompetence somewhere in an affair of this importance, the Canadian people will want to see it exposed.
I have just one other thing to say. As I gather from the Prime Minister's remarks, he is denying us the right to have the Drew correspondence tabled. He is undertaking to table certain other information-perhaps the greater part of the evidence of the Duff commission-but certain other parts he hag indicated, ag I gathered from his remarks, that he does not feel the government can take the responsibility for tabling.
I shall conclude by saying that the government must accept full responsibility for any portion of that evidence it denies to parliament. I am sure the Prime Minister is prepared to take that responsibility. But he must take it, not the House of Commons. When the evidence comes down we will see how much has been given and how much has been held back. We cannot be left in the position of allowing another administration to excuse this administration from tabling all the information we are entitled to have.
All we on this side of the house want is the facts, and the truth, without exposing any secret codes which may exist between another country and Canada. I trust that when the evidence comes down we will find that the government has not held back anything that would help to clarify this painful episode in Canada's history.


Mr.  M. J. COLD WELL@Rosetown-Biggar: Mr. Speaker, may I say just a word? I have a distinct recollection of what happened on July 14 after the leaders of the parties on this side of the house had received a copy of the letter which Colonel Drew sent to ithe Prime Minister. On that occasion I stated that I would accept the responsibility of asking that it be tabled. Next day the Prime Minister brought down the opinion of Mr. Campbell. As I recollect, having heard the opinion of counsel no one on this side of the house pressed at that time for the tabling of the evidence.
The war is over. The resolution which occasioned this discussion calls for a copy of the evidence taken before the Duff commission in connection with dispatching Canadian, armed forces to Hong Kong. The Drew letter does not figure in that particular resolution. The Prime Minister has only to bring down the evidence with certain telegrams paraphrased and with other telegrams with-
Hong Kong Inquiry

held at the request of the British government. If that is done I believe that we shall then be able to make an appraisal of the evidence :and come to a better conclusion with respect to the Hong Kong affair.
I have always been uneasy about the Hong Kong affair, particularly because I saw some -of the men who were to go there, one of whom appeared later before the commission nnd gave me information which I believe will be found in the evidence. I am glad that the evidence is to be produced. Following the discussion which the Prime Minister had yesterday with the leaders of the groups in the house I agree that in view of the secrecy of the code used between Great Britain and Canada the telegrams cannot be disclosed in their original phraseology. However, I hope that in making the paraphrase the responsible officials will exercise particular care to see that there is accuracy in every particular. I believe that that will be done. Since this meets the object of the resolution, I hope that we shall have an opportunity of reviewing the evidence.


Hon. C. G. POWER (Quebec South):: 
William Lyon Mackenzie King: Perhaps I might be permitted to answer mv hon. friend at once. As the house will recall, the hon. member who has just spoken was one of the ministers of defence at the time of the sending of the expedition to Hong Kong. I shall be very happy this afternoon to quote his words when he said that he hoped that the decision arrived at by the British authorities would be reviewed. I shall be happy to add to that my own words, that the government of Canada would be pleased indeed if that wish on the part of my hon. friend could be carried out.


Mr. CHURCH:: All we want to know is the truth, the whole truth and nothing but the truth. Our soldiers were marched off the ship and then inarched into an internment camp. It should be all on the record.


Mr. HACKETT:: Why should the dispatches be paraphrased rather than simply decoded?


Hon. BROOKE CLANTON (Minister of National Defence):: Mr. Speaker, perhaps I might be permitted to answer that question. It is within the knowledge of all hon. members that highly confidential information passes between representatives of governments which it would be of great advantage, in war or in peace, for other countries to obtain. For that reason all nations have ciphers and codes which they endeavour to keep safe. It is also well known to hon. members, through the press and otherwise, that sometimes certain nations endeavour to intercept messages in order to try to break a cipher and learn- exactly what is contained in it. And it is within the knowledge of hon. members that no small part of the allied successes during this war was due to the fact that so far as is now known- allied ciphers remained impregnable whereas enemy ciphers did not. One reason for that is that it may be possible to intercept the exact text of messages as they were sent in cipher, but in order to break them down it is almost essential to have the exact text of the message as decoded. A country having possession of those two factors certainly stood a much better chance of breaking a cipher than without them. On

Hong Kong Inquiry
that ground whenever ciphers are used they are required to be paraphrased. That is the ordinary and customary practice within government departments and between governments and it is in accordance with consistent requests from the British to ourselves and from us to them. They have made that request of us on this occasion.
I can assure hon. members that expert officers in the Departments of External Affairs and Defence are quite accustomed to paraphrasing and the results will be completely fair and accurate.


Mr. GRAYDON:: Does paraphrasing mean that we shall have the government's interpretation of what the actual correspondence is?


Brooke Claxton: Mr. Speaker, I should think the hon. member had been long enough in this house to know that that would not be the desire of this government at least. There is no case where that has been shown ever to have taken place. The paraphrasing will be done by expert officials of the Department of External Affairs or of National Defence, and it will be done under very close scrutiny.


Gordon Graydon: After the way the Prime Minister undertook to paraphrase George Drew's position in connection with this matter, you do not need to wonder that I asked the question.


Mr. POULIOT:: Mr. Speaker, being the one who asked for the resignation of Colonel Ralston on January 31, 1942, precisely_ on account of what had happened at Hong Kong I would ask the leader of the opposition why he eulogized him so much during the Grey North by-eleetion.	[DOT]
On the orders of the day:


Mr. L. W. SKEY (Trinity):: I wish to address a question to the Minister of National Defence. It has to do with the Hong Kong affair. Does the minister know of any instance in which a military or diplomatic cipher has been in use for as long a period as five years without becoming obsolescent?


Brooke Claxton: Why, of course, ciphers go on without any limit at all. I do not think this is the place to go into it in detail, but the cipher system may remain the same. What changes is the code or key that enables it to be applied or interpreted.


Mr. J. G. DIEFENBAKER (Lake Centre):: I should like to address a question to the Prime Minister arising out of his statement here today, with particular reference to the letter from Premier Drew. Will the Prime
Minister produce all letters, wires and memoranda containing any requests to the high commissioner's office and from the high commissioner's office to His Majesty's government in Great Britain regarding complaints put in against the production of that letter, so that the house and country may judge whether or not production was actually asked for or the request was made in such terms as to amount to an invitation to His Majesty's government not to consent to the production of it?


William Lyon Mackenzie King: Mr. Speaker, I resent very strongly the insinuation of my hon. friend that I have been sending messages to His Majesty's government in the United Kingdom to induce that government not to have Mr. Drew's letter produced. May I say to my hon. friend at once that the communications with respect to the Hong Kong inquiry which are included in the evidence took place before Mr. Drew's letter was ever addressed to myself. Mr. Drew's letter came some time after the report of the Hong Kong inquiry had been tabled. So far as Mr. Drew's letter is concerned, I have made no communication to the British government one way or the other with respect to it. My inquiry was in reference to the 'removal of an objection to the tabling of certain telegrams. I hope that that will answer my hon. friend's question.


John George Diefenbaker: On a question of privilege, when production of that letter was asked for, one of the ministers, if it was not the Prime Minister, said that there would be communication with the British government for the purpose of ascertaining whether or not it should be produced.


Some hon. MEMBERS:: No.


Some hon. MEMBERS:: Order.


Gordon Graydon: On January 30 that took
place.


William Lyon Mackenzie King: The communication to the British government was a query as to whether they were prepared, at the present time, to allow the publication of some telegrams that they had refused to have published before. Perhaps it will answer my hon. friend's question if I say that I made no request whatever of any kind to the British government at any time asking the United Kingdom government either to meet any wish of this government in this matter or to refuse it. The British government were left to make their own decisions in regard to their own matters in their own way.
Hong Kong Inquiry


John George Diefenbaker: I do not want to be misunderstood, but I am going to ask the Prime Minister this question, in the hope that he will be kind enough to answer it so that I may understand. Did he communicate with the British government in reference to permitting the tabling of the Drew letter? That is a very plain question.
_ Mr. MACKENZIE KING: My recollection is that when the leader of the opposition asked about the tabling of the Drew letter I said I would have to communicate with the British government, to ascertain wdiether the exception they had taken to having some of the telegrams published could be removed, before it would be possible to answer the question as to whether the Drew letter could be tabled. I asked the British government if they still raised the same objections they had raised some three or four years ago, or whenever it was, to the tabling of the communications referred to, and I have given the house the answer I received. I cannot understand what my hon. friend has in mind. If what he is asking is this: did I try to influence the judgment of the British government as to whether or not any matters relating to the Drew letter should be tabled, I would say I did not, nor would I ever think of doing such a thing.


Mr. SINNOIT:: I should1 like to ask a question of the hon. member for Lake Centre. Would he read to the house the copy of the letter from Colonel Drew that he has in his pocket?



PRIVATE BILLS


[Stage Direction]
Bill No. 115 to incorporate People's Fraternal Order.-Mr. Croll.
Bill No. 116 for the relief of Nellie Polis-tuck Levac.-Mr. Maybank.
Bill No. 117 for the relief of Eleen Rose Gray Lawson.-Mr. Maybank.
Bill No. 118 for the relief of Frieda Kimel-fild Solomon.-Mr. Maybank.
Bill No. 119 for the relief of Gordon Merrill Fuller.-Mr. Maybank.
Bill No. 120 for the relief of Phyllis Joyce Bradfield1 Ainsworth.-Mr. Maybank.
Bill No. 121 for the relief of Michael Charles Parr.-Mr. Maybank.
Bill No. 122 for the relief of Edna Birch Drimer.-Mr. Maybank.
Bill No. 123 for the relief of Elinore Oakes Forgues-Mr. Maybank.

Bill No. 124 for the relief of Mary Gwoz-decka Carter.-Mr. Maybank.
Bill No. 125 for the relief of Ralph Wood-all.-Mr. Maybank.


[Stage Direction]
On the orders of the day:
John Bracken: Mr. Speaker, in view of the many representations coming to members of parliament from farmers, I would ask the Minister of Finance whether he has given consideration to simplifying Form T-l Prairie Farmers 1947 now required for taxation purposes. The title of this form would indicate that it applies to prairie farmers only. Is a similar form required from farmers in other parts of Canada?
Hon. DOUGLAS ABBOTT ^Minister of Finance): That is a matter that comes under the Minister of National Revenue. I will ask him to reply.


Hon. J. J. McCANN (Minister of National Revenue):: I have received the question of the hon. leader of the opposition through the Minister of Finance. It will be generally appreciated bjr the members of the house that there are great difficulties in securing income tax returns from farmers and difficulties in assessing those returns. It is unnecessary for me here to enumerate what those difficulties are, but with a view to clearing up some of them and giving assistance to the farmers of Canada in making their returns, officials of the Department of National Revenue have given very close study to the matter, as a result of which we got out last fall two guides. One guide is called the Prairie Farmers Income Tax Guide and Farm Account Book. That form is distributed to the farmers in Manitoba, Alberta and Saskatchewan. Another form has been gotten out for farmers in eastern Canada. It is called the Farmers Income Tax Guide and Farm Account Book. As a result of those two guides which have been sent out, two forms have been devised on which the farmers might make their returns. One is T-l Prairie Farmers 1947, and the other is T-l Farmers, 1947.
The question has been asked, have we given consideration to simplifying these forms? The department will always give consideration to simplifying the forms and assisting the farmer in making out his return. That is the policy which is followed by the department, with

Inquiries of the Ministry
reference not only to farmers but to other people engaged in business. It is a policy followed by other countries.
Hon. members may have noticed that in the Ottawa Citizen and Ottawa Journal of last Saturday an advertisement appeared to the effect that an officer of the internal revenue department of the United States would be in Ottawa to assist United States residents in filling out their income tax returns, and in this morning's Montreal Gazette there appeared a notice to the effect that an officer of the internal revenue department of the United States would be present in Montreal to assist citizens of the United States in making out their income tax returns.
As I have said, with a view to helping the Canadian farmer make his return, these guides and these forms have been devised and sent out, and I can state that the form and guide for the prairie farmers have been very favourably received in the press, at least, and we have had a great number of applications for the form over and above the number already distributed. I think that this answers the question of the hon. leader of the opposition.
I might add that all our officers have been instructed to use the utmost courtesy and fairness in approaching the farmers and in giving the assistance which the division offers.


Mr. A. L. SMITH (Calgary West):: If the minister will permit a supplementary question, would he look at page 5 of the form which I see he has before him, the prairie farmers' form, which requires the farmer to set out his net worth? The method of setting it out is quite complicated. My question is this. Is any other class of taxpayer asked to do a similar job to that now asked of the prairie farmer? I know of none, and if I am correct I want to know why he has been singled out to expose the last cash dollar he has in the bank, in the strong box or in his wife's stocking, or wherever people put their money. I know of no other class of citizen which have been singled out as has the western farmer to give that information. If I am wrong I shall be glad to be told so. Certainly it is not something that I sign after my accountant makes out my return.


James Joseph McCann: Mr. Speaker, other people are asked for a form not exactly the same as this, but all people in business may be required to enter a form which will disclose their profit and loss position.


Arthur Leroy Smith: That is not what I am asking.


James Joseph McCann: Farmers are in the position where they can write off losses one year from profits they may have made in another year.


George Alexander Cruickshank: Losses are all they ever get.


James Joseph McCann: The assessment is made out from the average position of three years; therefore we require a return from a farmer, if he wishes to use that method, whether or not he is taxable. A great many farmers do not make and have not made returns. In order to arrive at a position where there may be a proper return and assessment made, if they are assessable, we have to find out their net worth position, and on that net worth position, over a period of years, to find out if possible what their income has been; and in regard to those who make the return yearly, what their average net income has been over the period of years. I do not know that there is any other way of arriving at it except to ask what assets and liabilities they have, and from that information determine their position.


Arthur Leroy Smith: I am utterly unable to find out what net worth has to do with income. I am not much of an accountant, but I am unable to see the relationship between net worth and income.


Mr. SPEAKER:: Order. I am sorry to interrupt the hon. member, but he will realize that on the orders of the day all he is permitted to do is to ask the government a question, and the question should be brief and to the point.


Arthur Leroy Smith: I realize that, and I shall take my seat, but I want to thank the minister for the courtesy he has shown me today.


Mr. ROSS (Souris):: May I ask a supplementary question? I was not able to follow the minister and his form, but may I ask why his department finds it necessary to have two distinct forms for farmers?


James Joseph McCann: I think the answer to that must be obvious. The type of farming that is carried on in the western provinces is different from what it might be say in the Niagara peninsula. In making up a form for farmers one has to attempt to make a composite return. You could not have one return for a farmer who is in the poultry business, another for a man who is in the grain business, another for a man who is in the fruit and vegetable business or the truck gardening business, and so on. Therefore it has been decided that at least we should have two different types, one
Inquiries oj the Ministry

which would cover the prairie farmers and the other which would cover the rest of the farmers of Canada.


Arthur Leroy Smith: You do not ask the eastern farmer his net worth?


James Joseph McCann: I beg your pardon; yes, we do. Let us clear that up right away. I hold in my hand the T-l Farmers 1947. They are exactly the same in that regard. On page 5 the farmer is asked for a net worth statement. Then I have the Prairie Farmers T-l 1947. On page 5 he is asked for a net worth statement. I suggest, Mr. Speaker, that some of the difficulties with reference to the information not being known is that people who are critical have not sufficiently perused either the current forms or the return forms to have all the information.


Mr. JAENICKE:: May I ask a supplementary question? Let us take the farmer who has regularly made hig income tax return for the last four or five years or so. Is he obliged to put in this statement of net worth?


James Joseph McCann: I am not in a position to answer that question immediately.


Mr. HARKNESS:: I should like to ask the Minister of National Revenue a supplementary question based on the answers he has given. Did I understand from the answer that the farmer is to be assessed for income tax purposes on the yearly changes of the net worth rather than on the basis of the actual receipts that he puts in?


James Joseph McCann: No. The purpose of the net worth position is to find out over a period of years what his income is. If his position was x dollars three years ago, and it is x plus $10 three years after, then you have some basis of saying, if he has no capital gains, where he got that money. It must be income if he has no capital gains.



INQUIRY AS TO NUMBER OF INSPECTORS

Mr. T. J. BENTLEY (Swift Current):: I should like to ask the Minister of National Revenue if there has been and now is the same number of income tax inspectors, in proportion to farmers, in all provinces as there is in Saskatchewan.


James Horace King: Order. I do not see any urgency in this matter, and I suggest that the hon. member place this question on the order paper.



PROVISION FOR INCREASE IN FIXED MINIMUM PRICE ON DELIVERY

[Stage Direction]
On the orders of the day:
Mr. J. H. BLACKMORE (Lethbridge)': The Prime Minister has probably had brought to his attention that a number of western farmers have had serious crop failures in the past year; therefore it is highly important that they have some assistance in putting in their crops. Can the Prime Minister take steps to see to it that at an early day the government order having to do with the Wheat Board Act, to make provision for an increase in the fixed minimum price on wheat delivered, will be brought before the house?
William Lyon Mackenzie King: Mr. Speaker, I have already outlined to the house the order in which business will be carried on. Subject to that, the government will make, with respect to the bill he has mentioned, every effort to have the course taken that will be most acceptable in the light of the circumstances my hon. friend has mentioned.



SHORTAGE OF RAILWAY CARS FOR TRANSPORT FROM CAPE BRETON SOFT-COAL BELT

[Stage Direction]
On the orders of the day:
Mr. GORDON B. ISNOR (Halifax): I wish to direct an inquiry to the Minister of Transport. What action, if any, is the Minister of Transport taking to provide additional railway cars to take care of coal shipments from the rich Cape Breton soft-coal belt where Dominion Coal Company's pits numbers 2, 4, 12, 16 and1 20 were obliged to remain idle owing to shortage of cars?
Hon. LIONEL CHEVRIER (Minister of Transport):: I have made inquiries of the Canadian National Railways in connection with the general position of car shortage for the carriage of coal in the maritimes, and they advise that for the period February 12-19 inclusive, there was an average of 66 cars of coal shipped1 each day. The ordinary average is about 75 cars per day. On February 20 only 23 cars were shipped.
There is a sufficient supply of open-top cars available in the maritimes. The difficulty has been that, owing to shortage of motive power, the movement of coal and the empties has been slowed down. This was first caused by weather conditions, and latterly by a heavy import and export movement. The operating

Inquiries of the Ministry
department of the railways does anticipate a substantial betterment in the movements immediately. I understand the Dominion Coal Company have undertaken to notify their consignees that coal must be unloaded very promptly in order to release the empty cars for further loads, and it is hoped by the joint action now being taken and the better weather, conditions, that the situation will be improved practically immediately.



THE SENATE


[Stage Direction]
On the orders of the day:
Lionel Chevrier: I should like to reply to a question which the hon. member for Victoria, Ont. (Mr. Hodgson) directed to the Prime Minister yesterday in connection with a car which is alleged to have been provided1 by the government to the Right Hon. Senator Mackenzie. The questions were, first:
Did Senator Ian Mackenzie use a government private car for a trip to Vancouver and return recently, and since his appointment to the Senate?
The answer is, yes. The second question is:
Who gave authority for the use of this car?
A few days following his resignation, Senator Mackenzie made application to the Department of Transport for the provision of a private car to and from Vancouver. He represented to me on that occasion that he wished to complete some unfinished business with his constituents-[DOT]


Mr. KNOWLES:: They were not his constituents any longer.


Lionel Chevrier: -and at the same time he desired to bid farewell to his constituency.


Mr. HOMUTH:: We would all like to do that.


Lionel Chevrier: At the time he made that application, the senator was in possession of a pass from the railways of this country authorizing him and entitling him to use a private car. Having regard to that fact, and also to the fact that the hon. senator had been a member of the House of Commons for some eighteen years and a member of this administration for no less than thirteen years, I thought that it was not only reasonable but appropriate and courteous that he should be given a car, and I so authorized the officers of my department.
The third question asked was this:
Have all senators such a privilege?
The answer is no. The fifth question was:
How much did it cost?
Let me tell my hon. friend that all expenses incurred in this case, as in all other cases of a similar nature, are borne by the person using the car.


Mr. NICHOLSON:: Did I understand the Minister of Transport to say the former member for Vancouver Centre paid the railway for the cost of hauling the car and the salaries of the staff? If not, would the minister explain just what was covered?


Lionel Chevrier: I am sure the hon. gentleman understood full well what I said, but in case he did not I will repeat it. In answer to the last question put by the hon. member for Victoria as to what was the cost, I said all out-of-pocket expenses incurred in this case, as in all other cases, were borne by the person who had use of the car.


Alexander Malcolm Nicholson: Does that include the salaries of the staff on the car? If not, who pays those?


Lionel Chevrier: That does not include the salaries of the men on the car.


Alexander Malcolm Nicholson: Who pays those?


Lionel Chevrier: Those are paid in the ordinary course whether the men are on the car or whether they remain in Ottawa, so in that case there is no additional expense.


Mr. MANROSS:: He paid the tips.



BAY OF FUNDY MARSHLANDS


[Stage Direction]
On the orders of the day:
Mr. P. C. BLACK (Cumberland):: Mr. Speaker, I would like to make inquiry of the Minister of Agriculture and the government whether a delegation, headed by the Premier of Nova Scotia, the Hon. Mr. Macdonald, and the Premier of New Brunswick, the Hon. Mr. McNair, their ministers of agriculture and other persons, making a delegation of eight in all, as reported in the press, waited on the government yesterday with respect to the reclamation of the marshlands on the Bay of Fundy. Who composed this delegation and were definite proposals submitted? Will the minister make public the proposals and will the government carry them out? If the minister is not able to state definitely today-
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Inquiries of the Ministry


James Horace King: Order. The hon. member is about to give information in addition to the question. He must not do so. He should be brief in putting the question.
Mr. BLACK (Cumberland)1: If the minister is not able to state definitely today, when can we expect a pronouncement of policy? Everybody concerned wants action and assumes that the minister is sympathetic.


James Horace King: Order.


Percy Chapman Black: Mr. Speaker, this is an important matter and we are entitled to a statement from the minister.
Right Hon. J. G. GARDINER (Minister of Agriculture:) Mr. Speaker, the hon. member for Cumberland gave me a copy of his question and in reply I would say that a delegation did meet me and other members of the government yesterday. The delegation was headed by the Premier of Nova Scotia and the Premier of New Brunswick. Along with the delegation were the minister of agriculture of Nova Scotia and the deputy ministers from the two provinces, with some others whose names I have not before me at the moment. They did present the question whether or not something would be done by the federal government to assist in the diking of the marshlands of the maritime provinces. I gave them an understanding that I would present their representations to the government, and that the policy would depend upon the decisions reached as a result of those representations. Until the representations have been made there is nothing more that can be said with regard to the policy that is to be followed.



PRICES-QUESTION OF ENSURING SUPPLIES FOR

[Stage Direction]
On the orders of the day:
Right Hon. J. G. GARDINER (Minister of Agriculture):: I wish to answer a question asked by the member for Lethbridge (Mr. Blackmore) on Thursday last, as follows:
Has the minister received communications from western Canadian beef producers and feeders that prices for finished beef are falling, apparently owing to the meat packing companies' lack of interest in bidding for finished beef? Secondly, will -the minister tell the house what measures he proposes to take to protect beef feeders from losses on their 1947-48 operations, and thus to safeguard beef supplies for Canadian consumers for the year 1949.

The answer, Mr. Speaker, is this. Representations have been received from some western producers to the effect that there is not an active demand and that prices are considered unsatisfactory. The facts are that during this year to date there has been a substantial increase in the number of cattle marketed, and prices for good quality cattle have averaged approximately $2 a hundred higher than during the same period a year ago.
The inspected slaughtering of cattle in January was 23-9 per cent greater than during January 1947. Slaughterings during the past two weeks were 39 per cent greater than the same two weeks a year ago, and to date slaughterings were 28-2 per cent higher. This would seem to disprove any argument that cattle were not moving freely. Not only was there a substantial increase in the number of cattle marketed, but the average dressed weight of beef slaughtered in January 1948 was 508 pounds per head, which was 28 pounds higher than the average dressed weight in January 1947, and 18 pounds heavier than the average dressed weight of beef slaughtered in January 1946.
During the early part of 1947 cattle slaughterings were barely sufficient to meet domestic requirements, and no surplus beef was being offered for export. Beef and cattle prices during this period were established on the basis of domestic value and not on export value. Marketings for 1948 to date have been substantially in excess of domestic requirements, and some 13,000,000 pounds of beef have been offered for export. I might add in passing that that is twice as much as we got last year, to November 1. The price provided in the 1948 beef agreement of $27.50 for choice quality beef and $26.50 for good quality beef is $3.25 higher than the price paid under the. 1927 agreement. Notwithstanding the fact that cattle marketings are in excess of domestic requirements, prices for good quality cattle are still well above their value for export based on the United Kingdom agreement.
With regard to the general level of cattle prices during 1947, good steers averaged $14.19 at Toronto. This was the highest annual average price ever recorded ,and was six cents higher than the average price of $14.13 in 1919 and more than double the average price of $6.77 in 1939. While there has been some moderate recession in cattle prices during the last two or three weeks, more particularly for

Inquiries of the Ministry
heavy weight cattle, there has been nothing comparable to the price reductions that have occurred in the United States, where cattle prices have declined by as much as S7 to S8 per hundred during the matter of a few weeks.
I have some figures I should like to table; first, comparison with respect to slaughter of cattle, 1947 and 1948 to date; and second, comparison of cattle prices for good steers up to 1,050 pounds in the four main markets.
February 20, 1948
Inspected Slaughterings of Cattle

Canada
				Cumulative	%
Week					Per cent
1947	1948	1947	1948	ChangeJanuary 10 	
25,992	30.583	25,992	30,583	+ 17-7January 17 	36,030	52,953	66,613	+26-0January 24	
23,380	31,435	76,333	98.048	+26-8January 31 	26,823	100,888	124,871	+23-9February 7 	26,966	119,693	151.837	+26-9February 14 	27,559	140,040	179,396	+28-2Price/Cwt Toronto	of Good Steers up Winnipeg	to 1,050 lbs. Calgary	Edmonton	1947	1948	1947	1948	1947	1948	1947	1948January 3 ....	$12.75	$14.54	$13.15	$14.63	$12.45	$15.15	$11.85	$14.30January 11 ....	13.20	15.1)	13.00	15.25	12.44	15.65	11.90	14.90January 17 ....	13.45	15.27	13.25	14.76	12.57	15.28	12.00	14.60January 24 ....	13.30	15.22	13.50	14.61	12.78	15.10	12.25	14.55January 31 ....	13.52	15.25	13.35	14.53	12.84	15.15	12.50	14.70February 7 ...	13.90	15.46	14.11	14.55	13.21	15.15	12.90	14.80February 14 ...	14.21	15.20	13.62	14.15	13.24	14.72	12.85	14.35



BRITISH COLUMBIA


[Stage Direction]
On the orders of the day:
George Alexander Cruickshank: I would like to take ten minutes to answer hon. members opposite, but leaving Lieutenant Drew in Hong Kong for the moment and moving over here I wish to direct two questions to the Prime Minister; the second will answer my hon. friends across the way. Is the Prime Minister aware that the Liberals won two provincial by-elections yesterday in British Columbia?


Some hon. MEMBERS:: Hear, hear.


Some hon. MEMBERS:: Coalition.


George Alexander Cruickshank: The second question, which will answer the hon. members across the way, is this. Is the Prime Minister aware that we will also win both federal by-elections as soon as they are called?



DIPLOMATIC SERVICE


[Stage Direction]
On the orders of the day:
Karl Kenneth Homuth: I want to direct a question to one of my hon. friends in the ministry with whom I have never had any quarrel, and I hope the house
will bear with me for a moment. During the war we had a great many nations allied with us in the fight. Since that time many of those nations have come under the domination of Russia and under communist influence. Those representatives are still in Canada. They have no country; they cannot go back to their homes.


Some hon. MEMBERS:: Question.


James Horace King: Order.


Karl Kenneth Homuth: Don't be so impatient. I wonder if the Minister of Mines and Resources would not give some thought to granting special consideration to the representatives of such countries, who are left in Canada and who actually have no country to which they can return, to permit them to become Canadian citizens, which I think many of them wish to do.


Hon. COLIN GIBSON (Secretary of State):: That matter comes under the Canadian citizenship branch of my department. The Canadian citizenship act, as passed in 1946, provides that no one may be granted Canadian citizenship until he has been in this country for five years.


Karl Kenneth Homuth: Then I hope there will be no effort on the part of the government to deport these people to the countries from which they came, but that they will be allowed to remain in Canada.
5849- 1001
Inquiries of the Ministry


Hon. J. A. GLEN (Minister of Mines and Resources):: That is a question I cannot answer at the moment.



REFRIGERATOR CARS


[Stage Direction]
On the orders of the day:
Mr. W. CHESTER S. McLURE (Queens): I should like to ask the Minister of Transport a question. It has to do with an emergency, and I received word of it just before I came into the chamber, so I had not time to send him a copy of the question. Perhaps he will [DOT]take it as a notice and give me an answer later. What action has the minister taken to supply .'refrigerator cars for the immediate shipment *of potatoes and turnips from Prince Edward ITsland to outside markets? The shortage of these cars at the present time is worse than it has been for some months.
Lionel Chevrier: I remember writing my hon. friend not so long ago in connection with the general position of refrigerator cars for Prince Edward Island. My recollection is that in reply he sent me a very flattering letter stating that the position of refrigerator cars at the island was very good at that time. In view of his question, however, of which I did not have notice, I will look into the matter tomorrow and see if anything can be done.


Mr. McLURE:: I acknowledged that letter and thanked the minister for the work he arid I had done. However, the shortage has come up again, and they cannot get the cars.



BUREAU OF STATISTICS


[Stage Direction]
On the orders of the day:
Mr. N. J. M. LOCKHART (Lincoln):: Mr. Speaker, may I make one or two observations as a basis for my question, which has to do with a communication sent out by the bureau of statistics on February 20? What I have to ;say is not by way of carping criticism. I have in my hand a circular which states that in addition to historical tables-


James Horace King: The hon. member knows that the purpose of a question is not to give information to the house but to get information. I would ask that he put his question.


Norman James Macdonald Lockhart: Then I shall refer to the circular of February 20 sent out by the bureau of statistics. May I point out, sir, that it gives information for 1945. The comment
(Mr. Homuth.]
from industries and others back home is that this information is two years too late. Is there some responsible minister who can tell me why information of this kind is compiled only up to 1945, when we are now in 1948? They are anxious to have that information.


Stanley Howard Knowles: Trade and Commerce.


Gordon Graydon: That is about the speed of the government.



FOREIGN EXCHANGE CONSERVATION


[Stage Direction]
Hon. DOUGLAS ABBOTT (Minister of Finance) moved the third reading of Bill No. 3, respecting emergency measures for the conservation of Canadian foreign exchange resources.
John Bracken: Mr. Speaker, I do not rise at this time to make any extended remarks. We opposed the measure on second reading, and we have opposed it consistently ever since. I rise now to move an amendment to third reading of the bill, an amendment which seeks to remove from the bill a feature which it was not the primary intention of the bill to achieve, namely that of protectionism. I move:
That the said bill be not now read the third time but that it be referred back to the committee of the whole for the purpose of amending it by inserting after the word "Canada" in the second line of section 3, subsection (1) the following words:
"from any one of the following countries, namely Cuba, Dominican Republic, Guatemala, Haiti, Panama. El Salvador, Switzerland, Union of 'Soviet Socialist Republics, United States of America and its possessions, Venezuela."
Section 3 (1) would then read in this way:
No person shall import or attempt to import into Canada from any one of the following countries, namely Cuba, Dominican Republic, Guatemala, Haiti, Panama, El Salvador, Switzerland, Union of Soviet Socialist Republics, United States of America and its possessions, Venezuela, any goods listed or of the classes described an schedules I, II or III except in accordance with a permit issued by the minister and, subject to this act and the regulations, the minister may issue, vary, or revoke permits for the import of such goods.
I shall take only a moment to comment on this amendment. The countries, the names of which I have read, are those which have been designated as scheduled countries in P.C. 4678 passed by the government under the foreign exchange control act, and under which these restrictions are now being carried out.

Foreign Exchange Conservation
This is the order in council, with some amendments, under which the government has been acting for more than three months.
The problem the government is seeking to solve by this bill is to conserve United States dollars. In order to conserve United States dollars the government has already divided the countries with which we do business into two groups: (1) dollar countries or, in point of fact, countries that have no dollar problem; and (2) countries which are, like ourselves, having difficulty in finding United States dollars to pay for purchases made in that country. The amendment I have moved means that we limit the bill to the policy of dollar conservation and exclude from it the features of wider protection. The bill without the amendment means that it is not an exchange conservation measure solely, but rather a bill providing additional protection against imports from all countries.
As it is at present the bill, whatever else it does, is a measure of ironclad protection. It means that this self-styled low-tariff government is making its present difficulty the occasion to introduce a wholly unnecessary and vicious type of tariff restrictions practically unknown in any democratic country.
We are not in this amendment, opposing the dollar conservation features of the measure; but the amendment would cut out the additional features of protection which are not necessary for the purpose I have mentioned.


Hon. DOUGLAS ABBOTT (Minister of Finance):: Mr. Speaker, as the house is aware, the suggested amendment is identical with one moved to section 3 of the bill when the house was in committee following second reading. If the amendment were accepted the effect would be to eliminate the so-called principle of non-discrimination.


Mr.  M. J. COLD WELL@Rosetown-Biggar: Does the minister refer to the amendment offered by the hon. member for Kindersley (Mr. Jaenieke)?


Douglas Charles Abbott: Yes. It may not be identical, but it is certainly similar to the one offered by the hon. member for Kindersley in the committee stage.
As I was about to say, if the amendment were accepted the effect would be to eliminate from this legislation the so-called non-discriminatory principle, and make it frankly discriminatory against certain countries named in the bill. I discussed this matter at some length when we were in committee, and I am sure the house would not wish me to repeat my arguments at this time. For the reasons I gave on that occasion the government opposes an amendment of this kind and feels it would
not be in the interests of Canada to have it incorporated in the bill. Therefore we shall have to oppose the amendment.


James Horace King: Before putting the question may I ask hon. members please to keep quiet during the taking of the vote in order to facilitate the work at the table.


Mr. GARIEPY:: I was paired with the hon. member for Victoria-Oarleton (Mr. Hatfield). Had I voted I would have voted against the amendment.


Mr. NIXON:: I was paired, Mr. Speaker, but had I voted I would have voted against the amendment.


Winfield Chester Scott McLure: I was paired with the hon. member for Beauoe (Mr. Dionne). Had I voted I would have voted for the amendment.


Mr. SHAW:: I was paired with the hon. member for Ottawa West (Mr. Mollraith). Had I voted I would have voted for the amendment.


Mr. JAQUES:: I was paired with the hon. member for Matapedia-Matane (Mr. Cote). Had I voted I would have voted for the amendment.

(Translation):


Mr. GAGNON:: Mr. Speaker, I was paired with the Hon. the Postmaster General. Had I voted, I would have voted in favour of the motion.
(Text):


Mr. LITTLE:: I was paired, Mr. Speaker, but had I voted I would have voted against the amendment.


Mr. J. M. MACDONNELL (Muskoka-Ontario):: We on this side of the house have been vehemently opposed to this legislation, and I think it wise to make a brief statement on the third reading of this bill. It is now some two months since we first had this bill placed before us in December. At that time I said on behalf of this party that we would vigorously oppose it, and that we would oppose it in the house and in the constituencies and do our best-


James Horace King: Order. May I ask hon. members to keep silence. It is nearly impossible to hear the hon. member who has the floor.


James MacKerras Macdonnell: In these two months, Mr. Speaker, the evils of this bill have become much more apparent than they were then. The evils to which I wish to refer briefly are, first, the evil of personal power, and, second, the fact that this bill is not really an emergency bill at all, which has become clearer and clearer as we have gone on.
First a word about personal power. We on this side have been complaining a good deal in the last two years about orders in council; but once this bill becomes law we shall look back on orders in council almost as the halcyon days of freedom, because this bill gives power to one minister so broad it is really hardly an exaggeration, indeed it is no exaggeration to say that he himself can tear up orders in council and make the effect of them nugatory.
Everything depends on this minister; and I wish to point out further, rather regretfully, that there has not been-I must admit this- as much protest from the country as we would have expected. I think the reason for it is twofold. First of all, as I said when this bill was introduced, people are afraid to object. People who may have to come to Ottawa and deal next week with the Minister of Trade and Commerce are in this position. Is it natural to expect that they will complain? How right I was in the prediction I know now, because I know by my own contacts and those of others that

Foreign Exchange Conservation
people are unwilling to stand up and. be counted.
I just wish to make one further comment on the effect of this power. The big people may have considerable confidence that it will not hurt them much because they will be able to see the minister; most of them know the minister personally, and I have no doubt they find him a very personable man to do business with. I think he treats them far differently from the way he treats us in the House of Commons.


Mr. HOWE:: They are much more intelligent.


James MacKerras Macdonnell: So far I have refrained from bandying insults with the minister. I do not think my intelligence is the question. We are talking about this bill. I have not come here to talk personalities, and I hope I shall never get down to that level.


Mr. JACKMAN:: We do not kowtow, anyway.


James MacKerras Macdonnell: man will change his production methods or his capital equipment or his markets unless it is really necessary.
There would be little question about the need if Mr. Howe himself did not make misleading statements about how long the dollar shortage was going to last. The other day in Halifax he said:	"I am hopeful that before
many months go by our reserves of United States dollars may be built up to a point where present-day restrictions will no longer be needed."
Then the editorial writer goes on:
This is not only nonsense, it is dangerous nonsense. As the Bank of Canada's annual report, published last week, points out, we are by no means out of the woods yet, nor are we likely to be in a few months.
Then there is a quotation, I presume from the Bank of Canada's report:
"Having in mind the present level of our gold and foreign exchange holdings, and the magnitude of our trade with other countries, there is clearly need to increase these holdings."
Then the writer concludes:
If Mr. Howe wants industry to take his dollar saving program seriously he will have to take it seriously himself.
So much for the time. The Minister of Trade and Commerce has not helped us very much on that. To use his own phraseology, he has become a bit tied to the use of the word "months", and that seems to have affected his comments since that time.
Coining to the more important part, what is really being done to end the emergency, we have nothing at the moment except vague and, I must add, unconvincing statements from the minister os to what great things are being done or what great things are to be done to increase exports to the United States. He has never been very convincing on that and, as I have said, it is left entirely in the air. Meantime, however, as the house will remember, by the financial policy of the government, and particularly by what was done in June, 1946, we have taken one step which operates vitally to put off the day when the emergency ends. That is to say, we have successfully cut off United States investment in this country.
I want to say a word to recall to the minds of hon. members the position we were in in June, 1946. We seemed at that time to have achieved a kind of rough and ready balance. We seemed-and in retrospect it looks even clearer-to have reached the point where the finance department was allowing a good deal of freedom, and where more and more freedom could have been achieved and our situation worked out. But whatever the reason was, whether it is because the finance department somehow cannot believe that

things can work through freedom, whether they believe that controls are the only means of doing things, at any rate in June, 1946, they took the action that we know, and from that time on, our supply of United States dollars and gold fell. I believe the figure in June, 1946, was SI,624 million, and it fell last November to something in the neighbourhood of S500 million.
Worse than that, we have created a situation in the United States where, as I said in this house a few days ago, our dollars and securities are wandering around like orphans. "Orphan", I believe, is the word they use. Our dollar sells below ninety cents and our securities at an even greater discount, and in my opinion we are creating a situation where Americans, who have regarded us as the very best investment market, are thoroughly irritated at what we have done. And we go from bad to worse.
The action that was taken then reminds me of an old epitaph with which we are all familiar. I discovered today that it was found somewhere on the tombstone of an Italian valetudinarian: "I was well; I would be better; I am here." I hope that nothing like that is our fate, but I suggest that those who disturbed the balance in June, 1916, took on a considerable responsibility.
Now a word to recall the circumstances attending the introduction of the bill, which circumstances do not commend it. First of all, there was the withholding of information- I believe that is the proper word-and the rapidly worsening figures all through last summer, and then there was the sudden action in the middle of November. We had been trying to get information here in this house even before parliament adjourned in July and we got none. Second, there was neglect to summon parliament, which could have been summoned, because, after all, this matter was under review, as the Minister of Finance has told us, from away back, months before; I believe he said it was in August or July. Finally, there was the disregard of an undertaking or a statement of intention, or what you will, which the present Minister of Justice (Mr. Usley) gave in connection with the foreign exchange control board.
I will not split hairs about that and ask whether it was a solemn undertaking or a promise. I do not know what the difference is between a solemn promise and any other promise. I consider every promise a solemn promise. I want that to be clear. I used the words "statement of intention". That is perhaps more correct than the word "promise". However, I should have thought that a statement of intention, particularly perhaps from a minister with the moral authority in this

Foreign Exchange Conservation
house which the present Minister of Justice has always had, was as good as putting it on your bond and affixing all the red seals around it, something as good as anyone could want. I will say no more on that. It was treated as such anyway, as the hon. member for Stan-stead reminds me.
There was little public protest; and it is a sad reflection, in my opinion, on the level of political consciousness in this country that there has not been more protest. I sometimes think people hardly realize what is going on under their very eyes, and that being so, it is all the more necessary that we who are members of parliament, who presumably think about these things and take them seriously, should have concern for a matter of this kind and not treat it lightly.
1 suppose it is true to say that in the long history of British institutions, of institutions that we rely upon, institutions that have brought us where we are, there have been many times when action such a!s has been taken by this government, first of all in withholding information; second, in dealing in so arbitrary a manner with a situation such as this, without calling parliament, and, third, in going back on a statement made by a responsible minister-it is, I say, no exaggeration to suggest that lesser things than these have brought governments toppling down more than once in our history.
My final point is this. I suppose one can say that freedom is the second greatest thing in the world. Faith is the greatest, and1 the church is the special guardian of faith. But surely this House of Commons should be the special guardian of freedom, and. therefore I suggest earnestly that everyone in this house who believes in freedom should vote against this bill, for in this bill freedom is the issue.


Stanley Howard Knowles: Mr. Speaker, I wish to take only a very few minutes before the vote is called on the third reading of the bill. We in this group are grateful to the leader of the opposition (Mr. Brackeni) for having given the house a chance to take a recorded vote on an amendment the same in principle as that which was moved by the hon. member for Kindersley (Mr. Jaenicke) when we were in committee. The principle involved in both those amendments highlights one of the reasons for our objecting to this bill, namely the government's insistence on applying the mon-diseriminatory principle at the present time.
We argued at the outset, and in our view the minister has not answered our arguments, that in effect this is discrimination against the United Kingdom and other soft currency
countries, and further that it has no real bearing on the main purpose of the bill which is to save United States dollars.
When the debate on the second1 reading was in progress another of the objections to the bill, which we put forward, was that it involved a ban on fresh fruits and vegetables which we regarded as inimical to the health of the Canadian people. Our friends of the Progressive Conservative party applauded us at that time and indeed echoed our sentiments.
When we were in committee of the whole at least one member of the Progressive Conservative party, the hon. member for Rosedale (Mr. Jackman), who just now applauded my remarks, spoke in support of our opposition to item 87 in schedule I. I regret to say, however, that when the time came for a vote in committee on that item our friends of the Progressive Conservative party voted with the government to retain it.
The hon. member for Muskoka-Ontario (Mr. Macdonnell) has just had something to say about the feeling of the people in the country as to this bill. If I heard him correctly he said he was amazed there was not more protest against the bill in general. I would say to him there is one feature about which there has been considerable protest, on the part of housewives in particular, and it is this ban on fresh fruits and vegetables; and I call as one of my principal witnesses the hon. member for Rosedale. I am indeed sorry that our Progressive Conservative friends did not see fit to join us in our vote against that item when we were in committee. I remind the house that the vote was 43 to 23; but had the Progressive Conservatives who were present at that time voted with us, the clause would have been defeated.
I suggest, Mr. Speaker, that this raises some question about the consistency of the opposition of the Progressive Conservative party to this measure, to which the leader of the opposition referred. The fact is that when the members of the official opposition were faced with this vegetable item, which to them was a question of protection or non-protection, they voted for protection. That is another of the reasons we gave earlier for our opposition to this bill, namely, that it is a highly protectionist measure and that it has and will have all the damaging effects to our economy of any of the restrictive trade measures we have had in the past. The demonstration we had, particularly in committee, of Liberal members rising and telling the house that if vegetable growers in their part of the country could be assured that this
Foreign Exchange Conservation

protection would be maintained they could produce greater quantities behind that wall of protection, indeed must go down in the pages of Hansard as a sorry story in the annals of the Liberal party. We call to witness all the arguments Liberals have used in the past about the dangers to our economy of restrictive tiade policies, and suggest that for these reasons this bill should not receive the support of this house.
Another of at least four reasons we stated earlier for objecting to this .bill was the unwillingness of the government to reimpose price ceilings in Canada on goods of a class or kind the importation of which from the United States was subject to restriction or embargo. We felt then and, having given the measure complete study clause by clause in committee, we still take that position, that the effect of this measure without price control on those items is to exploit the Canadian people at the expense of what is, after all, in its effect a protectionist policy.
So, Mr. Speaker, I submit that our consistent opposition to this measure has been well founded, and for the reasons I have stated we will oppose it on third reading.


Thomas Langton Church: said now as then that the disarmament of the free is the tyrant's chance. We have had two long wars as the result of the disarmament folly of Great Britain. By this bill, Canada loses empire preference, and we are back to free trade and unrestricted reciprocity with the United States.
When one reads Bill No. 3 and adds to it the Hyde Park agreement, he begins to wonder what is happening. Hyde Park was made at Easter, 1944, for the defence of the western hemisphere. Now, by an agreement made in May, 1915, it is turned into an economic measure to eliminate empire trade and aid' the United States forever. What has Time magazine to say about Hyde Park and the Geneva charter? It says that because of the Hyde Park economic agreement of 1945 Canada is now the 49th state of the union. That is all we are. In this state of unrestricted reciprocity and free trade with the United States, that is where we have now landed.
The businessman has been hamstrung by all these controls. We thought they were to last only during the war, but now we are to be hamstrung with them forever by austerity after the war. Controls which have been introduced will sooner or later rule, so that no man, wholesale or retail, can conduct his business. There is to be a regular horde of export and import officials who will be found everywhere, and the businessman will be put out of business. He will not know where he is going to wind up.
As I have said, I wish some hon. members had made a study of the agreements Soviet Russia has made with almost all countries of the world. Do not forget that she will use enslaved labour, nearly half a million of them, just as the Pharaohs did away back in the dim past. They took hundreds of thousands of men to do slave labour; and the Russians are doing the same, dumping them off in the arctic circle, and building huge walls, breakwaters and all that, by brutal savagery. What are those men? They are slaves, that is all they are, from free countries, who have had in eastern Europe to give Russia all their raw materials, food and manufactured goods by coercion.
Not only has Russia trade treaties with other countries of the world, but she has one with Great Britain. I was ashamed to read it; I was disgusted. Britain was our best customer for our grain, food and all our products of the sea, the soil, the forest and the mine, and never deserted us; so were France and Italy.
What mandate has the Minister of Finance (Mr. Abbott) or the present government for this kind of bill? As I said the other day, even my own party over here is one which has only of late given lip service throughout

the country to preferential trade, which did so much during the dark days of the two wars and between them and during the depression to save this country from ruin, and save us from a greater depression. It was our greatest asset, now gone forever.
The government had no mandate to offer this policy to the people. Let us study what has been done to Czechoslovakia. The hon. member for Nanaimo (Mr. Pearkes), who has done a great deal for the soldiers of this country, has called my attention to what is happening to Czechoslovakia.


The ACTING SPEAKER (Mr. Golding):: Order. The motion before the house is for the third reading of Bill No. 3.


Thomas Langton Church: Mr. Speaker, I am referring to the agreement which has been made by Britain with Czechoslovakia and which is driving the mother country away from the tariff protection which she had under preferences, as the cause and effect of Bill No. 3, and Britain has to seek food from Europe and other countries, including Denmark and Argentina. You will notice it is in the schedule. Britain has been practically forced out of the preference by the policy of this government. She has to provide food for
47,000.000 people and she cannot get it from Canada. She has had to go to Russia. She has made a treaty with them, a bargain. She has had to bargain with Poland. She has made one with Czechoslovakia. Russia made lengthy trade treaties with Poland, Czechoslovakia, Hungary, Yugoslavia, Bulgaria, Sweden. Norway, Denmark, Iceland, France, Great Britain, Uruguay and other countries.
Where has our trade gone? We had trade with all those countries and so had the mother country'; so had New Zealand and so had Australia. They have been kicked out. We know what happened in Manchester and Birmingham under British preference. They did a tremendous amount of business with India, but now that business goes to the United States and Russia. Russia has also made an agreement with Italy, with Sweden, with Belgium and with some of our other allies to the injury of trade with Britain and the dominions. I will not refer to any more now, but they have made them with Hungary, Roumania. Britain did a large trade with Roumania in food and many other things like that. A great writer on all these soviet trade treaties, Peter Dene, said ably in his conclusions on the soviet raid on trade:
This picture of post-war trade agreements concluded by Russia and her satellites shows how great are the distortion and shrinkage of trade and economic activity in a vital part of Europe. Before the war all these countries did

Foreign Exchange Conservation
a far larger trade with Germany, with Britain and other western lands, and in many cases with one another. The great bulk of all this has vanished. What remains comprises only the most essential-but also the most paltry- exchanges.
We cannot now, under preferential trade, do any particular trade with the empire. The A.R. Clarke and Company Limited, a fine patent and finished leather manufacturing concern was, before the war, located in my constituency. They did trade with Asia Minor and almost every other country in Europe and the far east under preference, and with India, but they have had to close up. Now the United States or some other country will get that trade. This writer, Peter Dene continues:
Very striking, 'among other things, is the inability of the much-vaunted soviet system to supply its satellites or anyone else with manufactured goods; raw materials are still the staples of Russia's exports. The fact, and its lessons, should be noted. As for the soviet satellites, a story current in Poland summarizes neatly what the present situation means for them. "What are the trade relations between Poland and Russia?" asked a foreigner.
"Oh! most cordial!" answers a Pole. "We are sending them our textiles, and in return they are taking our coal."
Did you ever hear of such a system as that? Britain did a large trade with Poland for many years. I am not going to vote for this particular bill without a protegt. I believe this particular bill will be the greatest economic gamble this country has ever made. If we abandon the mother country so far as preference is concerned, we shall never get preferences back. The government have not a mandate from the people. They have refused to give the people the facts, and they have not been altogether fair in giving the House of Commons the facts. As Mr. Wilgress said the other day, they cannot change this agreement one iota, and, as I say. we are only conducting a post mortem. It has been signed, sealed and delivered by twenty-one countries and it is retroactive to November 17. Mr. Wilgress sent a wire on behalf of the Canadian delegation from Havana saying that 800 amendments had been moved by twenty-one nations, Canada proposed none and not one was accepted there. Is that, the kind of business we want to transact in this country? I say no.
The plan is all wrong. We shall find that there will be widespread unemployment and the reimposition of controls which will hamstring business and retard the development of our national resources, for want of a national policy for our resources. What have we done to save United States dollars since 1923, when I raised this matter? Have we a national coal
and fuel policy today? No. Have we an oil supply, a policy of pipelines and real development? No. Have we developed the water powers of this country? No. We are even exporting power to United States industries along the St. Lawrence from power companies in Ontario and Quebec.
The present government has strangled the St. Lawrence waterway. They are to vote in Washington on Friday on the St. Lawrence waterway. I introduced resolutions concerning this waterway practically every year from 1923 onward. What is the policy of this government? Apparently the Minister of Transport (Mr. Chevrier) last fall appointed another useless commission to investigate the Lachine part of it. It will be going on in this way until doomsday if the present government has anything to do with it.
We should) develop our own natural resources. Last year we had a chance to save the base metals of Labrador for the people of Newfoundland and for the benefit of this country. As the hon. member for Davenport (Mr. MacNicol) suggested last night, smelters should1 be erected to process this Labrador ore. We had a long discussion about these Labrador natural resources being handed over to a private company in the bill I opposed here last year. That is one of the most fatal mistakes we have ever made. This great hand-out is being made to private interests for their own power and gain. These various American interests are largely run from New York by United States citizens, and they have the best sites all over Canada, of our raw materials and natural resources.
I am a great admirer of the United1 States, but I think they would1 appreciate us more if we told them our side of the story. They do not want to take unfair advantage of us. We know what they did in the last two wars and we know what they are planning to do under the Marshall plan. They are a great people and they would respect us more if we told the truth, the whole truth and nothing but the truth about this particular bill, and our side of the story after the last war. We have been told nothing about this bill; we have been blindfolded and kept in the dark.
I am sorry to see the Minister of Reconstruction and1 Supply doing this work. This country stands at the darkest hour in its economic history. I do not know where the empire is going or whether the empire will survive. England is facing her darkest days. The Marshall plan is part and parcel of this bill because they will expect United States dollars for the food Canada supplied1 for Europe under this bill. It would be far better for the United States to hand over all that
Foreign Exchange Conservation

to Europe. Parts of the United1 States loan to Britain are being given to other countries in Europe. It would be far better if they bought these things from us and then sent them over to Europe. We hope Britain will weather this storm. She can if she is left to herself. Britain is a great nation. She stood by us in two wars.
The hon. member for Vancouver South (Mr. Green), who has done splendid work and whose speeches I always like to hear, has complained about British Columbia not having a cabinet minister. In the last parliament which was dissolved in 1945, we had as many representatives from the Toronto district as there were members of our party from five or six of the nine provinces; yet the Toronto district has never had a cabinet representative since 1935-Toronto, the greatest city in the dominion, the centre of education, the leader in municipal institutions in the country, Canada's greatest manufacturing, taxpaying city and the centre of a great area of agricultural development. Yet we cannot get enough dollars from the government to have a steam suburban service, although Montreal island has had it for thirty years. We cannot get anything like that out of this government for Toronto. We are just a lot of orphans.
My hon. friend the member for Vancouver South perhaps can get along without a cabinet representative from British Columbia for two weeks or a few months, because the Toronto district has not had since 1935 any of these luxuries, and they are a luxury.
Under preferential trade we used to deal with Britain, our best customer, and send her our grain, food and raw materials and manufactures. Now see it gone and study these soviet deals and you will draw a lesson from them that will be fatal to Bill No. 3. As Time in its last issue said, Canada has now become the forty-ninth state of the United States.
Mr. SOLON E. LOW (Peace River): Mr. Speaker, I think it can be truthfully said that the members of this little group have been fighting the principle of Bill No. 3 ever since 1945. In the fall of that year the thirteen Social Crediters in this parliament, aided by the valiant efforts of the hon. member for Broadview (Mr. Church), fought this whole house to a standstill on the question of nondiscrimination and the most-favoured-nation clauses involved in the Bretton Woods agreement. We have continued consistently to fight that principle ever since and will continue to fight it until we get some sense into the heads of members on the other side of the house who are determined to dive headlong, and carry Canada along with them, into the

certain morass prepared for them under the Bretton Woods agreement.
We have sympathy with the minister's need to safeguard Canada's supply of United States dollars. We understand that unusual measures must be taken to safeguard our position with regard to our supply and reserve of United States dollars, and we would gladly give him every support in whatever measures he sees fit and proves it necessary to take to that end. But when in this bill he also involves the principle of non-discrimination, this group has to fight against it, and it is mainly on that ground we have opposed this bill strongly and consistently. The principle of non-discrimination we hold to be a pernicious thing. It is a diabolical thing, and in due time every .informed person in Canada will learn that it is a diabolical thing. In this bill the principle of non-discrimination or most-favoured-nation succeeds in extending to everybody non-discrimination with the exception of the Canadian people, against whom it is viciously discriminatory, and it i= mainly because of that, sir, that we must oppose the third reading of this bill.


Douglas Charles Abbott: Mr. Speaker, the hon. member for Eglinton (Mr. Fleming) asked me the other day whether some arrangement could be made for the regular publication of statistics as to the number of permits issued under this legislation. I said I would give the matter consideration and discuss it with the officials, which I have done, and I have come to the conclusion that it should be sufficient if we were to make available such statistics every three months, in quarterly statements. In addition, there will be the regular annual statement as required by the bill. If additional information is desired at any time it could, of course, be made available, but it seems to me that if regular quarterly statements are issued of the number of permits granted it would provide the information which the public and hon. members might wish. I would think it would be sufficient if that information were made available to the press and issued to anybody who might wish to obtain it.


Mr. TUCKER:: I was paired with the hon. member for Vegreville (Mr. Hlynka). Had I voted I would have voted for the motion.


Wilfrid Gariépy: I was paired with the hon. member for Victoria-Carleton (Mr. Hatfield). Had I voted I would have voted for the bill.


George Ewart Nixon: I was paired. Had I voted I would have voted for the bill.


Walter Little: I was paired, Mr. Speaker. Had I voted I would have voted for the third reading.


John Bracken: I was paired with the Prime Minister (Mr. Mackenzie King). Had I voted I would have voted against the measure.


Winfield Chester Scott McLure: I was paired with the member for Beauce (Mr. Dionne). Had I voted I would have voted against the motion.


Norman Jaques: I was paired with the member for Matapedia-Matane (Mr. Cote). Had I voted I would have voted against the third reading.


Frederick Davis Shaw: I was paired with the member for Ottawa West (Mr. McIIraith). Had I voted I would have voted against the third reading.
(Translation):


Paul-Edmond Gagnon: Mr. Speaker, I was paired with the Hon. the Postmaster General. Had I voted, I would have voted against the motion.
(Text):
Bill read the third time and passed.
At six o'clock the house took recess.
Farm, Improvement Loans

After Recess
The house resumed at eight o'clock.



FARM IMPROVEMENT LOANS


[Stage Direction]
Mr. GLEASON BELZILE (Parliamentary Assistant to the Minister of Finance) moved the second reading of Bill No. 114, to amend the Farm Improvement Loans Act, 1944.
He said1: Yesterday when the resolution preceding this bill was introduced in the house the leader of the opposition (Mr. Bracken) asked a few questions respecting this measure. He asked how much money had been lent under the act, how many loans there were, and in what sections of the country. He asked if the loans were being used to the extent expected, and what losses if any there have been. He further asked1 for a full statement respecting this measure and its administration during the last three years. It was therefore deemed advisable that a short statement of the purpose and working of the act of 1944 and of the objects of this bill be given the house.
As hon. members are well aware, the primary purpose of the act was to fill a- gap in the credit system which has been developed in Canada to meet the needs of agriculture. That gap related chiefly to the provision of intermediate credit and certain types of short term credit to farmers for the improvement and development of farms, and for the improvement of living conditions thereon. The act aims at assisting the average farmer, who in the past frequently has not been able to secure bank credit for these purposes. It aims, moreover, at providing credit in a form and under terms and conditions which are convenient and suited to the needs and conditions of the particular farm borrower.
Farm improvement loans are made by the chartered banks, which are guaranteed against loss by the government up to ten per cent of the aggregate principal amount of loans made by each bank. The liability of the government is limited to an aggregate principal amount of §250,000,000 in loans by all banks, made within a three-year period. Loans may be obtained for periods up to ten years, depending upon the amount borrowed. The maximum amount of any loan that may be outstanding at any one time is $3,000. Interest is payable at the rate of five per cent simple interest. The regulations require that security of an appropriate kind shall be taken in all cases, and in order to facilitate the operations of the act and the taking of secur-

ity the provisions of section 88 of the Bank Act were extended at the time of its 1944 revision.
Since the act became operative on March 1, 1945, it has facilitated the chartered banks of Canada in making a total of 39,387 loans to a dollar value of $31,423,129.23, up to December 31, 1947. This total is divided by years as follows:
	Number of	Total
	loans	Amount
1945 (10 months) ..	.. 4,311	$3,381,742.021946 	.. 13.030	9.880,565.741947 	.. 22,040	18.100,821.47By provinces the	loans were i	as follows:Number of	Totalloans	AmountAlberta 	.. 14,600	$11,176,435.47Saskatchewan 	.. 12.908	10,438,919.84Manitoba 	.. 5,910	4,453,351.46Ontario 	.. 3,905	3,738.720.44British Columbia . .	. . 1,063	854.034.54Quebec 	.. 658	504,971.56Nova Scotia 	.. 169	125,053.71New Brunswick . ..	.. 120	107,370.71Prince Edward Island 42>	23,671.50
Of the total of some $31,000,000 lent under the act, there has been repaid the sum of $15,448,045.08. Repayments since the inception of the act are, therefore, equivalent to 49-1 per cent of the total amount loaned.
This bill provides for the following two amendments to the act of 1944. First, it extends the operation of the act for a further period of three years from March 1 next. Second, it broadens the field of loans in respect of which security may be taken by way of mortgage. Under the present act there are two limits on the amount of bank loans for farm improvement purposes that may be guaranteed by the Minister of Finance. First, there is a dollar limit of $250,000,000; second, there is a time limit of three years from the commencement of the existing act, which was March 1, 1945. The dollar limit allows a great deal of scope for further lending activity, but the time limit becomes effective by the end of this month. By this bill we close off the old pool of loans at what the amount will be at the end of February, and then provide for a new pool to start on March 1 next and to run for a further period of three years, provided that the amount does not exceed the balance of the dollar limit, roughly $215 million. Thus, in respect of the approximately $35,000,000 amount of loans made up to the end of this month, the Minister of Finance (Mr. Abbott) will pay all losses incurred by each bank, provided that they do not exceed ten per cent of the total eligible loans made by the bank. Then, in so far as new loans are

Farm Improvement Loans
made after March 1 next and up until the end of three years therefrom or until the total amount of loans made by all banks from March 1, 1945, equals $250 million, we will pay losses of each bank up to ten per cent of the loans made by the bank.
With reference to the second amendment, the situation is now that mortgage security can be taken only where the loan exceeds $2,000 and the period for repayment is longer than five years. This has been found unduly restrictive and has tended to prevent the making of certain loans which otherwise would be made if mortgage security could be given.
The new amendment makes it possible to take mortgage security if the loan is made for the purpose of financing the construction, repair or alteration of, or making of additions to any building or structure on a farm; or if the loan is made for any other purpose, exceeds $2,000 in amount, and extends for longer than five years.
In closing my remarks, I wish to say that the banks have continued to give excellent co-operation in promoting the objectives of this legislation, both in the way of publicity and generally in making the provisions of the act known.
Mr. H. R. ARGUE (Wood Mountain):: Mr. Speaker, hon. members will agree that the passage of a bill such as we now have before us is certainly essential. As the parliamentary assistant has ably pointed out, the scope of the provisions of the bill is wide indeed.
The original act, which this bill amends, provided for loans for farm improvements for such things as the purchase of farm implements, livestock, electrical systems, fencing, farm buildings and general improvements. Anyone who has travelled much in the rural sections of Canada will know that on almost any farm there is room for vast improvements.
I believe almost any farmer could use many hundreds of dollars to provide for improvements both in his farm equipment and in the home in which he and his family live. Therefore I believe the scope of this act has given the banks an opportunity to be of real service to Canadian agriculture.
The act when first introduced to the house in 1944 promised a good many things, and the then minister of finance stated in one place what he hoped the Farm Improvement Loans Act would do by way of reducing farm implement prices. Prior to the passing of that act the farm implement companies had financed their own credit w'hen they placed machines out on credit. The excuse was made by the implement companies that the reason their implement prices had been kept high
was that they had lost a lot of money through bad debts. The then minister of finance, speaking in the house on June 6, 1944, as reported at page 3609 of Hansard, said the following with respect to the farm improv-ment loans bill:
When the scheme is in operation the great majority of farmers will be able to arrange a loan at the bank and pay cash to the manufacturer or dealer for his machinery and equipment. The lower rate of interest payable on farm improvement loans will constitute a direct saving to the farmer, and I am also hopeful that this method of financing will make a real contribution to a reduction in prices of farm implements and equipment.
I submit that the implement companies have taken advantage of the fact that there is an act such as this which provides a different means of credit for the purchasing of farm implements, and have absorbed the former costs of credits. This is well shown by the profits implement companies have made in the past few years.
The Farm Improvement Loans Act provides for interest at the rate of five per cent. I would say, in view of the general interest rates prevailing throughout Canada at the present time, that the interest rate is too high. The Canadian farm loan board is in business for the making of farm loans for the purchase of land, and that board is able to operate with a reasonable profit at an interest rate of four and one-half per cent. The Canadian farm loan board, in its report, shows assets in 1947 amounting to $22,909,000, acquired mainly through loans, and it shows that it made a profit of over $165,000. That $165,000 profit was made in respect of loans totalling $22,909,000 at a rate of interest which is one-half of one per cent less than is provided in the present measure. The Canadian farm loan board must borrow' the money it uses for reinvestment purposes, and it has borrowed that money from the federal government at a rate of three and one-half per cent. So I say that the interest rate provided in the present measure is indeed high.
A further incentive to chartered banks has been the guarantee against loss up to ten per cent of the aggregate amount of their loans. Through this measure the government is saying to the banks, "We will give you the high rate of interest of five per cent, and also guarantee you against loss up to ten per cent of the aggregate amount of your loans. We will allow you to make the profits, and the Canadian people, through the government, will pay any losses you are likely to sustain."
I say this is leaning over backwards in an attempt to make very easy and profitable business for the chartered banks of Canada.
Farm Improvement Loans

I was pleased to hear the parliamentary assistant read some statistics as to the amount of business accomplished through this measure thus far. If I understood him correctly he said that something more than $31,000,000 had been made in loans thus far under the act. The number of loans is approximately 40,000. That works out to an average loan of a little less than $800. On the basis of the total farms in Canada, which was 732,000 in 1941, it amounts to only $43 per farm. If the money were spread over the three years it would mean that, through this measure, the average farmer has received somewhat more than $14 a year with which to make improvements on his farm. I submit that such a small sum of money will do very little toward providing the improvements that are necessary on farms from one end of Canada to the other.
The past few years have been relatively prosperous years. In my opinion they have been years in which our banks would be likely to think these would be good loans that would be repaid. If during the last three years the total loans amounted to only $31,000,000, when, times were good, then I submit that when times are not as good as they are today, when farm prices are lower as they are certain to be, this measure will not provide for the improvements that will be absolutely necessary on farms across Canada.
I think one of the reasons why farmers have not taken advantage of this measure more than they have was the experience they had during the nineteen thirties. During those years when they were unable to meet their interest payments they found that their debts increased each succeeding year. I regret that there is no crop failure clause in this bill under which farmers would not have their debts increased in years of crop failure. The fact that there is no crop failure clause together with the high interest rates no doubt accounts to a considerable extent for the fact that this act has not been used more.
In looking over the statistics provided by the bureau of statistics in connection with chartered banks for the period 1943 to 1946, I find that their investments in securities have increased much more than their loans. During that period, for each dollar of increase by way of loans the chartered banks increased their investment in securities by $4.30. The fact is that, even with a guarantee against loss amounting to ten per cent and the high rate of interest, the banks found it more favourable to invest in government securities. By that policy the people of Canada are being made to bonus the banks and keep them in business.

The total loans which the chartered banks may make under this act and still be eligible for the ten per cent guarantee is $250,000,000, but actually the loans made amounted to only $31,000,000. That represents twelve per cent of what the banks could have lent under the Farm Improvement Loans Act. I say that the banks have done a twelve per cent job. They have not accomplished what the then minister of finance said in 1944 it was hoped they would. The then minister of finance is reported on page 3608 of Hansard of June 6, 1944, as follows:
It is considered that a guarantee of ten per cent of the aggregate amount of loans made by one bank will be sufficient to offset the special risks attaching to farm improvement loans, yet will not be so large as to result in reckless lending without regard to the prospect of repayment. The amount of the guarantee is not, of course, the only factor that will influence the volume of loans. The attitude of the banks is important, and I have reason to believe that they will welcome the opportunity to extend their field of usefulness to farmers.
Whether they welcomed, the opportunity^ or not, they certainly have not done the job through this bill which was necessary to improve efficiency in farming and to better the home conditions under which the farmer has to live. If we are to get sufficient money into the hands of farmers with which to buy necessary new machinery, with which to build the buildings that are necessary on our farms and provide for the host of improvements that come under this particular measure we must nationalize the chartered banks of Canada. If that is done, then money could be lent to agriculture at a cost which would be much less than the five per cent provided here, perhaps one-half the figure.


Mr. GIBSON (Comox-Alberni):: Why not just give it to them?


Hazen Robert Argue: The hon. member should move over to the Social Credit group if he is going to give something away. As I say, in order to make this bill effective the banks must be nationalized. Certainly the banks have not lent the money that is necessary to bring agriculture up to an efficient level. If that were done interest rates could be lowered and farmers encouraged to apply for the loans which are necessary to improve their farming operations. Apart from that, the most important thing to do is to provide a crop failure clause whereby the debt of a farmer would not be increased during a year of crop failure
If farmers in Canada were certain today that their prices would be good for years to come; if they had faith in the so-called stability program of the government, and I say "so-

Farm Improvement Loans
called" advisedly, then they would be willing to apply for loans whereby they could make the necessary improvements. However,, in, spite of the fact that this bill will not accomplish the objects for which it has been set up, I think even this mediocre bill is better than no bill at all.


Mr. H. W. HERRIDGE (Kootenay West):: Mr. Speaker, I want to say a few words on this Bill No. 114, to amend the Farm Improvement Loans Act, 1944. I shall be brief because I spoke for nearly forty minutes the other evening on agricultural credit, and I can already see the pained expression on the face of the hon. member for Comox-Alberni (Mr. Gibson).	,


John Lambert Gibson: Go right ahead.


Thomas John Bentley: That comes from where he is sitting.


Herbert Wilfred Herridge: I know that this legislation has been of some benefit to the farmers of this country, but I do not think it is the final answer to the question of intermediate farm credit. I have a few criticisms to offer in connection with the bill in general.
My first criticism would be that the interest rate is too high. Anyone who has studied the history of agricultural credit in the older countries which have had a great deal of experience in the lending of money for agricultural purposes will agree that five per cent is too high a rate of interest. It is established, in Britain, particularly, that money lent for agricultural purposes should not be charged an interest rate of more than three and a half per cent. The interest rate under this bill, five per cent, is, in my opinion, too high.
There is no provision in this bill, unless it is made in the regulations, which I have not seen or read, for the lending of money for clearing land. Provision is made for the lending of money for fencing, drainage, diking and things of that sort, but there is no provision for lending money for the clearing of land. I think that is a shortcoming in the bill. Many people are trying to develop forest farms, quite a number of them in the riding I have the honour to represent. I suggest that many of our farm ventures in the future will be forest farm ventures, and therefore provision should also be made in the bill for the lending of money for the purchase of a small portable mill, just as a person can now borrow under the bill to buy a tractor or other farm machinery.
The total of loans made in British Columbia to date under this bill is about SS00.000. and comparing that with the $11,000,000 odd lent in Alberta, one would say that the act is not functioning very well in British Columbia.
One other criticism. I do not see any arrangements made for the lending of money to those raising feather-bearing animals. Loans can be made to those raising fur-bearing animals, and in my opinion some provision should be made for lending money to poultry farmers and also to bee farmers.
I am going to support this legislation because I think it is of some assistance to the farmers of this country, but I think the government should consider introducing federal legislation which will assist those who support credit unions. To mobilize the credit resources of the credit unions of Canada, we should have enabling legislation to make it possible for these organizations to work under a federal scheme. The credit unions of this country have a total capital of approximately $200 million, and if we had the proper type of legislation for the development of credit unions for rural purposes we would soon have a large fund in this country provided by the farmers themselves. If we enmesh, as it were, the people who are concerned with the administration of their own affairs we shall find that way much more successful than our present way of doing business.
The farmers of this country, particularly in the west, put their savings into banks and insurance companies. The banks and insurance companies, we might say, control the savings of the farmers of this country, and at the same time the banks of this country control the lending of money to the farmers. I would like to see that condition changed. I would like to see this government-and this is not a radical suggestion, not even a socialist suggestion- pass enabling legislation that would make it possible for the farmer organizations to develop credit unions to a much greater extent on a national basis, so that farmers could invest their own savings in what might be termed their own rural banks, and thereby have some control in their administration and in the lending of money for agricultural purposes.
During the past three years we have invested in industry in this country something like over $800 million a year. During the past year we have invested in agriculture, under the Canadian Farm Loan Act something under $3,000,000, and under this act, approximately $10,000,000 a year. When we consider that the capital value of agriculture in this country is approximately $5,000 million, with an annual production of $1,500 million, and that we have an investment of $800 million a year in industry as compared with $13,000,000 a year invested in agriculture,
Farm Improvement Loans

we must realize that agricultural credit is not being supplied in sufficient quantities to develop agriculture as it should be developed at this time.
I repeat the suggestion I made the other evening. I believe the whole question of agricultural credit in this country should be referred for study to the committee on agriculture and colonization where witnesses can be called and the views obtained of representatives of farmer organizations in this country. But in the meantime, realizing that this bill contains certain benefits for the farmers and that under the present scheme of things it is necessary, I intend to support it.


John Bracken: Mr. Speaker, as intimated to the house a day or so ago, we propose to support this measure. It was supported generously from all sides of the house when it was introduced in 1944 and we propose to support its extension today. It provides a type of credit which for too long has been denied the farmers of Canada, an intermediate type of credit.
Before I proceed I wish to thank the parliamentary assistant to the Minister of Finance (Mr. Belzile) for providing the information in answer to questions I asked a few days ago. At the same time I should like to compliment him upon his maiden effort in the post he now holds. I would particularly compliment him on his facility in the use of a language which I gather is not the one he has always used. I only wish I could do as well in his language as he does in mine.
There are two questions I wish to raise and which I hope the Minister of Finance (Mr. Abbott) will deal with either now or in committee. It is this. In this act as w'e have had it for three years, and as it is proposed to continue it for another three years, there is provision for a guarantee on the part of the government against loss up to ten per cent of the loans. I ask the Minister of Finance whether he believes it is necessary to continue that guarantee.
The other question I wish to ask is this. The interest rate on these loans is fixed at five per cent. In view of the prevailing low rates of interest, and particularly in view of the guarantee by the government to meet a portion of any loss, does the government believe that it is necessary to charge a rate as high as five per cent in this measure?
As I said, we support the principle of the bill. We are pleased to know that it has been appreciated by the farmers of Canada to the extent that it has, and I am sure that they will welcome its extension. I would,

however, appreciate a statement by the minister with respect to the two points I have raised, namely, the necessity of continuing the guarantee against loss, and whether the rate of interest could not be lowered at this time.


Thomas John Bentley: Mr. Speaker, I wish to say a word or two on this measure. I shall try not to be long, not long enough to cause any great frowm to appear on the face of the hon. member for Comox-Alberni (Mr. Gibson).


John Lambert Gibson: I am a tolerant chap.


Thomas John Bentley: He did interject one
remark when the hon. member for Wood Mountain (Mr. Argue) was speaking. He said, "Why not give it to them?"


John Lambert Gibson: You fellows are not satisfied with anything.


Thomas John Bentley: Even if you did give money to the farmers of Canada for capital development, it would be a good investment. I am not recommending it, but if you did it would be a good investment.


John Lambert Gibson: Good politics; go ahead and recommend it.


Thomas John Bentley: It would be good politics and I recommend that type of action to the hon. member. He might get some more independents around him and form a party of his own.


John Lambert Gibson: It would be an improvement on the C.C.F., anyway.


Thomas John Bentley: I should like to point out to the hon. member also, Mr. Speaker, that while it is important to have the industry with which he is so much concerned, namely, that of timber-


John Lambert Gibson: We do not get free loans.


Thomas John Bentley: We could live a lot longer without timber than we could without food. The important basic industry of Canada is in our agriculture and because of that, along with other hon. members who have spoken tonight, I am not going to oppose this bill when it comes to a vote. I am one of those who believe, if you cannot get a whole slice, you should take the bottom crust if you have to and hope that you can get some more later on. This distinctly is the bottom crust so far as agricultural loans are concerned.
I congratulate the parliamentary assistant on his method of dealing with this bill tonight; but beyond that I cannot congratulate the

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government on a bill that has produced only a total of $31,000,000 in three years. Certainly the agricultural development of this country requires more than an average of 810,000,000 a year to improve the capital equipment on Canadian farms. The very fact that it has not been done is an indication of two things: first, that the people who would be the customers for borrowing that- money, the farmers, feel that there is something risky about it. The five per cent is too high a rate for them to face. The second thing is that the banks, even though guaranteed, are not yet prepared, even with the guarantee of assistance that they have in this bill, to do what our Progressive Conservative friends remind us so much of, use a little venture in their business and actually help develop the country with venture capital.
Something is radically wrong when a measure of this kind has made it possible for only that much money to be lent in that number of years.


James MacKerras Macdonnell: Will the hon. gentleman permit a question purely for the sake of information, because I have no knowledge of the matter? Will the hon. gentleman say whether he does not think the amount of loans, which he considers small in the last three years, may have been due to the fact that farmers have had a great deal of purchasing power, and perhaps for reasons of the recent war there was not the enormous amount of farm machinery and so on available? The chief part of my question is whether he does not think the amount of the loans has been due to the fact that the farmers have had a great deal of purchasing power, and did not require to ask for the loans?


Thomas John Bentley: Without question I think the hon. member for Muskoka-Ontario is correct, that there have been larger amounts of money in the farmer's pockets, and possibly a shortage of goods has made it unnecessary for him to borrow, or made it impossible for him to borrow the amounts for capital equipment that he might otherwise have done. The price may also have had something to do with the matter. But when you consider all that, $31,000,000 is a pitiably small amount. I venture to say, Mr. Speaker, that if the recommendations of those who have spoken tonight, the hon. member for Wood Mountain and the hon. member for Kootenay West (Mr. Herridge), with regard to interest rates were accepted it is entirely likely that the farmers would make use of an act which permitted them to borrow money at a lower interest rate, and they would retire present loans
which many of them have at the present time with private institutions and on which the interest rate is comparatively high. I believe that would develop much faster than we can estimate at the present time.
However, the fact remains that the loans have been small and that the need for agricultural development is great. Because of that, I believe also we should have a much lower interest rate. I do not know whether we can ask the private banks to reduce their rates or not. Personally if I had my way- which, of course, I shall not have while that outfit sits over there to your right, Mr. Speaker-I would nationalize the banks and rearrange their policies so that they would actually serve the people rather than make a profit for their shareholders as they are doing at the present time.


John Lambert Gibson: Then you would have to vote right before you got a loan.


Thomas John Bentley: No, not at all. You do not now' have to vote right in order to get a loan and you would not have to do it then. You would have to have the right kind of a proposition to lay before the lending authority and then you would get the loan. That is the way it would operate under a C.C.F. government. Nationalization would not mean political partisanship on the part of every prospective customer of the bank, and it is ridiculous to make statements of that kind. However, we can expect ridiculous statements to be made now and again by some people.
We have the Canadian farm loan board which makes it possible for longer term loans. This particular bill which we have before us tonight simply extends the old act of 1944 which is headed:
An act to encourage the provision of intermediate term and short term credit to farmers for the improvement and development of farms . . .
In this country there should be provision for a lending institution which can use money created by the parliament of Canada for the use of the people of Canada in this kind of development. If that were done it would be possible immeasurably to reduce the risks of the loan and the interest rates. We recommend that for the government's consideration and for the consideration of all hon. members.


John Lambert Gibson: Why don't you join the Social Credit party?


Thomas John Bentley: The hon. member can call it anything he likes. We believe it would be a proper public service, and that is part of the C.C.F. policy. If it is the policy of some other
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political party, that is fine. We have no quarrel with other parties having that kind of policy also. But since we are not likely to get it from those who administer the affairs of this country at the present time, I want to draw this to the attention of the responsible members of the front benches on the other side of the house that bank means "a bank incorporated under the provisions of the Bank Act." That again is not fair. It makes it possible for the chartered banks, privately owned institutions, to make loans under a pretty good guarantee at a pretty fair rate of interest, and they are very unlikely to lose. That being the case, I see no reason why even this government, who time and again, through the voice of their Minister of Agriculture, have claimed to be the fathers of co-operative enterprise, have not included among those who have the right to make loans under the guarantee the credit unions of the country.
In Saskatchewan we have, I believe, about 182 of them, besides a central organization which has, as its membership, co-operatives and credit unions. In Quebec there is a great credit union development, and in other provinces there are such institutions to some extent. If we are to give the right to private banks to lend money under a guarantee of the government, then I do not see why the government should not extend the same privilege to the people's banks which are, as we call them, credit unions.
If that suggestion were adopted I do not think it would be very long until this government, or any government sitting across the way, would recognize the value of such action and take steps to encourage further development of people-owned or co-operative banks of that kind, where the lending of the money, whether under government guarantee or not, would be supervised by people who have a definite interest in the institution making the loan, and where the decision would be made as to whether the loan was a good one.


An hon. MEMBER:: Private enterprise.


Thomas John Bentley: Co-operative enterprise in the shape of these credit unions is private enterprise, infinitely more private than some of the monopolies which at the present time exercise such economic control over certain natural resources and business institutions that no individual less financially strong can possibly hope to compete with them in that field. In the field of co-operate enterprise, however, which is distinctly private and distinctly voluntary, these people can learn and do learn successfully to operate their own co-operative banks with their own money. They lay that money

out in loans under the careful supervision of a credit committee according to decisions made at their annual meetings attended by members of the institutions.
I suggest that if this government would make it possible for these institutions to receive the same treatment as that accorded the chartered banks which are now lending money under this act or any other assistance act that is passed, and if in doing so the government would also encourage the development of such institutions so that there could be built up and organized credit unions and co-operative banks in the country, it would prove to all members of this house and to the people at large that it is possible to have publicly owned banks operating successfully, efficiently and in the interests of the public who will produce the things that this country needs so badly.
One other aspect of this bill which I criticize, even if none of my other suggestions are taken into consideration, is the fact that this act was passed only three years ago. It was passed for a term of three years, which term will expire next Saturday night, I suppose, and this 'bill enables it to continue for three years more. If this kind of bill is necessary, and I do not see why the house passed it if they did not 'believe it was necessary; if it is essential to have this kind of institution, then why in the name of goodness should we limit its lifetime to three years? If the government really 'believes that it is a good act, why should it not extend the act for at least ten years; or has the government some benevolent idea that at the end of the next three years it will have an improvement to offer? If so, let the government tell us what that improvement is and we will congratulate them upon it. But why limit the terms of this act to three years? If they believe that it is for the general good of agriculture and, therefore, of the country, I cannot see any object in bringing in this bill unless it is extended for at least ten years, and I would say even longer. If this bill were for a period of twenty-five years we could offer amendments at any time to improve it along the lines I suggested earlier in my remarks.


An hon. MEMBER:: They fear they will be out of there in three years.


Thomas John Bentley: An hon. member says they will be out of there in three years. They will be out in two years. I do not think they will be in there a third year.


John Lambert Gibson: What
minister will you be?


Thomas John Bentley: The hon. gentleman asks me what minister I shall be. Well, I shall net

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be a minister such as they have in British Columbia carrying the title Progressive Conservative

Liberal Progressive coalition. I shall have a definite mame. I shall not have my arms around somebody out there while opposing them here. It has been evident in the last few days in British Columbia that Rudyardt Kipling was right when he said that the colonel's lady and Judy O'Grady were sisters under the skin-I mean Colonel Drew's lady and; the Liberal Judy O'Grady.
What I was about to say when I was interrupted by the hon member was that, even if the Liberals were over there after the next general election, I believe I am offering constructive suggestions for a farm loan institution, and I hope that all members in the house will see the value of these suggestions. Therefore, no matter which party may in the course of events occupy the benches over there, I hope that the words of wisdom which I have imparted tonight will have sprouted and grown up into something worthwhile. At any rate, this bill is better than nothing, and consequently I cannot say anything against it except that it should1 be a lot better than it is.
Mr. VICTOR QUELCH (Acadia); I have just a few comments to offer on this bill. We in this group support the bill because we believe it serves a useful purpose; but, as we said when the bill was first introduced in 1944, we believe the rate of interest is too high, having in mind the fact that the government guarantees losses up to ten per cent. However, I do not feel like joining with some of the other speakers in criticizing the measure on the ground that the amount of business that has been done is small.
I would not at this time advise any farmer to go into debt, because at the present time the prices of everything the farmer has to buy are at top levels and there is no guarantee today that in the not far distant future the prices of the things he has to sell may not have gone down. If a farmer now loads himself with debt he may have to pay that debt back at greatly reduced prices. Therefore it is fortunate that this -act has not been utilized to a greater extent than it has been, and I am hoping that it will not need to be resorted to, to any great extent.
I realize, however, that there will always be a certain number of farmers who will have to make use of legislation of this kind. You remember how in the early days it used to be possible for farmers to buy machinery from the machinery companies without making a cash payment down. A farmer could buy a binder and pay for it in three years. Today the situation is different. If you want a binder or
a combine you have to pay cash, and if you have not the cash you have to go to a finance corporation and borrow the money. When you go to a finance corporation you pay very high rates; you pay finance charges and a high rate of interest. In view of the fact that some farmers have to buy machinery when they have not the cash, it may be a good thing to have legislation of this kind under which they may get loans at a lower rate.
I would not take the stand that it is not advisable to use this measure to any great extent if at this time we had a long-term program of stabilizing agricultural prices. If agricultural prices were stabilized at parity level for the future, then a farmer could go ahead with full confidence and borrow from an institution of this kind. So far we do not have that. We have no legislation to guarantee prices beyond 1949, as far as wheat is concerned. The Agricultural Prices Support Act is a transitional measure; it may be here today and gone tomorrow for all we know. We are hoping that the government this session will bring down legislation to stabilize agricultural prices in future, at a parity level. Until that is done, however, I repeat that I think farmers would be wise to avoid borrowing, as much as they possibly can. Most of us remember what happened after the last war, when so many farmers borrowed money. They paid high prices for the things they bought; they paid high interest rates, and after a few years they were repaying those loans with sixty cent wheat, though the debts were incurred at a time when wheat was $2 a bushel. I remember that, as I think all hon. members remember it. With that in mind, it will be a good thing for farmers if they can get by without having to use this legislation. We have a number of questions to ask, but we shall have to wait until the committee stage is reached.


Mr. P. E. WRIGHT (Melfort):: I should like to say a few words in support of what was said by the hon. member for Wood Mountain (Mr. Argue) and the hon. member for Swift Current (Mr. Bentley) with respect to this bill. The hon. member for Wood Mountain said he believed that the interest rate was too high. I quite agree. This summer I had the privilege of meeting a gentleman who was visiting Canada, and who was chairman of the Birmingham city savings bank, which was started by a small group of the Birmingham city council some twenty-two years ago. Since that time the institution has grown until today it has forty branches in Birmingham, with a central office. One of the things he could not understand was why our interest rates should be so high in Canada. He told me that the people's bank in the city of
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James Horace King: Order. I am sorry to interrupt the hon. member but I would direct his attention to the bill now before the house and ask him to confine his remarks to it. He should discuss only the merits of that bill, which is to amend the Farm Improvement Loans Act, 1944. It is not a bill to amend the Bank Act.


Percy Ellis Wright: I am talking about the interest rate being charged under this bill, and as an illustration I have mentioned a people's bank in Great Britain, to prove my point that I believe the interest rate is too high.


James Horace King: Order. I believe it is my duty to point out to the hon. member that since the beginning of this session the Speaker has been very lenient in not requiring hon. members to confine their remarks to the bill or measure under discussion. I believe that from now on I must remind hon. members that it is a rule of the house that on second reading the debate should be on the merits of the bill. I am sure the hon. gentleman will agree that he should not take advantage of this opportunity to discuss the position of the banks in Canada or the possibility of amending the Bank Act in order to alter the banking system in this country. What we have before us is a bill to amend the farm loan act, and I would ask hon. members from now on to confine their remarks to the measure before the house.


Percy Ellis Wright: I shall do my best to follow Your Honour's directions.
I want to support the suggestion by the hon. member for Swift Current that the provisions of this act should be extended to the credit unions in Canada. I am sure they are closer to the people who will be actually requiring these loans than probably any other institution in this country. If they could be given the privileges that exist under the bill, including the government guarantee, I think you would find the loans would increase to a very great extent, because people in rural

areas like to deal with their own institutions, especially in those provinces of Canada where the co-operative movement and the credit unions have been built up. Those were the two suggestions I wished to make.


James MacKerras Macdonnell: I presume the parliamentary assistant will bo making some comments, and I wanted to ask a question with respect to one or two figures he gave. He pointed out that in the province of Quebec there were only 658 loans as against nearly 6,000 in Manitoba; or, what is perhaps more comparable, as against something like 3,900 in Ontario. Would the parliamentary assistant say something by -way of explanation of that, if there is a ready explanation? It would seem as though the legislation as at present constituted is not suitable for Quebec.


Mr. W. GARFIELD CASE (Grey North):: Mr. Speaker, this bill is entitled, "An Act to amend the Farm Improvement Loans Act, 1944." I am convinced that this amendment is designed solely to protect the institutions which are lending the money for these farm improvements, and for that reason I may be more or less critical as we proceed to deal with the various clauses of the bill. I consider it unfortunate that we have the trend which is evident on the part of our rural population, and particularly the younger people, toward the larger urban centres, which indicates that they are losing their interest in the rural life of the community. I also think it is unfortunate that those who reside in the urban centres do not seem to appreciate how much the future economic welfare of this country depends upon the basic industry of agriculture; and I think that is the case in other countries as well. So my suggestion would be that rather than seek any restrictions such as those imposed in this bill we might encourage those who are in a position to lend money to have greater confidence in the future agricultural development of this nation so as to be ready to assume some credit risk.
There is evidence in the bill of a lack of confidence in the future productive capacity of the nation. I make the appeal that, in due time, our urban centres must come to appreciate the contributions made to the economic welfare of the dominion by our basic producers, including those engaged in agriculture, our fishermen, those who work in the mines and in the forests.
When we travel through life we think of our railroads; we think of the police force which protects us, the firemen who protect our property. But, in a sense, none of these is basic. So my appeal is simply to make it

Farm Improvement Loans
more attractive for the farmers of this great land to remain on their farms, and to make it possible for them to show a profit from their operations.
I repeat that this measure to amend the Farm Improvement Loans Act conveys only one thought to me, and that is greater security for the lender and less confidence in the future of Canada for those who must borrow.


[Stage Direction]
Motion agreed to, bill read the second time and the house went into committee thereon, Mr. Macdonald (Brantford City) in the chair.
On section 1.-Limitation of amount of liability to bank.
Mr. LOW:: Perhaps the parliamentary
assistant might give us a little more information at this point. Has he any figures showing the losses sustained, if there have been any losses sustained and paid by the government to date?


Mr. GLEASON BELZILE (Parliamentary Assistant to the Minister of Finance):: None, so far.


Solon Earl Low: Is it possible to get any figures showing a comparison of the cost of servicing this type of loan with the cost of servicing an ordinary bank loan to a farmer?


Gleason Belzile: I do not think there is any difference in the servicing cost of these loans. They are rather small loans, averaging about $800 each. I do not think the cost of servicing them is much higher than the average cost of servicing at a bank.


Solon Earl Low: Should it be any greater, taking into consideration the supervision that has to be exercised and the form of mortgage and hypothec that has to be taken?


Gleason Belzile: I do not think so.


Solon Earl Low: It should not be any greater than the cost of servicing an ordinary loan.


Gleason Belzile: I do not think so.


Solon Earl Low: Is it not possible for most farmers who would qualify under this bill to obtain loans today from commercial banks at five per cent, the same rate as is called for in this bill? I am speaking of short term.


Gleason Belzile: I think the standard rate now in banks is six per cent on short-term loans for small amounts. Personal loans are given at from five and a half to six per cent at the banks.


Solon Earl Low: My experience is that a good many are given at five per cent. Does the parliamentary assistant not believe that the value of a government guarantee which would
prevent banks from losing one cent on these loans would be worth more than one-half of one per cent, bearing in mind the fact that today bonds of the Dominion of Canada set the interest base to a great extent, and call for about three per cent? I notice the chartered banks find it very profitable to invest considerable sums of money in government bonds at three per cent. Should the government's guarantee not be worth a considerable reduction in the rate of interest?


Gleason Belzile: Section 3 (1) Of) of the Farm Improvement Loans Act, 1944, states:
. . . the rate of interest charged by the bank on the loan did not exceed five per centum per annum simple interest.
Of course that is the maximum.


Solon Earl Low: How many loans have been made under the act since 1944 at less than five per cent?


Stanley Howard Knowles: And what is the answer?


Gleason Belzile: None.


Solon Earl Low: It becomes a serious matter for the farmers of the country. Where the government is taking all the risk the people would have to make good any losses through increased taxation. In a measure, therefore, people are supplying their own credit; they are practically guaranteeing their own credit. I maintain that the government should consider seriously amending the legislation in committee to provide for a rate of interest lower than five per cent. My judgment is that the banks, having had some experience with this sort of thing, might very well lend money under this act with this guarantee to qualifying farmers at a rate of interest of not more than three and a half per cent and make money. I would suggest that the minister- and his parliamentary assistant consider that proposition to see if it would not be possible to bring in an amendment providing for a rate of interest of not more than three and a half per cent.


Mr. MAYHEW:: I would point out that many of these loans have been made in remote parts of the country rather than in the more settled areas. Many have been made in the Peace River district. Most of the loans have been on heavy farm machinery such as combines and tractors. It should be noted that a loan may extend over a period of ten years, and the bank must service it during that period. I think a rate of five per cent on a small loan over a long period is an excellent rate. The total of the loans for the first year was _ $3,000,000; for the next year it was $9,000,000 and last year it was $18,000,000. I
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think that indicates that the act has done the job it was intended to do. I am quite satisfied that in the next three years there will be a steady improvement. This was not intended to be the sole lending body or to provide a cure for all the ills of farmers; it was intended merely to provide loans on not very good risks.


Solon Earl Low: Is it not true that the larger part of the loans made under this act have been made to good credit risks rather than to poor ones as is suggested?


Robert Wellington Mayhew: The fact that there has been no loss would indicate that the risks have been good, but you have to consider that the last three-year period has been a good one. Machinery which can be easily moved or which can be destroyed in a fire is not a good risk for the lending of money.


Solon Earl Low: It is easy to see that my hon. friend has not had much experience with machinery of the type that farmers would buy. Is it not true that a certain cash payment must be made before a loan can be obtained?


Robert Wellington Mayhew: Yes.


Solon Earl Low: Is it not true that the repayment schedule takes into consideration the going rate of depreciation on the machine?


Robert Wellington Mayhew: Yes, you are about right.


Solon Earl Low: Is it not true that the machine must be insured before a loan is granted?


Robert Wellington Mayhew: No, that is not true.


Solon Earl Low: It certainly is true in connection with trucks. A good bank manager would certainly make sure that there was every protection before a loan was granted.


Robert Wellington Mayhew: No insurance is required.


Solon Earl Low: Can a bank demand insurance on farm machinery as it demands it on trucks? Can the hon. member assure the committee that, in view of the fact that no losses have been sustained over a period of years in granting loans at rates of interest comparable with those charged for commercial loans, the government will give consideration to the lowering of the interest rate?


Robert Wellington Mayhew: Personally I would think the government would be wise to continue the five per cent rate. There has been no great experience with this act during normal times because the last three years were not normal.


Solon Earl Low: Has the government given consideration to extending the time and also to creating an institution capable of taking care

of the needs of farmers and other basic producers for short and medium term loans?


Robert Wellington Mayhew: I do not think my colleague or I could presume to say what the government has been doing in connection with this.


Solon Earl Low: The hon. member for Swift Current called attention to the need of having an institution which would extend medium and short-term credits on a reasonable basis to farmers and other basic producers. That is certainly lacking now. Would it be possible for us to hope that this might grow into such an institution, or is it the government's plan to cut it off at the end of three years and' say they are through?


Robert Wellington Mayhew: If the credit unions were dominion organizations we might consider it.


Solon Earl Low: The honi. gentleman apparently has misunderstood me because I did not mean to use the credit unions. My own experience in Alberta leads me to believe that the credit union would not be the suitable body to supervise this type of loan. I doubt very much if the co-operative principle could be successfully maintained where the money is supplied by an outside source, say a govern* ment, and given to the co-operative union to supervise and administer. My judgment is that it would not succeed. It may have succeeded in South Africa or Europe, but I doubt very much if the co-operative set-up in the provinces of Canada is such as to guarantee the success of such a venture. What I wanted to ask the hon. gentleman was whether it would be possible to use the experience gained under this act to develop an institution that would be prepared to extend medium and short-term loans of this kind to farmers and other basic producers.


Mr. LESAGE:: Surely that is a question of government policy.


Solon Earl Low: That is what I am trying to get at.


Joseph Arthur Lesage: It will be made known in due time.


Thomas John Bentley: I would point out to the hon. member for Peace River that no money is used except the bank's money. Credit unions operate the same way. It has been suggested that the credit unions would not be a fit and proper institution because they would not be able to administer the lending of money which is not their own. That is not a valid) argument, because the banks are not lending money that is given to them by

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another institution. So the position of the two is exactly the same. Even though credit unions cannot create their own money, they could administer these loans satisfactorily if they were given the right to do so, even if they didl not do as extensive a business as a bank.
The junior parliamentary assistant stated that 49-1 per cent of the total amount lent had been repaid. Does that represent payments made on loans or retirement of loans or partly both, and, if so, to what extent in each case?


Gleason Belzile: Both.


Thomas John Bentley: What is the average
period of time for which a loan is made under this act?


Gleason Belzile: For a loan not exceeding $200, the maximum term is eighteen months; for $400 the maximum term is two years; for $750 the maximum term is three years; for $1,250 the maximum is four and a half years; for $2,000 the maximum term is seven years; and for $3,000, up to a maximum period of ten years.


Thomas John Bentley: Would it be difficult to give a breakdown of the number of loans within each of the categories just mentioned?


Gleason Belzile: I am sorry we have not a breakdown.


Alexander Malcolm Nicholson: The senior parliamentary assistant said that the period for which this act has been operating has not been a normal one, and I gathered from his remarks that he anticipated that the government might be required to make good some losses in the next two years. What is his basis for assuming that the last three years have not been normal? Does he anticipate a collapse in farm prices and that the government will have to compensate the banks for a substantial loss?


Robert Wellington Mayhew: We are not anticipating a slump.


Alexander Malcolm Nicholson: What did the hon. member mean by saying that this has not been a normal period?


Robert Wellington Mayhew: You would not call the last three years exactly a normal period.


Alexander Malcolm Nicholson: I was using your words.


Robert Wellington Mayhew: I think the farmers and nearly everybody else in Canada have been more' prosperous in the last three years than in almost any other three years for a long time.


Thomas John Bentley: Would you not call that a good norm?


Robert Wellington Mayhew: Yes.


Alexander Malcolm Nicholson: The farmers would like to have as good prices as they are getting now. It is difficult to convince them that they are getting too large a share of the national income. Is the government looking for a slump?


Robert Wellington Mayhew: We are not looking for a slump and I do not think Canada need have a slump unless we make it. If we keep on doing the work that has to be done in Canada in the next few years we shall have good times.


Mr. JOHNSTON:: If you change your policy.


Robert Wellington Mayhew: We shall have good times because I am sure this government is coming back again.


John Bracken: On the second reading of the bill I asked certain questions of the parliamentary assistant, one of which has been discussed to some extent in committee. The first had to do with the necessity of continuing the guarantee, and the second with the interest rate, about which there has been a good deal of discussion. When the government brings forward a measure of this kind continuing the guarantee clause and providing a rate of five per cent interest, ordinarily we can assume that that is the final policy of the government for the time being. The question I would ask, however, is this: has the government given consideration to whether it can eliminate this guarantee and still have money available under this measure to the extent necessary to serve the needs of the farmers for intermediate credit?


Robert Wellington Mayhew: I do not think there has been sufficient time to test whether it can work without a guarantee or not. If a farmer could get a loan from the bank in the normal way there would be no advantage in having this act; but by providing this guarantee we encourage the farmer to go to the bank and get a loan when he is in difficulties, even if his security is not of the best, so that he will not have to go to some small loan company and pay fifteen or twenty per cent for the money or have to buy machinery on a time-basis plan.


John Bracken: The fact that the government comes forward with the guarantee provision ini the bill indicates that it wishes to continue that policy for the time being. We have a right to assume that that is government policy. In the light of three years'
Farm Improvement Loans

experience in the administration of the act, is it fair to say that the government did re-examine its position and conclude that this guarantee was needed for sometime in the future? I assume that the answer is in the affirmative, and, if so, there is no use in pressing the matter further.


Robert Wellington Mayhew: The answer to that is very definitely in the affirmative. The government considers it necessary to continue the act on this basis.


John Bracken: With respect to the interest rate of five per cent, it was provided three or four years ago. Is it fair to say again that the government now feels that it cannot lower the interest rate for the next three years? Is that final government policy with respect to this matter? If it is we need not waste further time on it.


Robert Wellington Mayhew: That is government policy. We think that, in view of the amount of service which the banks have to give in inspection, collection and everything else, five per cent is fair and reasonable. This is merely an extension for another three years, during which time they can take full loan value out of the $250 million. The first act was for three years. We have used some $30,000,000 out of it. We are now extending the time in which the remainder of that money can be lent and on the same basis.


John Bracken: Then the government feels it would be unsound to bring forward a measure providing for a lower rate of interest under these conditions?


Percy Ellis Wright: The parliamentary assistant indicated that he did not have a breakdown of the loans as to amounts, but that he did have the breakdown as to purposes for which the loans were made. Could he give us the purposes for which the loans were made under the act?


Gleason Belzile: For the purchase of implements, the total number of loans made was 30,129, for a total amount of $24,984,022.59. For the purchase of livestock, the number of loans was 1,725, for a total amount of $1,009,770.88. For the purchase and installation of agricultural equipment or a farm electric system, the number of loans was 266, for a total amount of $132,527.20. For the alteration or improvement of the farm electric system, seven loans were made to a total amount of $2,471. For the erection or construction of fencing or works for drainage on a farm, the number of loans was 149 and the total amount was $186,185.07. For the construction, repairs or alteration of or making additions to any building or structure on a

farm, the total number of loans was 4,226, for a total amount of $4,128,472.35; and for any work for the improvement or development of a farm, the total number of loans was 2,885, for a total amount of $1,079,680.14.


Mr. GILLIS:: Has the parliamentary assistant a breakdown by .provinces?


Gleason Belzile: We have a breakdown by provinces which was given on second reading. Here it is. In Alberta 14,600 loans were made, for a total amount of $11,176,435.47. In Saskatchewan 12,908 loans were made, for a total amount of $10,438,919.84. In Manitoba 5,916 loans were made, for a total amount of $4,454,351.46. In Ontario 3,905 loans were made, for a total amount of $3,738,720.44. In British Columbia 1,063 loans were made, for a total amount of $854,634.54. In Quebec 658 loans were made, for a total amount of $504,971.56. In Nova Scotia 169 loans were made, for a total amount of $125,053.71. In New Brunswick 126 loans were made, for a total amount of $107,370.71. In Prince Edward Island forty-two loans were made, for a total amount of $23,671.50.


Arthur Leroy Smith: That was all read before, was it not?


Clarence Gillis: Thank you very much. That makes a complete picture in one Hansard. They do not like to see you do a good job.


James Arthur Ross: It is a double picture.


Arthur Leroy Smith: It is a double exposure, which ruins things. I want to ask this question of the assistant to the minister. As I understand it, this is simply extending the time of the present measure for another three years. The interest rate remains the same, five per cent?


Robert Wellington Mayhew: Yes.	-


Arthur Leroy Smith: Am I correct in assuming that it is the projection of the value of money over the next three years? The value is five per cent because you fix five per cent for your next three years. Am I safe in assuming that, that being so-we know it is so-it is the view of the government as to the interest value of money over the coming three years?


Robert Wellington Mayhew: I do not think one can assume that from these loans. If you were dealing in large loans over shorter periods or even over a longer period and with better security, naturally the interest rates would be considerably below that. Where our industrial loans are fairly large, the rate is 3i per cent. As I said before, under this measure we have loans of $200 spread over eighteen

Farm Improvement Loans
months. It costs a lot to service them, more than the actual interest rate, but I do not think it has any bearing at all on what one would call the normal rate of interest.


Arthur Leroy Smith: I realize what was said and I agree with it. I know that the service costs on short-term loans are higher than they are on long-term loans. But this is what I have in mind. Some years ago we set up 1250 million for the purpose of these loans, whatever they are. Frankly it does not matter to me what they are. They all bear a relative value to the different kinds of loans; therefore different rates are struck with respect to these different kinds of loans. What I am asking the parliamentary assistants to the minister is whether it is their view and, therefore, the government's view-because even though ministers may not express government policy I am sure that their juniors will since it is a well known thing in the operation of our country- that the continuation of the interest rate over the next three years on the same basis expresses government policy with respect to the value of money during that period? I am anxious to know whether that is the view of the government.


Robert Wellington Mayhew: I would suggest that the hon. member for Calgary West ask his question of the Minister of Finance when he is in his place.


Arthur Leroy Smith: Mr. Chairman, with the greatest respect in the world I can only say that officially I cannot see the Minister of Finance.


The CHAIRMAN:: Order. I probably should draw the attention of the committee to the fact that we are considering the Farm Improvement Loans Act, and it occurred to me that we should discuss the rate of interest in relation to that act and not from a wider point of view. In committee, as hon. members know, discussion should be strictly relevant to the section under discussion.


Arthur Leroy Smith: I am inclined to think that was directed at me, and unless I am greatly mistaken it was. But how can you possibly discuss any fixed rate of interest over a period of future years without having regard to the basic fact, which we all know so well, that rates change not only in three years but from year to year? The value of money is fixed by its interest rates. It starts with exchanges, and where you borrow; it runs into farm loans, housing loans, bank loans and all that sort of thing. With the greatest respect, Mr. Chairman, I think what I did say was entirely relevant; and I am anxious to know, for example-because we get wonderful leadership from this government in some things- whether it was the idea of the government that during the next three years, having regard only to $250 million, if you like-I said that with my tongue in my cheek because it is more money than I can conceive of-this policy of five per cent interest represented the government's view as to the future money market in this country in that period of time.


William Ross Macdonald: I understood the rate of interest at five per cent to be a maximum rata and not necessarily the rate to be charged under the bill, not a fixed rate at least. The hon. member for Calgary West may have been in order, but I did not think that under present circumstances it would be advisable to discuss the general rate of interest for all types of loans. However, I leave it to the committee.


Mr. BURTON:: I have no desire to go beyond the confines of the act, nor do I think any other member of the committee wishes to do so. Nevertheless, while the bill is before us, an opportunity is afforded the committee to endeavour to help the government to make the act as good os it can possibly be. I believe I am voicing the opinion of more members than those of our group when I say that there is much room' for improvement here. When we cover this territory we are only doing our duty as members of the committee. In that connection I should like to ask the parliamentary assistant whether the government, in considering the drafting of this legislation, gave any thought to extending the benefits of this provision to a wider field than is incorporated in the bill. In other words, has the government considered granting the same privileges to credit unions as to chartered banks? [DOT]


Gleason Belzile: Of course we appreciate what the credit unions have done for the people of the country, but I would point out that they are incorporated under provincial laws and therefore come under the jurisdiction of provincial governments, whereas the banks, being incorporated by federal statute, are under the jurisdiction of the federal government. It was therefore deemed advisable that these agreements be made with the banks, over which this government has some control, while it has no control over the credit unions since they depend upon provincial legislatures for their status.


Joseph William Burton: If I understood the parliamentary assistant correctly, before the benefits of this measure can be extended to credit unions they will have to be incorporated by dominion statute?


Gleason Belzile: Yes.
Farm Improvement Loam


Joseph William Burton: May I go one step farther and inquire whether credit unions in different parts of Canada, or any number of them, have made representations to the government to be incorporated in this undertaking, or have they been advised as to the steps that are necessary?


Gleason Belzile: I have not been informed that such steps have been taken. I happen to be very much interested in the caisses populaires in the province of Quebec and in credit unions in general, and I believe there was some kind of dominion council of credit unions, but I understand that they operate only on a provincial basis. Representatives from the different provinces sometimes attend the dominion council.


Joseph William Burton: I do not wish to labour this point, but I submit that the suggestions made by the hon. member for Swift Current, the hon. member for Wood Mountain and others of this group are worthwhile, and I hope the government will endeavour to encourage credit unions so to arrange their set-up that they can make use of this legislation. I am firmly of the opinion that credit unions operating within neighbourhoods in which these loans are made are just as competent to handle this business properly and efficiently as any branch bank manager. If my humble voice will be of any assistance in supporting my colleagues in that contention, I urge the parliamentary assistant to bring the suggestion to the attention of the minister.


Mr. IRVINE:: Would the parliamentary assistant be good enough to read the section of the act which gives power only to banks to handle the fund? If I understood him, he did not give the correct reason why institutions such as credit unions could not come under the act. I do not think it is because they are not operating under federal charter, but because this fund is confined to the chartered banks under the Bank Act.


Gleason Belzile: In section 2, paragraph (c) of the bill of 1944, under interpretation, "bank" is said to mean "a bank incorporated by or under the provision of the Bank Act."


Mr. KNIGHT:: It has been stated that the number of loans in Quebec is very small in proportion to population. Would the parliamentary assistant go so far as to admit that that is a matter for gratification on the part of the people of Quebec by reason of the satisfaction they have received from the caisses populaires as a lending institution?
(Mr. Belzife.]
Would the fact that there are so many caisses populaires in Quebec have anything to do with the fewness of loans in that province?


Gleason Belzile: In the province of Quebec a special credit which we call the prets agricoles and which is financed through the provincial government permits loans to be made for building and general farm improvement. In addition, as the hon. member just mentioned, there is, I should think, a caisse populaire in. almost every parish. They extend quite a lot of credit as well. Those probably are the reasons; and also, as I think my colleague mentioned a while ago, the farmers in my province are rather prosperous in these times. Then there has been a shortage of goods to be bought and a scarcity of labour, which have prevented some farmers from seeking loans.


John Thomas Hackett: Is it not a fact that the caisse populaire is not a rival of the farm loan board, but rather provides funds in smaller amounts to meet seasonal needs? There may be some mortgages, but as a general rule I think the loans of the caisse populaire do not constitute competition for the farm loan board. Then, speaking of the relatively small number of farm loans in Quebec, I believe such loans are not made to any great extent in the old parishes, where a large percentage of the people own their land free. I think the loans are made in areas where land is being taken up, where the French people are going as settlers or where they are buying land from English-speaking people or from large companies. I believe the percentage of loans is low on farms in the old parishes.


Gleason Belzile: The hon. member for Stan-stead is well informed on the situation of the farming community in the province of Quebec. I might add that our farming people do not go in for big machinery, combines and such implements, to the extent the western farmers do.


Mr. McKAY:: I wonder if the committee could be informed as to how the aggregate principal amount for lending purposes is apportioned as between the various chartered banks. If the aggregate of $250 million named in the bill is reached, on which, of course, the government guarantees against a ten per cent loss, are those loans based on the capitalization of the banks, or is some other method employed? A statement was given tonight as to the amount of loans made in the various provinces, but I do not think there has been any indication as to the amount the various chartered banks have been able to lend throughout the dominion.

Farm Improvement Loans


Gleason Belzile: I do not think there is any allotment or allocation made to the different banks on the basis of their size or capitalization. The loans are made on the application of the farmers to their own banks. I have before me a breakdown of the loans made by the chartered banks of Canada since the inception of the measure, as follows:
Number of Total		
	loans	Amount
Royal Bank of Canada ..	10,819	$8,600,000
Canadian Bank of Com-		
me roe 	10,208	7,900,000Bank of Montreal 	7,834	6.300,000Bank of Toronto	3,607	2,700,000Imperial Bank of Canada	3,141	2,600,000Bank of Nova Scotia ....	1,932	1,700,000Dominion Biank 	1.047	900,000Banque Canadienne Na-	tionule 	798	600,000B'anque Provinciate du	Canada 	1	1,200


Eric Bowness McKay: Just a word on		that point;
if no quota is set on some	definite basis there	
is nothing to prevent one	bank	from getting
the lion's share of the aggregate of $250 million.


James Arthur Ross: There is a point I think the parliamentary assistant can clear up in regard to the small number of loans in the province- of Quebec. You may say I am a little out of order, Mr. Chairman, but this is a temporary measure and I believe it is closely related to the farm loan act. There was a time when the province of Quebec paid half the interest rate under that act. Probably that province now has a lending board of its own, with interest at about three per cent. If that were so I think it would partly answer that question.


Gleason Belzile: The rate on farm loans financed through the provincial government is five per cent, of which I think the federal government pays two per cent, so that the provincial government pays only three per cent.


Mr. MacNICOL:: How much?


Gleason Belzile: The Quebec government pays three per cent interest and the federal government pays the difference of two per cent.


James Arthur Ross: Under the Canadian farm loan board?


Gleason Belzile: Yes.


John Thomas Hackett: The five per cent includes the portion of the capital which is repaid, does it not?


Gleason Belzile: Yes.


John Thomas Hackett: But the interest rate is as the hon. member for Souris stated; a straight three per cent, is it not?


Gleason Belzile: The total amount on a loan for forty years is 5-75 per cent per annum. That is capital and interest. Of that the federal government contributes a certain amount every year to take care of the interest, something like 2^ per cent, the same amount paid on federal farm loans.


John Thomas Hackett: But the interest is three per cent, is it not, as distinct from the refunding aspect?


Gleason Belzile: The total amount is 5-75 per cent per annum which takes care of interest and principal, but the straight interest is three per cent.	-


John Thomas Hackett: I am seeking now to ascertain the rate of interest as distinct from the amortization. It is my understanding that the rate of interest is three per cent and that anything in excess of this goes toward repayment of the principal.


Gleason Belzile: That is right; it is three per cent interest and 2-75 on capital.


Mr. McCULLOUGH (Assiniboia):: No
doubt when the Farm Improvement Loans Act, 1944, was brought into force the government intended that it should serve a useful purpose. They undertook to guarantee the lending institutions, that is the chartered banks, any loss up to ten per cent of the $250 million, in case that much should be loaned. Now, after three years, we find the government extending this act; but during the period it has been in force, only about $30,000,000 in loans have been taken up. I think it is quite clear that the act has not operated to the extent the government may have hoped it would, and I feel one of the reasons, as some of my colleagues have already stated, is that the interest rate is far too high.
The senior parliamentary assistant has told the committee this evening that he does not consider as normal the period of time this act has been in operation. One is disturbed if he is to take from that remark the suggestion that we can look forward to a period which is not normal. On account of that condition we are told1 that the government does not see fit to bring down the interest rate to one at which farmers can secure loans.
I feel there must be a real reason why the farmers have not gone to the banks and secured1 loans, or why the banks have not seen fit to give those loans. I find that in 1941 the total farm debts, including mortgages and
Farm Improvement Loans

agreements of sale, amounted to $799 million. That is a formidable amount of diebt on the farm population of this country. It has already been indicated in this debate that the lack of machinery on our farms is an urgent problem. Then, to go into the matter further, figures from the Dominion Bureau of Statistics show that the institutional holdings of farm debt 'by insurance companies, trust loans on mortgages, government agencies, railways and1 other organizations for 1945 were reduced1 to $263 million, whereas in 1938 the figure had stood at $418 million. Surely that indicates that the position of our farm people in respect of the reduction of debt is favourable. If we can anticipate the continuation of prosperity of our farming communities it is only reasonable to expect the lending institutions in this country to give farmers risk capital at a decent rate of interest. I would, therefore, ask the government to give real consideration to bringing the rate of interest dlown to two and a half or three per cent, more in line with the risk involved.
When we find the government putting a prop under private enterprise, as it is doing in this bill to the extent of ten per cent, and when we have the government's own statement that no losses have been incurred1-in other words, when we have prosperity the farmer pays his debts-it is only reasonable to ask the government to give serious consideration to reducing the rate of interest, and not leaving it so that provision is made for a maximum of five per cent, and a lower rate only if the bank sees fit.
While I am on my feet, I would ask the government to give serious consideration to the suggestion put forward by the hon. members for Wood Mountain and Swift Current to the effect that, in respect of crop failure, the farmer, after setting out his loss, should have a crop security, so that in the event of his losing his crop no interest would be payable in that year.
How many applications for loans have been made under the act, but have not been approved1?


Robert Wellington Mayhew: We would not have the number of applications where they have gone to the banks and have been turned down. But I am informed that it has not been customary to turn loans down.


Edward George McCullough: Do I understand the parliamentary assistant to say he is not aware of applications being turned down?


John Thomas Hackett: There must have been some turned down; good business would dictate that.
(Mr. McCullough (Assiniboia).]


Percy Ellis Wright: I take it that when the idea of amending the act was under discussion the government would have consultation with the banks respecting the amendments. During those consultations, were any representations made by the government to the banks respecting a reduction in the rate of interest, and may we have any information available with respect to those consultations?


Robert Wellington Mayhew: I cannot answer that question. I do not think any representations were made. I would point out, however, that this act has been in operation for only three years. Last year it was amended to include poultry farmers, and it is now being amended further to give wider use. I believe the committee and country can expect that the government will try to make the act a success and something which will be helpful to the people as a whole. Whether it can afford to amend the rate of interest at a later time, I cannot say.


John Thomas Hackett: What was the gross farm debt in 1930? I understood the hon. member for Assiniboia to say that it was about $400 million in 1938. The Farmers' Creditors Arrangement Act came into operation in the early thirties and resulted in a substantial reduction in the debt weighing upon farm lands. I believe it would be of interest to the committee if the parliamentary assistant could state by what amount the debts of the farmers were reduced by the operation of that act.


William Henry Golding: I do not believe it would be wise at this time to enter into a discussion of the Farmers' Creditors Arrangement Act. We should deal specifically with the bill before us.


John Thomas Hackett: Even if you did not think it wise, Mr. Chairman, we might differ from you on that point, but I would submit that the matter was in order. And. being in order, I should hope I would have the indulgence of the Chair to have an answer from the parliamentary assistant. If the information, is not available, we shall wait until it is.


William Henry Golding: I would say at once that, under the rules, the hon. member is entirely out of order. The rule is that in committee a speech must be strictly relevant to the section of the bill under discussion. Certainly at this time we are not discussing the Farmers' Creditors Arrangement Act.
Mr. TOWNLEY-SMITH:	Can we be
informed whether the money to be made available under this act is limited to any particular province? Could one province have the use of all the money, if it made the proper number of applications?

Farm Improvement Loans


Robert Wellington Mayhew: I suppose the first applications to come in would be served first. There is no other way it could be done.


John Thomas Hackett: I should like to go back to my question about farm debt. My question was relevant to farm debt; and unless we are going to-


William Henry Golding: We are dealing with a bill to amend the Farm Improvement Loans Act.


John Thomas Hackett: Yes.


William Henry Golding: The hon. member knows as well as I that this section does not present an opportunity to deal with the Farmers' Creditors Arrangement Act or any other act. That is one reason why we have not made greater progress, because we do not confine ourselves as the rules say we should to the section under discussion.


John Thomas Hackett: I do not discuss matters with the Speaker or the Chairman very frequently, but I am seeking to make a useful comparison. I do not think we would lose as much time if I were permitted to get an answer as we would in debating whether or not my question is relevant.


William Henry Golding: I happened to be here between 1930 and 1935, and I remember my hon. friend occupying this chair and taking the same position as I am now taking.


John Thomas Hackett: I think if I were to ask the Chairman to quote chapter and verse he might be a little embarrassed. I will not go further in denying what has been said, but in the meantime I would be grateful if the Chairman would make some allowance for that period of my green and salad youth and permit the hon. gentleman to answer the question.


John Ritchie MacNicol: Mr. Chairman, if I remember correctly, from 1930 to 1935 I occupied that chair more than all other hon. members put together.


John Thomas Hackett: I thank the Chairman for having mistaken me for the hon. member for Davenport.


William Henry Golding: I agree that the hon. member for Davenport did occupy the chair a great many times but, in looking through the records of the decisions given, I came across one by the hon. member for Stanstead.


William Irvine: I should like to p rint out to the hon. gentlemen who are pilot! ag this bill that, in my opinion, they have not given enough consideration to the question asked by 5849-102
the hon. member for Weyburn. I understand that there is a certain sum available under this act, $250 million?


Gleason Belzile: Yes.


William Irvine: The hon. member for Weyburn was anxious to find out how it might be apportioned if the demand should become greater. For many reasons some of which have been mentioned tonight, this fund has not been drawn on extensively during the past three years, but it may be in the following three years. It is conceivable that one province might demand the entire $250 million, and I think we are entitled to know the basis upon which the fund would be administered.


Mr. CASTLEDEN:: Why is this extension of the bill limited to three years?


Robert Wellington Mayhew: I said before that this money is not allocated to the provinces, and that is quite evident from the way the money has been drawn in the past. While it is possible, it certainly is not probable that any one province would ask for the whole $215 million.


William Irvine: They might come in first and get away with it all in a proper and legal manner.


George Hugh Castleden: I asked why the act was being extended for only three years.


Gleason Belzile: The first bill was passed in 1944 for a period of three years and wre want to renew it for another term of three years.


George Hugh Castleden: If the legislation is of any value, why bring it up every three years? The fact is that when the farmer wants an extension of capital it is generally at a time when credit is easy, when money is cheap and he can generally get a loan from the bank. There has been plenty of money available under this legislation for the past three years when things have been fairly good, relatively speaking, for the farmer. The next three years may be years in which our farmers may not want extra capital, but a period may come when there are crop failures and they will want loans. That will be the time when they will need money out of this fund, but they may not be able to get it. This legislation is something like the chap who lends you an umbrella when the weather is fine but who takes it back from you when it begins to rain.


Gleason Belzile: The act is to encourage the provision of intermediate term and short-term credit. I do not think a $200 loan should be extended for ten years. The regulations which I have cited provide for a maximum term of eighteen months for a loan of $200, and up to ten years for a loan of $3,000. With refer-
Farm Improvement Loam

ence to the crop failure section, I might say that a bank may, with the borrower's approval, revise an agreement in any way. It can extend the time; it can reduce the amount of the instalments, and it can increase or decrease the period between payments. In any case where a borrower might be in default he can have the terms of his loan revised without in any way discharging the responsibility of the Minister of Finance in this matter.


James MacKerras Macdonnell: Now that the hon. member for Stanstead has left the chamber, may I on his behalf have an answer with regard to the act in which he and the hon. member for Davenport were so much interested fifteen years ago?


William Henry Golding: This bill has nothing to do with the Farmers' Creditors Arrangement Act, and hon. members should not try to interject a discussion of that act into a discussion of this clause. It is absolutely out of order.


James Arthur Ross: There has been considerable discussion this evening as to why only $31,000,000 of this $250,000,000 has been used. I think the answer is that we are in an inflationary period and have been almost ever since this act has been in force. I know many farmers who want to repair and build, but if you look at the second to the last report of the Bank of Canada you will see that the building index is at 202. Farmers are frightened of going into debt for many of the things they actually need.
Farm implements were mentioned, and I think all hon. members know that the supply does not begin to take care of the demand. The fact is that farmers fear going into debt to buy things at prices which are rising daily. Electrical appliances were mentioned, but I would remind the committee that, with one stroke of the pen when parliament was not sitting, the cost of those things was increased 25 per cent. It is these and other reasons why greater advantage has not been taken of this legislation.
When the act was brought into being in 1944 we argued that the interest rate should be around three and half per cent. I should like to know upon what basis the present rate was arrived at. The banks charge different rates of interest in the different provinces, depending upon local conditions.


Edward George McCullough: Then the hon. member would say that these higher costs are due to the orderly decontrol?


James Arthur Ross: I am not saying anything about that. I do not think it will be disputed 
that the figures I have given from government's experts are accurate. As I say, that ia the prevailing situation, and I am sorry to say that it is getting worse instead of better. That is why more use is not being made of this measure. It was stated when it was brought down that it was for the transitional period following the war; that was the reason given at the time.


Mr. QUELCH:: If a situation should develop such as has been suggested where the demand for loans is greater than the capital available, what will be the governing principle? Will the loans be made where the need is greatest or where the credit is of the best? So far as we are concerned, they should be made where the need is greatest.


Gleason Belzile: It is up to the manager of the bank. Of course the banks are not run exactly as charitable institutions.


Victor Quelch: Do you leave discretionary powers to the banks to divide up the loans?


Gleason Belzile: It is purely discretionary with the banks.


Mr. ZAPLITNY:: The hon. member for Melfort asked whether there had been consultation between the department and the banks as to the interest rate in view of these impending amendments, and the reply of the junior parliamentary assistant was that he was not sure whether such consultation had taken place, but no representations, he said, had been made to the banks with regard to the interest rate. I want to make sure whether that is correct, that no representations were made by the department to the banks with a view to having the interest rate lowered.


Robert Wellington Mayhew: I said I did not know of any representations having been made.


Frederick Samuel Zaplitny: That is an important point, because the information given us earlier was that of the $31,000,000 lent none had been lost in the three years of the operation of the act. One would have thought, therefore, that in the interest of the farmers the government would have sought to have the interest rate reduced. The banks are apparently doing a very safe business under this act. The minister is here now, and perhaps he could tell us definitely whether any representations were made by the government to the banks with a view to having the interest rate lowered.


Douglas Charles Abbott: Not so far as I know.


Edward George McCullough: The hon. member for Souris has given us his reason why he thinks more loans have not been made under the act. The high cost of farm imple-

Farm Improvement Loans
ments and other equipment would be a deterring factor in the farmers taking advantage of the act. But I do not agree with the hon. member that this should be a short-term measure.


James Arthur Ross: I did not suggest that it should be. I said that was the reason given by the government on introducing the bill in 1944.


Edward George McCullough: There should be a source of credit available to farmers at a low rate of interest so that they can develop their farms efficiently. Out west you can see farm after farm abandoned because during the 1930's the farmers had to pay a tremendous rate of interest to the banks on loans and mortgages on their farms, and hundreds of farmers lost their farms in consequence. As the hon. member for Swift Current said this evening, agriculture is the backbone of this country and, until we get a measure through which will provide credit to our farmers at a reasonable rate of interest, we have no alternative but to support this measure even though it is inadequate to the needs.


James Arthur Ross: I want to make it clear that I was not suggesting that this should be a short-term measure. I realize just as well as the hon. member for Assiniboia that there is a great need for credit among the farmers, especially of western Canada, and has been for years.


[Stage Direction]
Section agreed to.
On section 2-Form of security by bank.
Frederick Samuel Zaplitny: Paragraph (a) states the purposes for which a loan will be made, and paragraph (b) says:
(b) for any purpose other than that specified in paragraph (a).
Is there any limitation whatsoever on the purposes for which a loan may be made? Or is it wide open for any purpose whatsoever?


Gleason Belzile: The purposes are specific. It may be to buy agricultural implements or livestock, for alterations and improvements to a farm, for fencing, draining, ditching, construction, repairs and alterations to farm buildings, for the improvement and development of a farm, and general improvements.


An hon. MEMBER:: That does not include paying off a debt?


Gleason Belzile: No.


Mr. McMASTER:: Are the words in line 10, "the principal amount of the loan exceeds two thousand dollars and the period for 5849-102J
repayment thereof is longer than five years" intended to qualify paragraph (a) as well as (b)?


Gleason Belzile: No, just (b).


Frederick Samuel Zaplitny: What is the procedure normally followed in making application for a loan under the act? I suppose that a farmer needing a loan goes to the bank and speaks to the manager. Does the manager himself decide on the application without the matter going any farther and there being no appeal from his decision? In other words, is it left entirely in the hands of the bank manager?


Gleason Belzile: When a borrower wants to get a loan he goes to the bank manager and fills out a form, which is later turned in to the department; and the applicant, when the loan is granted, files a document showing the goods he has bought with the proceeds. At the end of the month the bank makes a report to the department stating that such-and-such a loan has been made.


Frederick Samuel Zaplitny: That covers the case of a loan that is made. But if the bank manager turns down the request for a loan, the department hears no more about it?


Gleason Belzile: That is correct.


Frederick Samuel Zaplitny: Then the department would have no information and no way of compiling information as to the number of applicants for loans who had been turned down ?


Gleason Belzile: There is no way of checking on loans which have been refused.


Air. STUART (Charlotte):: Will primary producers other than farmers be eligible for these loans?


Robert Wellington Mayhew: No.


Andrew Wesley Stuart: I know that this bill is called the Farm Improvement Loans Act. In cases of this kind the general view should be taken that all primary producers should be included. Apparently this bill is for the benefit only of the farmers of Canada.
I should like to be told why other primary producers are not eligible. I will speak of the fishermen. They must have boats and equipment to work with. They must have homes in which to live. Why this discrimination? Why is one primary producer selected to take advantage of these loans and other primary producers not included?


George Hugh Castleden: If no answer is to be given to the last question I should like to ask a question on section 2. It states that in case the amount of the loan is more than $2,000
Farm Improvement Loans

the bank can take a mortgage or hypothec upon the farm. Then with regard to foreclosure this might easily happen. The farmer has a loan of $2,000, but the next year he has a crop failure. Is it entirely within the discretion of the bank as to whether or not foreclosure would be entered into? Does the government exercise any discretion or protection in the way of advising the bank as to when it shall or shall not foreclose? In many cases, if the farmer is allowed to carry on for a year or two, even though he cannot make his payment in one particular year, in a couple of years he may be able to make the payments and in that way save his home. In that event he would be able to pay both the government and the bank and save his home. I was wondering whether there was some provision in the act which would carry him over a year or two when, through no fault of his own, he has no income at all.


Gleason Belzile: I explained a little while ago that the terms of the loans could be revised. In case of default the banks make a report to the minister every three months stating that some loans are in default. That is the only procedure that is required by the department.


George Hugh Castleden: There is no provision for the minister to advise as to whether or not foreclosure should be carried on or proceeded with?


Gleason Belzile: No.


George Hugh Castleden: None whatever?


Gleason Belzile: No.


George Hugh Castleden: Is it entirely in the hands of the bank?


Gleason Belzile: Yes.


[Stage Direction]
Section agreed to.
Section 3 agreed to.
Title agreed to.
Bill reported, read the third time and passed. WAYS AND MEANS

[Stage Direction]
The house in committee of ways and means, Mr. Golding in the chair.
That it is expedient to introduce a measure to amend the Excise Tax Act and to provide:
1.	That on and after November 18, 1947, there shall be imposed, levied and collected an excise tax of twenty-five per cent (25%) on the following goods imported into or manufactured or produced in Canada: (a) The following electrical appliances: waffle irons; roasters;
fMr. Gastleden.]
kettles; chafing dishes; juice extractors; coffee makers; toasters of all kinds; portable humidifiers; curling irons or tongs; hair dryers; permanent waving machines and spacers or clamps; rods and heaters therefor; razors and shavers; garbage disposal units; (b) The following electrical appliances when adapted to household use; food or drink mixers; food choppers and grinders; irons and ironers; vacuum cleaners and attachments therefor; floor waxers and polishers; (c) Electric or gas refrigerators or freezing equipment, and coils, condensing or compressor units, cabinets, boxes, evaporators and expansion valves therefor; all the foregoing when adapted to household or apartment use or when for use in places of entertainment, amusement or recreation, including rinks, auditoria, halls and clubs; (d) Firearms except for military or police purposes; (e) Outboard motors; (f) Motorcycles. and all other two or three-wheeled motor-driven vehicles including motors for attachment to bicycles but not including vehicles specially designed for carrying goods or for use by invalids; (g) Projectors for slides, films or pictures designed for industrial or professional photographers' use; (h) Toilet articles of all kinds (including combs, mirrors and brushes other than tooth brushes or shaving brushes the duty paid value or the Canadian manufacturer's selling price of which combs, mirrors and brushes is more than twenty-five cents each) and which items do not already come within any other item in schedule one of the said act.
2.	That on and after November 18, 1947, the rate of excise tax on automobiles adapted or adaptable for passenger use with seating capacity for not more than ten persons each, imported into or manufactured or produced in Canada be increased from ten per cent to the following rates, namely, on automobiles valued at $1,200 or less, 25 per cent; over $1,200 but not more than $2,000, 25 per cent on $1,200 plus 50 per cent on the amount in excess of $1,200; over $2,000. 25 per cent on $1,200 plus 50 per cent on $800 plus 75 per cent on the amount in excess of $2,000.
3.	That on and after November 18, 1947, the rate of excise tax on phonographs, record playing devices, radio broadcast receiving sets and tubes therefor, be increased from ten per cent to twenty-five per cent;
4.	That	on	and	after	November	18,	1947,
the rate of excise tax on cameras, photographic films and plates, projectors for slides, films or pictures, except those designed exclusively for industrial or professional photographers' use, be increased from ten per cent to twenty-five per cent;
5.	That	on	and	after	November	18,	1947,
electricity and gas used in dwellings be exempt from consumption or sales tax; and
6.	That	on	and	after	November	18,	1947,the excise	tax	of one cent per pound	on	sugar,
grape sugar, glucose, sugar syrup, corn syrup, etc., be repealed.
James MacKerras Macdonnell: Mr. Chairman, last night the minister gave us what was a drastic revision of the original articles covered by the resolution, and I think I have one or two general questions which

Excise Tax Act Amendment
the minister might perhaps answer now, and which will lead me to other questions. Can the minister give us in some detail a breakdown of the savings in United1 States exchange which were expected to be made? The bill is designed to do two things, to collect taxes and to save United1 States dollars. Can the minister give us, in whatever form is convenient to him, figures which were estimated when the schedules were first prepared, and the changes which will result from the eliminations which have been made?
Hon. DOUGLAS ABBOTT i(Minister of Finance): No estimates were made as to what the savings in United States exchange might be as a result of the curtailment of consumption in Canada of those articles as a result of the imposition of the tax. Therefore, since no estimate was made, nor do I think it would have been possible to make any accurate estimate, I can give the committee no idea as to what it might amount to.


James MacKerras Macdonnell: The minister says that no estimate was made of the saving of exchange. Was an estimate made, of the taxation likely to be collected?


Douglas Charles Abbott: No; it was felt that it was extremely difficult to do even that, and I could not give the committee any estimate as to the amount of taxes which would likely be realized from the imposition of this particular tax. There are so many uncertain factors. Perhaps it would be a bit easier to estimate in connection with automobiles than with any other thing; but there again it is hard to say how much the imposition of this tax would, in fact, cause prospective purchasers of automobiles to defer the purchase. Therefore my officials found that it was really impossible to make anything like an accurate estimate of the probable tax realization from the imposition of the proposed tax.


James MacKerras Macdonnell: To turn to another aspect of it, I take it that it must be possible for the minister to give us in some detail the reasons for the drastic changes which have been made. They have just been referred to. I should like to hear the minister say something as to the reasons, because the changes have been drastic in1 the extreme.
While I am on my feet, I should like to ask another question. It has been represented to me that actually the falling off which was expected in United States purchases has not taken place. For instance, in electric tableware and that kind of thing, can the minister give figures showing us whether or not the expectations have been realized?


Douglas Charles Abbott: No, I cannot give any figures. It is probably a little early yet in any event for there to have been any real results which could be shown. A good many of those who were affected by the taxes have made representations to us that orders have been cancelled and that their volume will be substantially reduced. I must say that when I received those representations I had to point out to them, regretfully as it might be, that was one of the purposes which the proposed tax was intended to accomplish. But I have not yet any figures, and I think it would be pretty difficult to give them at this stage, as to what the actual effect of the imposition of the tax would be. There are so many other factors that might influence the purchase of these particular goods that one perhaps could never put one's finger exactly on what the effect of this tax might be.
As to the other point, the reasons for the drastic changes that have been made, as a matter of fact the changes have not been nearly so drastic as might appear. The first change made was the removal of electric stoves from the list of electrical appliances on which it was proposed that the tax should be imposed. The principal reason for that was this. It was represented to me, and I am satisfied that it was the case, that in a great many sections of Canada there was really no alternative form of cooking stove which could be made readily available. One outstanding example occurred in a certain section of the citj' of Winnipeg, and that was true elsewhere. And, since a cooking stove is an essential part of household equipment, it was felt that, much as we would like to reduce, for the time being, the manufacture and purchase of electrical stoves, it would not be desirable to impose a tax on that particular article.
Then there was the case of sporting goods. There it was shown, after discussion with the industry, that in that particular line-tennis balls and that sort of thing-a large export market, relatively, had been built up, a market which would virtually be lost if this tax was imposed1 on these products. In view of the United States customs regulation, which requires a tax of this kind to be included for the purpose of fixing customs duty rates, that would affect these exports, and we found on analysis, on balance, that there would be more United States dollars lost by imposing this tax and restricting domestic consumption, at the same time cutting off exports.
The other example was in connection with certain cases where it was found that the products included were manufactured almost entirely by small industries located in different parts of Canada. Among other things, that
Excise Tax Act Amendment

applied to such items as pleasure boats, which were made by small builders in Nova Scotia and around the great lakes section of Ontario. There it was represented, and we were satisfied that the representations were sound, that the effect of imposing this tax would impose a great hardship on these small builders.
The same thing applied to the piano industry. There are seven or eight manufacturers of pianos in Canada and the import content is negligible. The materials are nearly all produced in Canada. The financial position of the piano manufacturers, while adequate, was not too strong. By that, I mean that the imposition of the tax, it was quite clear, would virtually eliminate for the time being their *prospective sales and would again in these cases cause great hardship.
We came to the conclusion that on balance, weighing all the factors, taking them all into consideration, there would be no substantial saving of United States dollars either directly or indirectly and that on that sort of thing the tax should not be imposed.
There was one other general class. We decided to exclude from the operation of the tax electrical appliances and that sort of thing which were used in the processing of food and so on. That could be more properly handled under schedule III, and the tax would be imposed only where the articles -were going into consumer use for household purposes.
There were other examples. In the general category of toilet articles, it was represented that on the cheaper hair brushes, combs and mirrors and small things the imposition of the 25 per cent tax created an impossible price situation. Again, the import content was negligible, and therefore these were eliminated from the list.
Speaking broadly, over the last couple of months I have received a great many delegations, and a great many individual representations have been made both to myself and to the officers of my department. All have been carefully considered, and where it was
felt that we could appropriately remove articles from the list which was proposed, without seriously affecting the purpose which we had in view, we decided to do so.
That is as detailed a statement as I can give. Every one of these cases has been carefully considered by myself personally after all the facts have been gone into by the officers of the department. I am familiar with and could give to the committee the reasons for each individual change; but, broadly speaking, these were the principles that guided us in making the changes.
Mr. M.ACDONNELL (Muskoka-Ontario): Do I gather from the minister that the endeavour has been to remove those articles where there was a comparatively small United States content?


Douglas Charles Abbott: That is one factor. The other factor has been where the continued imposition of the tax would cause exceptional hardship to the producer involved, beyond what we felt was commensurate with the benefit which we wanted to produce. The third factor, which is really related to the second, was where there were two or three or a small number of relatively small producers who would be seriously affected by a substantial drop in or a complete elimination of their production.
Progress reported.



BUSINESS OF THE HOUSE

John Bracken: I presume we shall have the speech from the throne tomorrow.


Douglas Charles Abbott: Yes. We shall proceed with the debate on the speech from the throne tomorrow.


[Stage Direction]
At eleven o'clock the house adjourned, without question put, pursuant to standing order.
[Stage Direction]
Wednesday, February 25, 1948