[Stage Direction]
Hon. CHARLES A. DUNNING (Minister of Finance): Mr. Speaker, I desire to lay on the table tariff board reports as follows: Reference 91, regarding automobiles; reference 93, furniture; reference 97, coke; reference 99, vegetable oils; reference 100, cocoa fibre mats and matting; reference 101, cigars; reference 102, starches and dextrins; reference 103, worsted weaving yarns; and reference 104, the radio industry.


Mr. A. W. NEILL (Comox-Alberni):: Mr. Speaker, I wish to present a petition, in fact three petitions, but as the preamble and the prayer is the same in each case I shall treat them as a unit. The first one is signed by 477 business men of British Columbia, the next one by 248 sport fishermen, and the next by 1,837 fishermen of the province of British Columbia. The preamble is leading up to the prayer, which I will read:
Wherefore your petitioners humbly pray that your honourable house may be pleased to pass the necessary legislation prohibiting the taking of salmon by means of fish traps from the waters of the British Columbia coast.



BARTER IN TRADE


[Stage Direction]
On the orders of the day:
Hon. R. J. MANION (Leader of the Opposition) :: I should like to direct a question to the Minister of Trade and Commerce (Mr. Euler) and the Minister of Agriculture (Mr. Gardiner), or both. It is based upon an Associated Press item which appeared last evening in the Ottawa Evening Journal. The heading is, "Britain and U.S. Plan Big Barter Deal." I will read a few lines from the first part of the dispatch, as they explain the matter better, perhaps, than I could.
London, April 24-The United States Ambassador, Joseph Kennedy, was reported authoritatively to-day to be arranging barter of about
10,000,000 bales of United States cotton and more than 100,000,000 bushels of American wheat to Great Britain for a supply of rubber and tin.
The deal, it was reported, would be made under the barter exchange proposal made two weeks ago by Senator James Byrnes of the United States.
A little further down:
The Byrnes proposal, which was made in Washington April 14, would have the double effect of building up the wrar strength of Britain, The Netherlands and Belgium and at the same time get rid of some of the trouble' some farm surpluses of the United States.
In view of our own very heavy farm surpluses, particularly of wheat, and in view of the fact that the amount of wheat involved would be about half the normal purchases of Great Britain for a year, may I ask whether the matter has been drawn to the attention of the government, and whether any action is being taken to protect our grain growers against any cutting into their market by such a deal as this?


Hon. W. D. EULER (Minister of Trade and Commerce):: The item in question has been brought to the attention of the government. My hon. friend did not give me any notice that he would ask the question, and about all I can say at the moment is that the government is cognizant of the situation and will take such action to protect Canadian interests in connection with the matter as it may be possible to take.



BELL TELEPHONE COMPANY


[Stage Direction]
On the orders of the day:
Mr. T. L. CHURCH (Broadview):: I should like to make inquiry of the Minister of Transport (Mr. Howe) and the Minister of Labour (Mr. Rogers) with reference to return No. 273, tabled on April 19, with respect to the tolls and charges of the Bell Telephone Company of Canada. My question is this: Will the Minister of Transport and the Minister of Labour, as trustees under two statutes, the Railway Act and the Combines Investigation Act, of their own volition-because they are the trustees and have this power-order or request an inquiry into that particular company? It has reduced the number of its employees by over 4,000, and although it has a very large surplus it has reduced employees' salaries, nearly $5,000,000 between 1930 and 1937. It has effected other savings by dual operation, and has a net operating revenue of $9,500,000.


Mr. SPEAKER:: Order.


Hon. C. D. HOWE (Minister of Transport):: An application has been made to the board of
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transport commissioners for an inquiry into Bell Telephone Company rates. The government is not required to take any action in order to set an inquiry in motion, and does not propose to do so.


Thomas Langton Church: I should like to hear from the Minister of Labour.


Walter Edward Foster: Order.


Mr. ROGERS:: My answer is the same.


Thomas Langton Church: If the minister will look at the return he will find that as yet no inquiry has been started.


Walter Edward Foster: Order.



THE BUDGET


[Stage Direction]
Hon. CHARLES A. DUNNING (Minister of Finance) moved:
That Mr. Speaker do now leave the chair for the house to go into committee of ways and means.
He said: Mr. Speaker, in these years the task of a Minister of Finance in preparing a national budget is not an enviable one. Even if only domestic factors had to be considered, the difficulties would be great enough for a country still in the process of recovering from the effects of prolonged depression. But to-day domestic problems are enormously aggravated by the turmoil and confusion of the outside world, and "the best laid plans" of government and business may be suddenly upset by dramatic events elsewhere or incalculable shifts in world trends. We are an organic part of a troubled and seemingly crazy world, and the impact of that world affects us abnormally by reason of the instantaneous transmission of news and rumours by means of the radio, telegraph and telephone.
Like its predecessor but in even more striking degree, the year which I have now to review has been packed with drama and tension. One international crisis has crowded upon the heels of another. Naked aggression has caused a grim procession of tragedies and repeatedly altered the map of Europe. Brute force has been publicly acclaimed by some statesmen as the only philosophy for the guidance of international relations. The word of great nations has been plighted only to be broken, almost before the ink was dry on the document. Every small nation of Europe has lived in perpetual fear of its own safety. The mills of industry have everywhere been frantically speeded up to grind out the weapons of destruction. Economic autarchy has spread over a larger portion of the earth's surface and trading between nations which should be 
a cooperative process has tended to degenerate into economic warfare. A tense public has turned its attention more and more to diplomatic and military affairs and less and less to the normal business of living. Although at times the tension has been relaxed, these interludes have been all too short and the recurring crises do not diminish in severity.
Inevitably this reversion to political and economic barbarism has cast a dark shadow over economic life which has impeded recovery not only in Europe but on this continent as well. Recovery has on several occasions raised its head only to be buried again in a new wave of fear and uncertainty. Confidence and courage are essential for the effective working of any economic system based on individual liberty and private enterprise. These qualities are difficult to develop in the world of to-day but at least in Canada there is more chance for their exercise and development than in most other countries.
Our fiscal year opened last April with a recession in business under way in most of the larger countries. While most severe in the United States it was substantial in Great Britain as well, and only a few areas escaped. The recession, while sharp, was short-lived and by the fall revival was under way in most countries. Canada was one of the first to show a substantial upturn in industry, and our revival has been more natural than that of most other countries. Undoubtedly the levels of production and incomes in Europe are due very largely to the ever quickening pace of rearmament. On this continent spending for defence purposes has played as yet only a minor part in economic life, so that our business and employment are not dependent as yet to any important extent upon this artificial stimulus.
The Canadian economy has shown a remarkable degree of strength and recuperative power in the face of the external pressures to which I have referred. We entered the past fiscal year still burdened with the effects of our disastrous crop failure of 1937 and depressed both by the drastic recession in the United States and the uncertainty following the annexation of Austria. Nevertheless our previous recovery had been a sound one and our industry and trade were not handicapped by excessive inventory accumulation, by grandiose expansion of productive facilities, or by excessive rises in wages- in capital goods or export industries. Nor had our security markets been pushed to inflated levels by an extravagant use of credit. For these and other reasons our domestic situation was basically sound and the recession was checked before it had gone very far.

The Budget-Mr. Dunning
The course of our economic activity during the year is reflected clearly in our most comprehensive index, that of the physical volume of 'business, which covers activity in manufacturing, mining, lumbering, construction and trade. From the peak point of 127-9 reached in November, 1937, this index fell to a low point of 106-7 in February, 1938, flattened out at a somewhat higher level during the spring and summer, and then recovered during the early fall to a level of 123-4 in November, 1938. The preliminary index for March, 1939, stands at 113-1 or 4 per cent above the figure for the same month of the previous year. Other indexes of a general nature tell substantially the same story. Preliminary estimates of the national income indicate a probable figure for 1938 of about $4,460,000,000 or approximately 7£ per cent below the total for 1937.
Not all our major industries were equally affected by the world recession. However, as I am including a more systematic review of recent trends in a supplementary paper, I shall not in this address do more than make reference to certain special features which illustrate some of the points I wish to make.
It is reassuring to note that in spite of the unfavourable weather conditions and the recent extraordinary series of international crises, business activity has maintained part of the gains it made last fall and we enter the spring and summer with certain definite indications of further improvement. Pre-season moisture conditions for the 1939 prairie crops are in general excellent, and the live stock markets have been improving in recent months. During the first quarter of this calendar year, construction contracts awarded were 6 per cent and residential contracts 92 per cent higher than for the same period in 1938. and the immediate outlook is for a further substantial improvement in residential construction. Our most important lumbering area, British Columbia, has benefited from better weather and an improved demand in foreign markets. The log scale for the first three months of 1939 was almost 60 per cent higher than that for the first quarter of 1938. In our central and eastern forest industries conditions have not been so favourable but progress has been made in reducing accumulated stocks. Manufacturing operations will benefit from improving economic conditions elsewhere and from increased defence expenditures, both Canadian and British. Finally the mineral industries seem destined to continue their impressive record of expansion. Exploration and development work has continued, although at a slightly slower pace; operations have been carried on over a more
extensive area than ever before, and the completion of new mills, the reopening of old mines and the discovery of new ore bodies have brought the industry's production facilities to an all-time peak. In addition it is interesting to note the rapid development which is going on in the oil fields of Alberta and the reported discovery of a large commercial deposit of high grade iron ore in northwestern Ontario.
The changing trends in the prosperity of our various industries mainly reflect not internal conditions but lowered demand and falling prices in external markets due to the world recession. This is a price we must inevitably pay for our dependence on world trade, but as I pointed out last year it is a price considerably' smaller than that which we would have to pay in terms of a lower standard of living and other costs incident to a policy which would force readjustment of all our industry onto a purely domestic basis. Such a change would be unthinkable for a population of eleven million people living in so large an area endowed with so much of the essential raw materials of the world's industry.
During the calendar year 1938, Canada maintained its position as the world's fourth largest exporting country and displaced Japan as the fifth ranking nation in terms of total external trade. For the fiscal year ended March 31, 1939, our total merchandise exports, excluding gold, aggregated $841,600,000, down 15-1 per cent from the total for the preceding fiscal year. Net exports of nonmonetary gold, however, increased by 13-4 per cent to $167,500,000. For the same period, total merchandise imports amounted to $658,200,000, a decrease of 17-6 per cent. This meant an export or so-called "favourable" balance of trade of no less than $350,900,000 as compared with $339,800,000 during the preceding year.
Practically all our decrease in exports of merchandise, excluding gold, was accounted for by lower sales to our two largest markets, the United States and the United Kingdom, which countries suffered most from the prevailing recession. Exports to other countries of the British commonwealth were down by only $5,200,000, and exports to all other countries decreased by less than 6 per cent. The beneficial effects of our comprehensive trade agreement with the United States are already beginning to make themselves felt, and for the first quarter of 1939, our exports of merchandise, exclusive of gold, to that country registered a gain of nearly 16 per cent over the total for the same period in 1938. It is a significant tribute to the importance of our treaty that the dollar amount of this increase in United States imports from Canada was
The Budget-Mr. Dunning
[Stage Direction]
greater than the total increase in their imports from all countries. Fortunately, also, business prospects for both the United States and the United Kingdom for the current fiscal year are such as to justify high hopes for a substantial expansion in the sale of our export commodities to these two great markets. Business in Great Britain has been improving in recent months and under the revitalized rearmament program it should continue to improve because that country still has unemployed resources available for expansion. In the United States, the revival of last fall has been checked by prevailing uncertainty during the last few months, but not even the war clouds in Europe will suffice in my opinion to withstand the upward pressure of the powerful economic forces making for recovery on this continent. If only the fear of war could be removed, there would be released long-pent-up economic and social forces which would, I believe, soon transform again the economic organization of the world into a vibrant, dynamic machine bringing new prosperity and happiness to all countries.
Our huge export balance is an evidence of the strong position which Canada enjoys in her international balance of payments. On merchandise account alone, this balance during the calendar year 1938 was $171,200,000, to which should be added another $160,500,000 representing net exports of gold. Our tourist trade suffered somewhat from reduced incomes on the part of our potential visitors, but, nevertheless, net tourist expenditures in Canada reached the imposing total of $149,000,000. Our credit balances on merchandise, gold and tourist account enabled us to offset our debit balances in respect of interest and dividends, freight charges and various miscellaneous services, and left us with the substantial surplus on current account of $185,000,000. As in previous years, this current surplus was used to repatriate Canadian securities and retire other Canadian indebtedness payable abroad. It is not generally recognized,
I think, that as a result of such transactions Canada has been a net exporter of capital to the extent of over $900,000,000 during the last five years. This is a tribute to our inherent financial strength and an evidence of increased ability to withstand financial storms in the future. During the last few months there has been an inflow of capital in considerable volume from the continent of Europe, and this inflow is apparently continuing, reflecting the faith of European investors in the safety and profitableness of investment in this country. To the extent that this capital represents " fright money " ready to take flight again at a moment's notice, it may

create new problems, but to the extent that it consists of funds which seek, or will in practice find, permanent investment in Canada, it is to be welcomed. Fortunately, in considerable part at least, it seems to be accompanied by that much-needed spirit of enterprise which will foster the establishment of new industries and the expansion of old.
Interest rates have continued low. Our high-grade bond market has followed the rising trend in New York rather than the declining trend in London. The yield on long-term dominion bonds has recently been lower than at any time in our history, except for a short period in 1936, and also lower than the yield on similar obligations of most other countries except those of a few of the great creditor nations with which it compares very favourably indeed. Many municipal credits have shown a substantial and very welcome improvement during the year. Bank reserves, deposits, loans and investments have continued to increase, and Canadian bank deposits at the end of March aggregated $2,485,000,000, 22-2 per cent above the level of March, 1935, just after the establishment of the Bank of Canada, and 8-8 per cent above the figure for March of the boom year, 1929.
Recession in the United States, Great Britain and elsewhere had its usual effect in depressing the level and disturbing the relations of commodity prices. Our index of wholesale prices stood at 73-2 in March last as compared with an average of 78-6 for 1938. As in the previous depressions of 1921 and 1930, the fall in prices has been particularly severe in the case of foodstuffs and raw material. Metal prices have risen again since their drop last spring, but prices of farm products remain seriously depressed in world markets. This special weakness of farm prices is due to a variety of causes, chief among which are the contraction of import demand on the part of countries striving for increased self-sufficiency and the too rigid nature of farm production in the great exporting countries. The agricultural crisis remains with us still and shows up whenever world demand for farm products falters.
I need hardly point out to you, Mr. Speaker, that these general conditions affecting agriculture throughout the world apply with particular emphasis to wheat, so long the backbone of international trade. Because of this and because Canada must export not only wheat but meat and live stock, dairy products and fruit, the impact of any world recession falls with special severity upon the farmers of Canada.
Agriculture can do little to protect itself against these international storms. Other

The Budget-Mr. Dunning
producers can contract their output, can frequently lay off their workers to live at public cost upon the relief rolls, while their contraction in output prevents a disastrous decline in price and the disappearance of profits. Farmers cannot readily do these things. In particular our western wheat growers, who have suffered from crop failure for a long series of years, cannot be expected to face unassisted this international problem. In time agriculture may, and should be expected to, adjust itself to the new problems created by international developments, but such adjustment involves a long and slow process. In the meantime, agriculture, if allowed to remain depressed, would have serious adverse effects upon the rest of our economy. It is therefore, only self-interest for all of us to see that everything that can possibly be done is done to improve the economic standing of agriculture. Only thus can all industries and all sections of Canada achieve the maximum' of prosperity. Only thus can we preserve and strengthen national unity.
This was the reason for the guarantee of a basic minimum price of 80 cents for the western wheat crop of last year. That guarantee may cost the dominion treasury a substantial sum of money, but at the time it was given there were few, even amongst the industrial and financial leaders of eastern Canada, who did not believe it justified in view of the drastic decline in the world price of wheat and the general economic interest of the country as a whole. Experience has shown that there may have been defects in the method by which the assistance was given, but it was, of course, the only form of assistance possible under the legislation which was upon our statute books when the crisis arose.
I have for many years expressed the personal view that the best form which assistance to agriculture can take is that of helping the farmers to help themselves. This the government is attempting to do by its prairie farm rehabilitation program, its various measures to assist cooperative marketing, and its intensified efforts to improve the quality of agricultural products destined for foreign markets. In the contemplated legislation to provide for the setting up of a central mortgage bank we are striving to do two things, also primarily in the interest of agriculture but for the benefit of the urban home-owner as well. First, we are attempting to deal with the immediate problem of excessive and harassing indebtedness by providing for an adjustment of existing mortgages on an equitable basis which will inspire new hope in the debtor. Secondly, we are trying to find a solution for a longer run problem by
encouraging the revamping of the whole financial structure which has been built up to provide long term mortgage credit. In this way we hope to put mortgage lending on a new basis, which will be not only stronger but also more flexible, more economical and more equitable. Finally, but not least important, we have done and are continuing to do our utmost to secure for our farm products entry on more favourable terms into the great export markets of the world.
In providing aid to agriculture at this time, we wish it to be assistance that will promote a more efficient, more prosperous and more vigorous industry. We wish it to accelerate, not to impede, the development and expansion of our Canadian economy as a whole. It is essential that our economy develop and expand. We have seen during the last eighteen months that Canada has a strong economic system able to withstand shocks from nature and from the world outside our borders. We have demonstrated our strength and stability. But we must not let stability become stagnation. If we can no longer count on great possibilities of expansion extensively by pushing back farther the borders of settlement or by means of a rapid growth in population, then we must expand intensively by improving our capital equipment, by making ours a better rather than a bigger country. On the frontiers of science, invention and technology, the possibilities of expansion are greater than they ever were on the geographical frontier.
Both the necessity for expansion and the means to make it possible are found in the volume of unemployment that remains with us still. Without taking time to analyse the figures of unemployment, I wish to express my own conviction that the number of unemployed in Canada who are willing and able to work, with or without retraining, is not now so great that it should be beyond the capacity of an expanding Canadian economy to absorb.
However, in order to expand production, employment and incomes, we must have substantially more capital creation, a more rapid rate of private investment. Someone must convert a larger proportion of the savings of the people into capital expenditures or else our national income will decline again. Look back on the history of this or other countries in their modem phase and you will find prosperity only with expansion, only when the people were busy creating new capital works. In our prosperous first decade of this century we were busy extending our capital equipment, building cities, railways, harbours, elevators and factories. In our post-war period of prosperity from 1925 to
[Stage Direction]
The Budget-Mr. Dunning
[Stage Direction]
1930, we were busy building houses, factories, power plants, roads and automobiles. Since that time, investment in durable goods has languished. It revived somewhat in 1936 and 1937, particularly in the mining industry, and persisted well into 1938, with some recession thereafter. But it is still very far below the levels needed to utilize fully our increased labour and other resources. Its full recovery is our greatest need to-day.
This government has striven with all its efforts to restore private capital creation. This was the main purpose of our easy money policy. That policy has been successful in effecting a substantial reduction in interest rates, both short and long term. The reduction in long term interest rates* made possible many projects otherwise unprofitable, made many improvements in fixed plant and equipment worth while, and by permitting savings through refunding it has strengthened the finances of many industries thus putting them in a position to carry out desirable expansion. It has materially reduced the interest burden on governments and is bringing about a gradual lowering of the rate of interest on mortgage funds which is one of the factors responsible for the recent recovery in residential construction.
Some critics have claimed that this easy money policy has not been carried far enough, and, indeed, in this house a few days ago, the astounding assertion was made that our monetary policy had been deflationary or at least had had deflationary effects. How absurd that assertion was is apparent from even the most superficial examination of the facts. The volume of bank deposits is probably the best single indicator of the effects of monetary policy, and certainly the United States, Australia, the United Kingdom and Sweden are countries which are usually quoted to us as having made effective use of monetary policy as an instrument of economic recovery. Well, what are the facts? Comparing 1938 with the depression year 1932, the average volume of bank deposits in Sweden had increased by 15 per cent, in Australia by 16 per cent, in the United States by 22 per cent and in the United Kingdom by 23 per cent, whereas in Canada the increase was slightly over 25 per cent.
I sincerely believe that Canada's monetary policy in the last few years has been wisely conceived and carried out with great skill by our financial officers. I am convinced furthermore that a policy of more rapid expansion would have been either futile or positively dangerous. The policy which has been followed has been one designed to expand money and credit as rapidly as the needs of the public

require but not so rapidly as to create an unhealthy, speculative expansion which would be bound to end in a serious depression. As I have frequently stated, its objective has been and is to promote the minimum possible level of unemployment by stimulating the maximum possible level of productivity that could be sustained over a period of time. I repeat that in order to achieve this objective, monetary policy has been used and is constantly being used as far as it can wisely be carried.
While we have been endeavouring to use monetary policy to the fullest possible extent as an instrument of economic recovery, we have always realized that monetary policy alone was not sufficient to solve our problems under present world conditions-that it is a tonic but not a cure-all. If other factors are favourable, a good monetary policy may stimulate recovery, may assist greatly in securing the desired ends, just as a bad monetary policy is certain to impede progress. For this reason we have adopted many other measures in the non-monetary field, some of which I have already mentioned. At the moment, however, I am specially referring to our efforts to stimulate private capital creation. Perhaps the most important of these is the series of measures adopted to restore more normal activity in the construction industry which suffered more from the pernicious anaemia of depression than any other industry in Canada. Hon. members are familiar with this comprehensive program, and I wish to refer only briefly to the results thus far accomplished.
Under the home improvement plan, which provides a simple and inexpensive method for making repairs, additions and improvements to existing homes, we had by March 31 this year given a limited government guarantee to 65,690 loans for a total volume of $26,228,621. This, of course, does not by any means represent the total volume of modernization work stimulated by the government program. As an illustration of the fundamental soundness of a lending program adapted to the needs and income conditions of the small borrower, it will be interesting to hon. members to know that as of the same date, March 31, the losses which we have had to pay in respect of these loans amounted to only $19,037, or less than l/13th of one per cent of the amount of loans made. The significance of this very small amount of loss is greatly enhanced when it is realized that over 50 per cent of the total of loans made have already been paid off, as of the date I mentioned, March 31.
Under Part I of the National Housing Act a plan has been provided whereby a Canadian family can finance the construction of a new

The Budget-Mr. Dunning
home on a long term 80 per cent or 90 per cent mortgage bearing 5 per cent interest and by making monthly instalments for interest, principal and taxes comparable with and usually less than ordinary rentals, it can own that home free and clear of all encumbrances at the end of twenty years. As of March 31, 8,014 family housing units had been financed under this plan by loans aggregating $30,628,894. During the eight months in which the amended legislation has been fully operative, the total value of loans approved has increased by 83 per cent over the volume of such loans made in the corresponding period of the previous year. I am confident from the indications already received that operations under this act during 1939 will result in a volume of loans several times as large as last year.
However, it seems to me that much more can and should be done. The abnormally low volume of building during the last few years has built up a very large deferred demand for new homes, particularly for persons of small or medium incomes, and it is in this field of residential construction, in my opinion, that is to be found the greatest single opportunity for new capital creation. It seems to me, however, Mr. Speaker, that we need a new motive power to take full advantage of the opportunity provided by this legislation. In the past the speculative builder has been the driving force behind most new house building. This type of operator has frequently been criticized because in many cases the quality and the cost of his product left much to be desired, but he did perform a real service in a country whose people for the most part have not yet been educated to the point where they are willing to buy a new house on the basis of plans and specifications. This speculative building industry was very hard hit during the depression, and to-day there are relatively few builders with sufficient resources to provide the service required. We will not get active building until this type of business enterprise is revived or replaced by a new type. Personally I think we stand much in need of a group of building or development corporations along the lines of the estates corporations which have put much of the drive behind the British building boom.
On a recent occasion I referred to the generous facilities now provided under part II of the National Housing Act for the construction of low-rental housing accommodation to be leased to families of low income at less than ordinary economic rentals. As yet no loans have been made under this part, but in several cities plans have been worked out which I hope will come to fruition in the
71492-198J
next few months. The national employment commission believed that this low-rental housing field offered one of the greatest opportunities for government assistance which would give a direct and decisive stimulus to the construction industry. Our legislation embodies their recommendations in substance, but in order to realize its immediate possibilities and ultimate social advantage we need the cooperation not only of municipal and provincial authorities but also of public-spirited private citizens who will give their time, business ability and some capital to the organization and management of limited-dividend housing corporations.
In addition, to make all these plans more effective, we took the drastic step last year of removing completely the 8 per cent sales tax on the major materials entering into house construction. I know that this step has been one of the factors responsible for the speeding up of residential construction during the last few months, but I doubt whether the various branches of the construction industry have as yet taken full advantage of the sales appeal which exists in the reduction of building costs made possible by this important enactment.
To complete the record I may refer to another measure adopted to stimulate the construction industry, and to help unemployment, namely, the Municipal Improvements Assistance Act. During the eight months in which this act has been in operation, 46 loans have been approved for a total amount of $3,582,667. Five applications are pending for a total amount of $442,731. I have reason to know that apart from the contribution made by these loans to the relief of unemployment they have been a veritable godsend to many municipalities which have only in this way been enabled to finance much-needed improvements to productive undertakings without adding new burdens to the shoulders of the general taxpayer.
I think hon. members will agree that this series of measures, responsible already for over 65 million dollars of new work, represents a comprehensive and powerful program to stimulate capital creation through the construction industry. In a similar way we have tried to encourage new capital creation in other industries. The aggressive steps which have been taken to open up and broaden export markets for Canadian products have been directed to putting our essential industries on a profitable basis which would justify expansion and new investment. We have also encouraged investment in new mines by exempting them from corporate income tax for the first three years of operation, by money spent on geological surveys, and by assistance in
[Stage Direction]
The Budget-Mr. Dunning
constructing roads into new mining areas. Up to February 18, 1939, seventy-five new mines that are eligible or likely to be eligible for tax exemption have come into production, and the prior costs necessary to bring these mines to the producing stage are estimated at $44,000,000, of which over $14,000,000 was for direct wages. The metal output of these mines to March 31 last is estimated at over $54,000,000, with a probable expenditure of nearly $13,000,000.000, of which over $14,000,000 was for wages and salaries. I would not, of course, contend that tax exemption is wholly responsible for all these mines coming into operation, but the magnitude of the figures given for prior production costs, new wealth creation and wages and employment indicates at least the possibilities of this type of program.
We are, of course, well aware of the arguments for pump priming in times of depression, and we have had to increase government expenditures substantially as a partial offset to the gap in private investment. But we have never believed that public spending could be a substitute for private enterprise. We have realized that public spending could only be a relief and not a cure, unless one is prepared to take the whole of business into government hands. There are few Canadians, I believe, who are as yet willing to give up their society based on individual freedom and enterprise for a system of state regimentation. Under our present system government expenditures are likely to leave the situation no better, and perhaps worse, when they are withdrawn. If they are carried too far they are likely to undermine confidence in the country's financial position and thereby to retard employment in private industry to an extent much greater than the new employment which they create. Nevertheless, a government cannot stand idly by and allow the ravages of depression to take their toll because of the too slow revival of private investment. In these days, if the people as a whole, and business in particular, will not spend, government must. It is not a matter of choice but of sheer social necessity. The alternative is a greater burden of relief and greater dangers from deflationary forces. This is the reasoning, Mr. Speaker, behind the increase in our special expenditures already proposed to you in supplementary estimates now before the house. These estimates are based as far as possible on projects of a productive and self-liquidating nature, projects which are intended to conserve or develop our resources. While it is hoped they will increase national income and expand national wealth over a period of time, nevertheless 
they involve expenditures to-day. We dare not, we cannot, contract our expenditures until our industries and our people generally are spending more freely. When private investment expands, not only will we find our need for government expenditure less, but also our revenue receipts will be so much increased that debts can be reduced and taxes lowered.
We hear a great deal to-day about the need of leadership and public men have been subjected to much criticism on that score. I would be the last to deny our own limitations and the mistakes which have been made in the past by governments just as by other people, and no one would welcome more than myself the development of an informed and vigilant citizenship that would constantly study public problems and keep public men advised and alert. But I speak with all candour and with no attempt whatever at defensive criticism when I say that it is in the field of private investment that leadership and courage are most needed in Canada to-day. There are many business and financial men who have been using every resource to improve processes, expand plant and employment, or set up new industries. Their efforts, heart-breaking at times, have my sincere admiration. But they are far too few in number. In general, I confess to a disappointment with the lack of imaginative business leadership in recent years, certainly as compared with that shown by the generation which built our railways, opened up the west and transformed this country in a short span of years into one of the great industrial nations of the world.
It may be urged that these are troublous times when one must think twice before putting his capital and effort into a new venture. Business men have become more conscious of the trade cycle and the dangers rather than the virtues of competition. Sometimes I think they pay too much attention to the risks which face business in other countries but which have less significance in Canada. In any case, risks have always existed, and business has overcome them. We shall get nowhere if our investing public spends its main efforts not in looking for new opportunities but in trying to forecast the short term movements of the stock and bond markets. No important social purpose is served by that type of gambling.
Repeated assertions are made that the burden of debt and taxation in this country is the main factor holding back business. I do not believe this to be the case. Certainly it need not be unless irresponsible but doubtless well-intentioned statements by people

The Budget-Mr. Dunning
who should know better convince business that it should be depressed by the fear of debt and taxes.
It seems ironical to put me in the position of appearing to argue for high debt and high taxes, because a major interest of my public life has been to keep the burden of debt and taxes on the people down to the lowest practicable level. But I am forced to speak out when I hear persons who have the same purpose as I have making ill-considered statements which are bound to have the effect of slowing up private business and thereby driving governments to perform tasks which will inevitably call for higher taxes and higher debts. Those who make such statements fail to realize that the old days of complete laissez-faire, of devil-take-the-hindmost, have gone forever. In the world of to-day, governments must act to relieve distress and prevent cumulative deflation, and, speaking generally, the magnitude of governmental expenditures in democratic countries is likely to be a rough measure of the failure of private enterprise to do its full duty.
Public debt per capita in this country is not as high as in England, Australia or New Zealand; on the contrary theirs is roughly fifteen to twenty-five per cent higher than ours. Although our dominion funded debt has increased substantially since 1930, the annual interest burden of that debt, allowing for elimination of tax-free securities, is lower than in any year since the war. So the increase in dominion debt has not required any increase in taxes to carry it. Economic conditions have made the increased debt well-nigh inevitable, but a careful regard for our credit and the improvement of our financial machinery have enabled us to meet this economic necessity without increasing the burden of our debt. Our borrowing has not impeded private investment by forcing up rates of interest against other borrowers. Our taxes are high but we do not bury the money we take in in taxes, as one might gather from what some speakers say. We spend it quickly, far too quickly, in my opinion, and for the most part pass it on to those who will spend it quickly again. Much of it, moreover, goes to improve the country's economic equipment, to promote the more rapid creation of new wealth. I do not of course claim that any government is perfect, nor that government spending has always been wise. We make mistakes as other people do. But we are subject to and responsible to social forces to which a private business can be relatively indifferent.
Nor need investment in Canada be paralyzed by the fear of war in Europe. The dangers
of war cannot be avoided by hiding. War might upset our commerce for a time, but the world will still need to eat and will still demand, perhaps in larger amounts, our paper, our metals, and our other products. War would mean higher taxes, higher prices, but none of these dangers will be avoided by hoarding rather than investing capital. I cannot believe that people in this country are trying to keep their capital liquid in order to take it away in case of war. Such plans would be not only foolish but cowardly.
Investment in this country has been profitable, Mr. Speaker. Examination of the public statements of 334 corporations indicates that their profits in 1938 were only 10 per cent below the 1937 level, and still 7 or 8 per cent above those of the recovery year 1936. Foreign investors have been convincingly demonstrating their faith in this country's future. Why should not our own investors show the same faith? The possibilities of profitable new investment have by no means been exhausted. I have already pointed out the great opportunities which exist in the field of housing. Can we not in other fields, manufacturing, merchandising, transport and the service industries, apply new methods and modernize equipment in order to reduce costs, lower prices and thereby expand our markets both at home and abroad? Cannot we adopt new ideas developed during recent years in other countries without waiting for branch plants or refugees with capital to bring them to us? Have our other industries explored at all fully the possibilities of research which has proved such a profitable investment in the nickel and the chemical industries? Have we fully explored the possibilities of processing our raw materials before exporting them? Have we sought out all the opportunities for the profitable investment of capital in new industries, particularly small industries?
These are vital questions, Mr. Speaker, for Canada's future. I confess that I do not know all the answers but I am satisfied that the low level of new investment in Canadian industry is a challenge to our financial, industrial and scientific leaders to an even greater degree than it is to parliament.
n.

[Stage Direction]
I turn now, Mr. Speaker, to the government accounts for the fiscal year which has just closed. Fortunately, the procedure which we are now instituting will make it unnecessary for me to weary you with a long and dreary recital of statistical facts relating to every category of our revenues, our expendi-
The Bridget-Mr. Dunning
[Stage Direction]
tures, our direct and indirect liabilities, our active investments, and our financing operations during the past year. It is, of course, necessary that the house should have a comprehensive record of all our financial transactions but, borrowing from the practice of the United Kingdom and of Australia, I have incorporated the details in a separate white paper which, with the permission of the house, I shall place on Hansard at the conclusion of my address. This white paper will be published as an appendix to the budget speech and therefore will be readily available to all. The new procedure will enable me to confine my remarks at this stage to results rather than detail in the record of the past year.
My forecast of a year ago indicated an aggregate revenue for the fiscal year 1938-39 of $501,700,000. I now estimate that, when the books for the year are finally closed, they will show a total revenue of $501,677,000, or $23,000 less than the estimate I gave the house a year ago. This total represents a decrease of $15,016,000 or 2-9 per cent from the preceding year but is higher than that for any other year in our history.
Income tax receipts at $142,025,000 set a new all-time record-18-0 per cent above the collections of 1937-38. All other types of taxation recorded decreases, particularly the sales tax, which reflected the decline in general business activity, and also, of course, the exemption granted to the major building materials. Customs duties on a lowered volume of imports also failed to come up to expectations. Non-tax revenues, however, reached the new record level of $61,818,000.
Unfortunately, I was not so lucky in my budget estimate of aggregate expenditures for the past year. That estimate of $524,600,000 has been exceeded because of the disappointingly poor earnings of the government-owned railway system and the prospective losses in wheat marketing resulting from the low level of world wheat prices.
Breaking our total expenditures down into the usual main categories, we find that ordinary expenditures for the fiscal year 193839 are now estimated at approximately $416,372,000, an increase of only $1,480,000 over the previous year.
Capital expenditures, chiefly for dredging operations on the St. Lawrence ship channel and construction of airways and airports, showed little change at $4,687,000 as compared with the preceding fiscal year.
Special expenditures for the relief of unemployment and agricultural distress were less by about $20,000,000. The total for this category was $48,583,000 and the main items

were $17,025,000 for grants-in-aid to the provinces, $5,790,000 for our share of joint dominion-provincial projects, $16,492,000 for the cost of solely dominion projects, and $9,276,000 for the cost of direct relief, foodstuffs and feed and fodder distributed in the drought areas of western Canada.
Government-owned enterprises accounted for aggregate expenditures of $58967.000 as compared with $44,833,000 in the preceding year. Most of this total is represented by the net income deficit of the Canadian National Railways for the calendar year 1938. As hon. members are fully aware from the annual report of the railway already tabled in the house, this deficit amounted to $54,314,000. The increase of $11,968,000 over 1937 was due to a substantial decrease-over $16,000,000-in gross operating revenues, which was particularly severe on the United States lines of the railway and which in general reflected the prevailing business recession, as well as to an increase in railway wage rates which partially offset the economies it was possible to effect in other operating expenses of the system.
Operations of the Trans-Canada Air Lines during 1938 resulted in a deficit of $818,000 after interest on capital and after depreciation. Canadian National (West Indies) Steamships Limited achieved an operating surplus (after payment of interest on bonds held by the public but before depreciation and interest on government advances) of $276,000 during 1938. This surplus was turned over to the government in partial payment of interest.
The operations of the harbours and facilities under the administration of the National Harbours Board recorded a substantial improvement during 1938. Operating income, after payment of interest to the public but before depreciation and interest payable to the government, totalled $3,640,000, an increase of 33 per cent over the corresponding figure for 1937. Financial assistance provided by the government for operating deficits, debt retirement and capital expenditures amounted to $3,441,000.
Finally, other charges, consisting mainly of write-down of miscellaneous assets, amounted to $3,734,000 during 1938-39.
Hon. members who have been keeping their pencils sharpened may already have calculated that the figures I have given for the five main categories of expenditures add up to the grand total of $532,343,000. This is $2,065,000 lower than the corresponding total for 1937-38, and with total revenues estimated at $501,677,000 it would appear to indicate an over-

The Budget-Mr. Dunning
all deficit for the year just closed of $30,666,000 as compared with my budget estimate of approximately $23,000,000.
In view of the world trade recession, such a result for the past year would, I think, have been encouraging. It has seemed necessary to me, however, to go farther and to add to that deficit some reasonable provision for possible losses arising from the dominion's guarantee of a basic price of 80 cents for the western wheat crop of 1938. No one can tell at this time what the ultimate loss will be. Our experience in 1935 and 1936 shows how quickly an apparent loss of very large proportions can be wiped out by rapid changes in the level of wheat prices resulting from actual or anticipated changes in the world supply and demand situation. Nevertheless, it seems to be only sound common sense to take account of present facts and the immediate outlook. Unfortunately, I cannot without the possibility of serious adverse consequences do anything which would tend to disclose to speculators in the world's wheat markets what the exact position of the Canadian Wheat Board is in regard to sales and holdings of wheat. I have therefore decided to pick an arbitrary figure of $25,000,000 and to set this up in our books as a reserve against possible wheat marketing losses.
This will bring my estimate of our over-all deficit for the fiscal year 1938-39 up to $55,666,000.
In addition to the expenditures already outlined, the dominion has made disbursements during the past year for the acquisition of investments which are treated as active assets in the public accounts. The net increase in these active loans and investments amounted to S23,524,000.
As at March 31, 1939, the net debt of the dominion is estimated at $3,157,334,000. Gross liabilities are estimated at $3,642,049,000 and our active assets at $484,715,000. Bonds and debenture stocks bearing the guarantee of the dominion and outstanding in the hands of the public at the close of the fiscal year amounted to $1,085,466,000. These guaranteed securities outstanding increased during the year by $34,859,000. There are also outstanding other contingent liabilities arising out of guarantees given under relief acts and various other Acts. These are fully set out in the white paper which is being placed on Hansard.

[Stage Direction]
I turn now from the role of historian to the task of the prophet. Under present world conditions, this task is not an easy one. The economic pattern of 1939-40 is not as yet clearly discernible and a major turn in world events may be near at hand which may make conditions either very much better or very different from what one can foresee to-day.
However, a Minister of Finance must take a realistic view based on the trends at work when his forecast is made. Taking such a view, I now estimate that, allowing for the tax changes I am about to announce, our aggregate revenue for the fiscal year 1939-40 will amount to $490,000,000, made up as follows:
Tax Revenue-
Customs duties	$ 78,000,000
Excise duties	 52,500,000
Income tax	 140,000,000
Sales tax	 126,000,000
Manufacturers', stamp, importation, and other special excise
taxes	   27,000,000
Bank circulation and insurance
company taxes	 1,800,000
Total tax revenue	$425,300,000
Non-Tax Revenue-
Post Office receipts	$ 35,600,000
Interest on investments	 13,600,000
Other	 13,500,000
Total non-tax revenue	$ 62,700,000
Total ordinary revenue.. .. $488,000,000 Special receipts and credits	 2,000,000
Grand total revenue	$490,000,000
I am fully conscious that this estimate may prove to be unduly pessimistic.
On the expenditure side, the main estimates provide for a total expenditure of $457,200,000 of which $29,400,000 represents defence expenditures which are being capitalized under the special sinking fund plan. To the remaining $427,800,000 must be added $122,300,000 asked for in the special supplementary estimates which have already been tabled, making a total of $550,100,000. If any further supplementary estimates need to be provided during the year, I believe we may assume on the basis of past experience that they will be offset by savings made by the departments in the appropriations based on the main and special supplementary estimates. The estimated total expenditure of $550,100,000 includes the railway deficit but does not take into account any additional loss which may possibly occur in marketing the 1938 wheat crop, over and above the $25,000,000 for which provision has already been made, nor does it take into account possible losses with respect to the 1939 crop. No man could possibly estimate what these items may amount to or make even a reasonable guess.
The Budget-Mr. Dunning
[Stage Direction]
Leaving aside therefore any expenditure in regard to wheat, there will be a probable gap between our revenues and expenditures during the new fiscal year of about $60,000,000.
Needless to say, I am disappointed to have to contemplate another deficit of this size. I had fervently hoped that this year I would be able to offer to the house a balanced budget and as a result be in a position to begin the process of reducing debt and taxes. I have already outlined the reasons why this "consummation devoutly to be wished" must be deferred and I have discussed at some length the forces which must be set to work to make it possible.
Let no one think that I have changed my mind in regard to the necessity of a balanced budget. Doubtless I will remain the target equally of two extreme schools of thought; on the one hand, those who believe that budget balancing is an outworn fetish, that a nation can continue to do what would soon bring an individual to disaster, and on the other hand, those who believe that governmental expenditures should be ruthlessly slashed regardless of the social distress and the cumulative deflation which would thereby be caused. I trust that Canadians of goodwill, regardless of party, will see that such criticism is merely the penalty which must be paid by public men who go neither to one extreme nor to the other but try to take the common sense middle course.
In times of depression, as I have already shown, increased expenditures on the part of governments are a sheer social necessity. Nevertheless, no nation can go on indefinitely with a budget heavily unbalanced without sooner or later providing a real, not an imagined, basis for fear as to the soundness of the country's financial position. If that fear should take root, nothing which a government could do short of taking over gradually the whole field of private enterprise, could offset the slowing up of private enterprise and the reduction in employment and incomes to which fear and uncertainty would give rise. Canada has had ten years of unbalanced budgets. There is as yet no reason whatsoever for any fear as to our national solvency. But this process cannot go on forever. Governments must be eternally vigilant that they do not simply take the path of least resistance which is that of easy spending. The private citizen must be awake to see that governments resist that temptation. And I may add, the private citizen should endeavour not to put that temptation in the way of governments. Business and financial leaders must make every effort to expand production, employment and incomes in order to avoid

the necessity of governments embarking upon work-creating programs.
I for one am convinced that, given peace in the world, if we all put our shoulders to the wheel, we can soon so galvanize our economy that national income will be raised to a point where unbalanced budgets will be a nightmare of the past for the nation as well as for the individual .citizen.
On the basis of the analysis which I have given, and particularly in view of the forecast which I have made in respect of the over-all deficit for the new fiscal year, hon. members will, I think, agree that any major reductions in taxation, beyond the proposals with respect to the special excise tax, are clearly impossible. Under current conditions of business recession and the continued threat of international lawlessness, we must courageously face the demands made upon us for unemployment and agricultural distress and for the vital requirements of national defence. Much as I regret it, I am forced to ask our taxpayers to continue for the time being to bear approximately their present burdens, because I am convinced that for us to give up tax revenues at this time would only cause greater burdens and probably other serious difficulties at a later date. The size of our expected deficit might, indeed, suggest under more normal conditions an increase in tax rates but I prefer to make the present rates yield more revenue by doing everything possible to promote an increase in the national income.
For this reason I am recommending a three-year extension of the income tax exemption granted to new metalliferous mines coming into production. As a result of this provision, exploration and development work will be encouraged to go forward on the understanding that any new mine coming into production prior to January 1, 1943, will be exempt from corporate income tax for its first three years of operation, in the same manner as has been the case during the last three years, and in connection with which I gave detailed information earlier in this address.
With a similar purpose in mind, I am recommending to the house another measure which involves the application to all productive industry of the principle which has been applied with such beneficial results to the mining industry. I need not here repeat the argument which I have already used as to the necessity of increased creation of capital works if we are going to solve the problem of unemployment and restore normal business activity. To my mind that argument is unanswerable.

The Budget-Mr. Dunning
The government proposes, therefore, to offer what I believe will be a powerful incentive to all industries to go forward immediately with any justified expansion of plant and with such modernization of machinery and equipment as the progress of recent years has made essential. Any firm, therefore, which begins after May 1 next the construction, installation, betterment, replacement or extension of plant, machinery or fixed equipment will be allowed a credit against income tax equal to 10 per cent of the costs incurred for such capital projects prior to April 30, 1940-one year. This tax credit is to be spread equally over the next three years in which the firm has a taxable income. It will apply to any firm in any industry whether organized as an individual firm, partnership or corporation, except, of course, a new metalliferous mine which already has the benefit of the three-year exemption from corporate income tax.
I am convinced, sir, that this measure will have highly desirable results both immediately and permanently. During the present year it should serve to counteract the several factors which have been holding back investment in new capital enterprise in so many cases and should thereby promote a substantial expansion of employment both in heavy construction and in the machinery and equipment industries. But it should do more than this. It should help to place our industries on the most modern and up-to-date basis, enabling them to cut costs, to compete more effectively in both the domestic and the world markets, and thereby to be in a position to maintain prosperous employment for the longer run future.
Other minor changes in the Income Tax Act will be made for the purpose of clarifying the intent of existing provisions, removing anomalies and closing certain loopholes.
Under the Excise Act it is proposed to increase the rate of duty on spirits used in making vinegar from 27 cents per gallon to 60 cents per gallon. The purpose of this proposal is to stimulate the use of apple cider in making vinegar, and thus to widen the market for low grade apples.
In the sphere of trade negotiations, Canada's outstanding accomplishment of the year now closing was of a dual nature: cooperation with the United Kingdom in the successful negotiations between that country and the United States and the simultaneous revision and enlargement of our existing agreement with the latter country. The three-way negotiations necessitated were lengthy and difficult; and that the two agreements resulting therefrom have so generally commended themselves to the citizens of the countries 71492-199
concerned is in itself a tribute to the spirit of give-and-take in which these three democracies entered jointly upon an admittedly difficult task.
In view of the time devoted earlier in this session to consideration of the new agreement with the United States, I do not propose to refer to it at any length. That it will prove to be as beneficial to both countries as was the one which it has superseded, I have not the slightest doubt. Of the enduring success of the United Kingdom-United States agreement I am equally confident.
I am not suggesting for a moment, sir, that our tasks in this direction are concluded; that the latest agreements, merely because they are the most important and most comprehensive, are necessarily the crown of the arch. On the contrary, they seem to me rather to emphasize the work which remains to be done. And that leads me to remind the house that notice of termination has recently been given of the agreement existing betweer this country and the British West Indies- not because Canada does not want an agreement, but because the one which has stood for twelve years is sorely in need of revision. And I may assure this house that when the time comes to sit around a table with their representatives, we shall do so in that spirit of friendliness and goodwill which long has marked the relations of this country with the islands of the West Indies.
As might be expected in the light of earlier legislation, tariff changes to be announced to-day are neither numerous nor of striking importance. Many of them arise out of the provisions of the new agreement with the United States and have already been approved by the House.
Reports from the Tariff Board I have laid on the table to-day, respecting furniture, cigars, cocoa matting, starches and dextrines, worsted weaving yarns, coke, radios and tubes, and automobiles. The report on the radio industry, apart from recommending free entry of certain parts, refers to the bearing of the Patent Act upon the investigation. In this connection the board states that "radio tube manufacturers in Canada have taken full advantage of the protection afforded to them by the terms of the Patent Act". The board expresses the opinion that selling prices of radio tubes in Canada to all classes of purchasers should not be in excess of the recognized list prices in the United States, plus all charges on importation. To that end the board suggests that the proposed reduced duties on parts, unless "immediately reflected" in the published selling prices of Canadian radio tubes, be rescinded. In giving fuller study
[Stage Direction]
The Budget-Mr. Dunning
[Stage Direction]
to other phases of this report than those relating strictly to tariff rates, the government will have to consider the relation thereto of the provisions of the Patent Act respecting the abuse of exclusive rights under patents.
There is, Mr. Speaker, one further Tariff Board report tabled to-day to which I wish to refer. That is the report arising out of the inquiry respecting vegetable oils. As the house well knows from frequent discussions during the last three sessions, this investigation by the board arose out of an application by the National Luiry Council of Canada for the imposition of specific duties upon importations of vegetable oils. The matter being intensely involved and technical, I thought the application a highly proper one for a board inquiry. This inquiry, begun in the fall of 1936, is now completed and the result is the voluminous report I have placed on the table. Very briefly may I outline the nature of the board's recommendations: first, a rearrangement and reclassification of the tariff items relating to animal fats, oils and greases, as well as of those relating to vegetable oils, with certain proposed changes in the rates of duty;' second, the imposition of an excise tax of three cents per pound upon the vegetable oil content of vegetable shortenings and lard compounds, and of two cents per pound on the vegetable oil content of soaps of all kinds, such excise taxes in all instances to apply to both the domestic and the imported product.
This report was received only in time to be tabled with the budget speech. A week ago, however, I was advised by the board as to the nature of its recommendations and these were at once given serious consideration by the government. Since the recommendations, both as regards certain tariff changes and the excise taxes, are such as to require consultation with the United Kingdom government-because of commitments under trade agreements that have applied to these commodities since the Ottawa conference of 1932- the Canadian government decided to refer the matter at once to the government of the United Kingdom. This was done last week, as speedily as the essential abstracts of the report could be coded and transmitted, and we have intimated to the British government that a reply at the earliest possible moment would be greatly appreciated. May I add, Mr. Speaker, that should such reply release Canada from any obligations that may rest upon her at present by reason of these empire agreements, and should the reply be received before the committee stage is over, it will be possible to introduce the necessary resolutions,

Reference to the reports of the Tariff Board laid before parliament to-day provides a fitting opportunity, Mr. Speaker, to pay tribute to one who had, perhaps, most to do with their making but who is not in the place where he was usually to be seen on budget day. I refer to the late Honourable George H. Sedgewick, whose sudden passing was a shock to every member of this house. Highly intelligent, industrious, fair-minded, the soul of integrity, Mr. Sedgewick was admirably fitted for his high position, and I share the general view that his death is a great loss to the public service of this country.
The resolutions to be moved to-day include one which provides for the removal of the special excise tax of three per cent from all imports into Canada under any tariff more favourable than the general tariff. The direct obligation under the Canada-United States agreement was, as members will recall, to remove the tax from the goods covered by the items in schedule I to the agreement. Any further removal of this tax is not a matter for negotiation with another country but is entirely a matter of domestic policy for Canada. The decision taken in connection with the items in the agreement was made, therefore, in a full recognition of the larger issues involved, and I am sure that the action I am proposing to-day, which will involve an estimated reduction in taxation of about $14,000,000, will commend itself to all interests in this country, whether manufacturers, importers or consumers. In this connection, I should mention also the fact that, having in mind that practically all the crude rubber and the primary forms of tin imported into Canada are of empire origin and come now for the most part through empire channels and Canadian ports, the government have decided to impose a duty of 5 per cent ad valorem on such goods when imported under the intermediate or general tariffs.
In conclusion, I wish to say, Mr. Speaker, that repeatedly during the past year I have been impressed with the extent to which foreign visitors look on Canada as a specially favoured land. In their view we are blessed in our geographical situation, in our powerful and friendly neighbours, in our political, economic and social institutions, in the sanity and enterprise of our people, and in our rich and varied resources available for productive investment. Many of them indeed have been shocked at the evidence of constant bickering and destructive criticism which they find here, at the tendency of some of our people to overlook the advantages which we possess over

The Budget-Mr. Dunning
most other countries and to belittle our own achievements and the future that should be in store for this country.
I ask you, Mr. Speaker, is it not time for us Canadians "to see ourselves as others see us," to- adopt a constructive rather than a negative attitude, and to concentrate with courage and vigour on a united effort to solve our own problems and continue the work of building a greater and better country? If only we can develop more of a national esprit de corps, if only we can recreate that spirit of cooperation, mutual helpfulness and constructive enterprise possessed by those who founded this nation at confederation, we need have no fear of the future. I for one have never lost faith that Canadians will successfully meet that challenge.
*	RESOLUTIONS
Mr. Speaker, I beg to give notice that when we are in committee of ways and means I shall move the following resolutions:

[Stage Direction]
Resolved, That it is expedient to amend The Income War Tax Act and to provide:-
1.	That a taxpayer (other than a company deriving income from a metalliferous mine to which section 89 of the act applies) shall be entitled to deduct from the tax that would otherwise be payable under the act amounts not exceeding in the aggregate ten per cent of capital costs actually incurred and paid in the period beginning May 1, 1939 and ending April 30, 1940 in respect of the construction, installation, betterment, replacement or extension of plant, machinery or fixed equipment during the same period, by deducting, in each of the first three fiscal years of the taxpayer after April 30, 1940 in which the taxpayer has taxable income, an amount not exceeding one-third of the aggregate amount of the deductions authorized.
2.	That any metalliferous mine that comes into production after the 31st day of December, 1939, and prior to the 1st day of January, 1943, shall be exempt from income tax for the first three fiscal periods following the commencement of production.
3.	That dividends paid by a metalliferous mine to a Canadian company during the period that such metalliferous mine is exempt from taxation under section eighty-nine of the act shall be exempt in the hands of such Canadian company.
4.	That the tax imposed at the source on payments by Canadian debtors to non-residents in respect of films, whether copyrighted or not, be increased to 5 per centum on the total amount of such payments.
5.	That salaries, bonuses, directors' fees, or other like remunerations, paid by Canadian companies to a non-resident, in excess of $14,000, shall not be allowed as an expense of such Canadian company.
6.	That general overhead expenses of companies shall be rateably apportioned between the taxable and the non-taxable income of such companies.
7.	That where any estate or trust is taxable under the act it shall not receive a personal exemption of one thousand dollars.
8.	The dividends paid by a personal corporation out of capital gains after all of the income of such corporation has been taxed against and received by its shareholders shall be exempt from taxation.
9.	That the resolutions numbered 3, 5, 6, 7 and 8 shall be applicable to the incomes of 1938 and fiscal periods ending therein. Resolution numbered 4 shall be applicable on April twenty-sixth, one thousand nine hundred and thirty-nine. Resolutions numbered 1 and 2 shall come into force as indicated therein.

[Stage Direction]
Resolved, That it is expedient to introduce a measure to amend The Special War Revenue Act, and amendments thereto and to provide:
1.	That section 88 of the said act be struck out and the following substituted therefor:
"88. (1) In addition to any duty or tax that may be payable under this part, or any other statute, there shall be imposed, levied and collected a special excise tax of three per cent on the duty paid value of all goods imported into Canada subject to entry under the general tariff payable by the importer or transferee who takes the goods out of bond for consumption at the time when the goods are imported or taken out of warehouse for consumption: Provided that when raw furs imported into Canada are exported therefrom, a drawback of the tax paid may be granted under regulations to be made by the minister.
(2) The tax imposed by this section shall not apply to:
(a)	The articles enumerated in schedule V to this act.
(b)	Goods, the duty paid value of which does not exceed twenty-five dollars, when imported by mail or express, or by the owner thereof when entering Canada unless more than one entry of such goods be made by one importer during one day from one country, in which case the tax shall be applicable."
2.	That any enactment founded on this resolution shall be deemed to have come into force on the twenty-sixth day of April one thousand nine hundred and thirty-nine, and to have applied to all goods imported or taken out of warehouse for consumption on and after that day and to have applied to goods previously imported for which no entry for consumption was made before that date.

[Stage Direction]
Resolved, That it is expedient to introduce a measure to amend The Excise Act, 1934, and amendments thereto and to provide:
1. That the schedule to the said act which sets out the excise duties to be imposed, levied and collected on spirits distilled in Canada be amended by striking out subsection (c) of section 1 of the said schedule and substituting therefor the following:
"(c) On every gallon of the strength of proof used in any bonded manufactory in the production of vinegar, sixty cents, and so in proportion for any greater or less strength than the strength of proof and for any less quantity than a gallon;"
71492-199J
The Budget-Mr. Dunning
[Stage Direction]
2. That any enactment founded on this resolution shall be deemed to have come into force on the twenty-sixth day of April one thousand nine hundred and thirty-nine.

[Stage Direction]
1. Resolved, that schedule A to the Customs Tariff, being chapter forty-four of the Revised Statutes of Canada, 1927, as amended by chapter seventeen of the acts of 1928, chapter thirty-nine of the acts of 1929, chapter thirteen of the acts of 1930 (first session), chapter three of the acts of 1930 (second session), chapter thirty of the acts of 1931, chapter forty-one of the acts of 1932, chapters six and thirty-seven of the acts of 1932-33, chapters thirty-two and forty-nine of the acts of 1934, chapter twenty-eight of the acts of 1935, chapter thirty-one of
the acts of 1936, and chapter twenty-six of the acts of 1937, be further amended by striking thereout tariff items 39, 39a, 39c, 39d, 53, 54, 54a, 55, 63a, 77a, 87 (n), 98, 98a, 117, 170, 171a, 172, 172a, 173, 174, 175, 176, 177, 178b, 183, 184, 203, 208g, 208h, 210b, 220(a) and (b), 241, 241a, 255, 265b, 289, 326f, 343, 346a, 386 (c), 390c, 409e (ii), 417, 422a, 427b, 427e, 427h, 435, 438e(3), 445d, 446g, 448, 454, 462b, 466, 476(i) and (ii), 537c, 549e, 569e, 571a, 587b, 597a, 616, 618c, 652, 657b, 663c, 664b, 682a, 696, 804, 810, 814, 816, 818, 825, and orders in council P.C. 1414 and P.C. 2736, the several enumerations of goods respectively and the several rates of duties of customs, if any, set opposite each of the said items, and by inserting the following items, enumerations and rates of duty in said schedule A:
'Mr, Dunning.]
Tariff
Item
39a
39c
39d
39e
55
77a
98
(i) Potato starch and potato flour	per pound
When in packages weighing two pounds each, or jess, the weight of such packages to be included in the weight for duty.
British
Preferential
Tariff
1 ct.
(ii) Starch, and all preparations having the quality
of starch, n.o.p	per pound
When in packages weighing two pounds each, or less, the weight of such packages to be included in the weight for duty.
1 ct.
Starch or flour of sago, cassava, or rice; riee meal, rice feed, rice polish, rice bran, rice shorts.per pound
Dextrine, and combinations or preparations of starch and dextrine without admixture of foreign material, n.o.p	per pound
Combinations or preparations of starch and dextrine with admixture of foreign material, n.o.p., which, when mixed with cold water, do not form an adhesive paste	per pound
J ct. 1 ct.
1 ct.
Resin sizing.
5 p.c.
Cornmeal,
per barrel
Free
Indian corn
per bushel
Free
Cocoa beans, not roasted, crushed or ground per
one hundred pounds
(n) Tomatoes	
but not less than .... per pound
Bananas	per stem or bunch
Fish livers, fresh, salted or in preservative medium.
Free
Free
Free
Free
Intermediate
Tariff
2 cts.
1} cts.
11 cts.
1	ct.
2	cts.
7J p.c. 50 cts. 10 cts.
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271 P.c. 2 cts.
50 cts.
Free
Present Rates Applicable to
The
United
Kingdom
Most
Favoured
Nations
General
Tariff
Countries
1 ct.
2 cts.
2 cts.
1 ct.
2 cts.
2 cts.
| ct. or Free
5 p.c. or 1 ct.
5 p.c. or 1 ct.
5 p.c.
Free
7J cts. Free Free
Free
Free
Free or 50 cts. Free
1} cts. 174 P-c.
p.c.
2 cts.
p.c. 2 cts.
7i p.c.
224 cts.
7i cts. Free 10 cts.
1} cts. 17J p.c.
10 p.c. 2 cts.
10 p.c. 2 cts.
10 p.c.
25 cts.
7$ cts. Free 25 cts.
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50 cts. 50 cts. Free
50 cts.
50 cts.
Free or 25 p.c.
The Budget-Mr. Dunning
Tariff
Item
172
178b
Books, periodicals and pamphlets, or parts thereof, printed, bound, unbound, or in sheets (not to include blank account books, copy books, or books to be written or drawn upon) in any other than the English language	
Books, pamphlets and charts, printed or published by any government abroad; official financial and business reports and statements issued by companies or associations abroad; books, pamphlets and reports for the promotion of religion, medicine and surgery the fine arts, law, science, technical training, and the study of languages, not including dictionaries. Scripture and prayer cards, and religious pictures and mottoes, not to include frames; books, bound or unbound, which have been actually printed and manufactured more than twelve years; manuscripts; insurance maps; freight rates, passenger rates and time-tables issued by transportation companies abroad and relating to transportation outside of Canada, in book or in pamphlet form	
Books which are included in the curriculum of any university, college or school in Canada for^use as text books or as works of reference, not to include dictionaries; printed books, pamphlets and cards for use in schools to test the degree of intelligence of pupils; all books for bona fide libraries, and being the property of the organized authorities of such libraries and not in any case the property of individuals or business concerns, under such regulations as may be prescribed by the Minister directories for free reference libraries; books received from free lending libraries abroad, subject to return under Customs supervision within sixty days
Printed advertising matter and tickets, time-tables and freight and passenger tariffs issued by railway systems in the British Empire (not including railway systems operating in Canada)	
British
Preferential
Tariff
Free
Free
Free
Free
Intermediate Tariff
Free
Free
Free
Present Rates Applicable to
General
Tariff
The
United
Kingdom
Free
Free
Free
Most
Favoured
Nations
Free
15 p.c.
Free
Free
15 p.c.
Free
Free
Free 22J p.c. 15 p.c.
Free
22§ p.c. 10 p.c. Free
22J p.c. 10 p.c. Free
General
Tariff
Countries
25 p.c. 10 p.c. Free
25 p.c. 10 p.c. Free
25 p.c. 10 p.c. Free
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(i) Newspapers, or supplemental editions or parts thereof, partly printed and intended to be completed and published in Canada	
Free
197e
206b
208g
208h
208v
(ii) Comic and pictorial sections to be inserted in or folded with periodical publications entered for mailing purposes as second-class matter, when the space devoted to advertisements in each section does not exceed 40 per centum of the total space__
Newspapers, unbound, n.o.p.; tailors' milliners' and mantle-makers' fashion plates, when imported in single copies in sheet form with periodical trade journals	
Electric cable insulating paper, -0045 inch or less in thickness, and condenser tissue paper	
Non-edible seeds, beans, nuts, berries, plants, weeds, barks, and woods, in a crude state or chipped or ground, and extracts and preparations thereof, all of the foregoing when adapted for dyeing or tanning; turmeric, nutgalls and extracts thereof; indigo, indigo paste and extracts of; aniline oil, crude; aniline salts, alizarin and artificial alizarin; annatto, liquid or solid; iron liquor, being solution of acetate or nitrate of iron adapted for dyeing and calico printing; red liquor, being a crude acetate of aluminum prepared from pyroligneous acid and adapted for dyeing and calico printing	
Dextrose (glucose) solutions, prepared for parenteral administration in therapeutic treatments; component materials and articles to be used in making such preparations	
Calcium molybdate, molybdenum oxide, vanadium oxide and tungsten oxide, whether in powder, in lumps, or formed into briquettes by the use of a binding material, when for use in the manufacture of steel, under regulations prescribed by the Minister	
Ethylene glycol, when imported by manufacturers for use exclusively in the manufacture of anti-freezing compounds or of explosives, in their own factories	
Methyl ethyl ketone; isopropyl acetate; butyl alcohol	
Free
Free
Free
Free
Free
Free
Free
Free
Free	Free	Free	FreeFree	Free	10 p.c.	10 p.c.Free	Free	Free	Free25 p.c.	10 p.c.	10 p.c.	25 p.c.Free	Free	Free	FreeFree	Free or 20 p.c.	Free 27J P.c. (and various other rates)	40 p.c. 40 p.c.5 p.e.	Free	Free	5 p.c.orl2J p.c.	20 p.c.	22J p.c.Free	Free	Free	Free25 p.c.	Free	25 p.c.	25 p.c.
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27ie Budget-Mr. Dunning

Tariff
Item
210b
241
241a
265b
326f
(i)	Barilla or soda ash..per one hundred pounds
(ii)	Sal soda	per one hundred pounds
All medicinal, chemical and pharmaceutical preparations, compounded of more than one substance, including patent and proprietary preparations, tinctures, pills, powders, troches, lozenges, filled gelatine capsules, tablets, syrups, cordials, bitters, anodynes, tonics, plasters, liniments, salves, ointments, pastes, drops, waters, essences and oils, n.o.p.:-
(a)	When dry	
(b)	Liquid, when containing not more than two
and one-half per centum of proof spirit	
Litharge and mixtures or combinations of litharge with other materials, such mixtures or combinations to contain not less than 50 per centum by weight of litharge, when imported by manufacturers of electric storage batteries, for use exclu sively in the manufacture of storage battery plates in their own factories	
Litharge, n.o.p	
Cod liver oil, crude or refined.
Baths, bathtubs, basins, closets, closet seats and covers, closet tanks, lavatories, urinals, sinks and laundry tubs of earthenware, stone, cement, clay or other material, n.o.p	
Moulded illuminating shades, reflectors and refractors of glass, of synthetic resins, of pyroxylin, or of plastics of cellulose acetate or other chemical derivatives of cellulose, of a class or kind not made in Canada, designed for use with lighting fixtures or with portable lamps	
Tin, in blocks, pigs or bars.
British
Preferential
Tariff
15 cts. 20 cts.
17J p.c. 20 p.c.
Free
Free
Free
15 p.c.
Free
Free
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		Present Rates Applicable to		
Intermediate Tariff	General Tariff	The United Kingdom	Most Favoured Nations	General Tariff Countries25 cts.	30 cts.	20 cts.	30 cts.	30 cts.30 cts.	30 cts.	20 cts.	30 cts.	30 cts.20 p.c.	25 p.c.	17} p.c.	20 p.c.	25 p.c.27} p.c.	40 p.c.	20 p.c.	27} p.c.	40 p.c.Free	Free	Free	Free	Free15 p.c.	15 p.c.	Free	15 p.c.	15 p.c.15 p.c.	22} p.c.	Free	20 p.c.	22} p.c.27} p.c.	35 p.c.	15 p.c.	27} p.c. (and various rates)	35 p.c.15 p.c.	32} p.c.	(Free J10 p.c. 110 p.c. (20 p.c.	15 p.c. 27} p.c. 25 p.c. 27} p.c.	32} p.c 40 p.c. 32} p.c. 30 p.c.5 p.c.	5 p.c.	Free	Free	Free
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The Budget-Afr. Dunning
346a
351c
Tin strip waste and tin foil	
Zinc slugs or discs, when imported by manufacturers of electric dry batteries for use in the manufacture of seamless cups or shells for such batteries, in their own factories	
Brass wire, when imported by manufacturers of fourdrinier wires or of paper-machine wire cloth, for use exclusively in their own factories	
Free
Free
Free
(c) Sheets, plates, hoop, band or strip, hot rolled, being mould boards, shares, cultivator or shoe shapes, plough plates, land sides or disc circles, when such rectangles, circles or sketches are cut to shape but not moulded, punched, polished or otherwise manufactured, wrhen imported by manufacturers of agricultural implements for use exclusively in the manufacture of agricultural implements, in their own factories	
Free
390c
Piston ring castings of iron or steel, in the rough as from the moulds	
Free
409c
(f) Wire, of rust or acid resisting steel, twisted or stranded, for use exclusively in commercial fishing operations	
(ii) Fruit and vegetable grading, grating, washing and wiping machines and combination bagging and weighing machines, and complete parts thereof; machines for topping vegetables, and machines for bunching and/or tying cut flow-ers, vegetables and nursery stock, and complete parts thereof; box-lidding machines, egg-graders and egg-cleaners, and complete parts thereof, not including aluminum parts	
Machinery and apparatus and complete parts thereof and structural iron and steel, of a class or kind not made in Canada, when imported for use exclusively in the construction or equipment of factories for the manufacture of sugar from beetroot, or for receiving sugar beets, under regulations prescribed by the Minister	
Free
Free
Free
Free
Free
Free
15 p.c.
Free
Free
10 p.c.
5 p.c. Free
Free	Free	Free25 p.c.	Free	Free35 p.c.	10 p.c.	30 p.c.Free	Free	Free271 p.c.	Free or 15 p.c.	Free 221 p.c.25 p.c.	Free	10 p.c.10 p.c.	Free	5 p.c.Free	Free Free	Free 10 p.c. (various other rates)
25 p o.
35 p.c.
Free
27J p.c. 27J p.c.
25 p.c.
10 p.c. or 35 p.c.
Free 35 p.c.
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The Budget-Mr. Dunning
[Mr. Tariff Item	-	British Preferential Tariff
422a	Concrete road-paving machines, self-propelling, end loading type, with a capacity of 21 cubic feet of wet concrete or more; concrete and asphalt road finishing machines; form graders; sub-graders; combination excavating and transporting scraper units; concrete mixers, transit type; dump wagons or trailers on crawler-tracks, not self-propelled; back-filling machines and equipment, mounted on self-propelling wheels or crawling traction, semi- or full-revolving boom and scraper type; steam or air driven pile hammers or extractors; well-points; truck turntables; all the foregoing of a class or kind not	
	made in Canada, and complete parts thereof		Free
427b	Ball and roller bearings; complete parts thereof,	
		Free
427e	Automatic machines for making and packaging cigars and cigarettes, not to include tobacco-preparing	
	machines		Free
427h	Motion picture projectors, arc lamps for motion pic-	
	ture work, motion picture or theatrical spot lights, light effect machines, motion picture screens, portable motion picture projectors with or without sound equipment; electric rectifiers or generators designed for use with motion picture projectors; complete parts of all the foregoing, not to include	
	electric light bulbs, tubes, or exciter lamps		Free
435	Locomotives and motor cars for railways, of a class or kind not made in Canada, and complete parts thereof, for use exclusively in mining, metallurgical	
	or sawmill operations		Free
438e	(3) Parts, n.o.p., of iron or steel, not electro-plated,	
	whether finished or not	 (4) Parts, n.o.p., other than of iron or steel, not	Free
	electro-plated, whether finished or not		Free
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Intermediate Tariff	General Tariff	Present Rates Applicable to	The United Kingdom	Most Favoured Nations	General Tariff Countries10 p.c.	12§ p.c.	Free	10 p.c.	12} p.c. 30 p.c. 35 p.c.17} p.c.	35 p.c.	Free or 10 p.c.	17£ p.c. 25 p.c.	35 p.c. 35 p.c.10 p.c.	35 p.c.	Free	10 p.c.	35 p.c.15 p.c.	35 p.c.	Free	15 p.c.	35 p.c. 37j p.c. 30 p.c.12} p.c.	20 p.c.	Free	12} p.c.	20 p.c. or 35 p.c.25 p.c.	40 p.c.	Free	25 p.c.	40 p.c.30 p.c.	40 p.c.	Free	30 p.c.	40 p.c.
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442.1
443a
445d
Materials, including all parts, wholly or in chief part of metal, of a class or kind not made in Canada, when imported by manufacturers of goods entitled to entry under tariff items 410g, 4101, 410n, 410o, 410p, 410q, 410u, 410w, 410z, 411, 411a, 411b, 427b, 428c, 428e, 440k and 447a, for use in the manufacture of such goods in their own factories, under such
regulations as the Minister may prescribe....
Provided, that materials and parts which are entitled to free entry or to a lower rate of duty than is specified in this item shall not be dutiable under this item.
Ovens, of a class or kind not made in Canada, for use in commercial bakeries	
Electric wireless or radio apparatus and complete parts thereof, n.o.p	
Free
Free
Free
10 p.c.
10 p.c, 25 p.c,
445o
Acid-free capacitor tissue and >
aper, plain and gummed; aluminium cans, extruded; automatic record changers and parts for pickups; bias cells; diaphragms with or without spider and voice coil frames, yokes, brackets and housings to be used in the assembly of speakers with mounting not exceeding 6} inches in width; glass dial crystals and scales; high frequency circuit switches; high frequency iron cores; magnets; motors and gears for automatic tuning; radio frequency ceramics; sheets and punchings of low loss mica; tube shields; vibrators; vulcanized fibre in sheets, rods, strips and tubing; for use in the manufacture or the repair of the goods enumerated in Tariff Items 445d or 597a, or for use in the manufacture of parts therefor
Free
Free
10 p.c.		at various rates
30 p.c.	15 p.c.	15 p.c.30 p.c.	Free	25 p.c.SO p.c.	15 p.c.	22$ p.c.15 p.c.	22$ p.c.20 p.c.	27$ p.c.Free	25 p.c.15 p.c.	25 p.c.10 p.c.	17$ p.c.17$ p.c.	17$ p.c.15 p.c.	20 p.c.
30 p.c.
30 p.c.
35 p.c. 25 p.c. 35 p.c. 30 p.c. 30 p.c. 22$ p.c. 25 p.c. 25 p.c.
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Tariff Item	-	British Preferential Tariff	Intermediate Tariff445p	Ceramic spacers and insulators; copper alloys for welding; getter and getter assemblies; glass bulbs and glass tubing; metal bulbs; mica parts and wire snubbers; molybdenum and molybdenum alloy wire; nickel and nickel alloy tubing, wire, ribbon, screen and strip, coated or not, carbonized or not; wire of tungsten or zinc; all the foregoing when imported by manufacturers of radio tubes for use exclusively in the manufacture of radio tubes, in their own factories	Free	Free446g	Electric or gas apparatus designed for welding or cutting and parts thereof, not including motors	5 p.c.	20 p.c.448	Steel balls and rollers for use only in ball or roller bearings	Free	7| p.c.454	Frames not more than ten inches in width, clasps and fasteners (not to include slide or hookless fasteners), when imported by manufacturers of purses, chatelaine bags or reticules for use exclusively in the manufacture of purses, chatelaine bags or reticules in their own factories, under regulations prescribed by the Minister; parts of the foregoing	Free	121 P-c.462b	Cinematograph and motion picture cameras, 35 mm., for use by professional motion picture producers having studios in Canada equipped for motion picture production; parts of the foregoing	Free	10 p.c.466	Iron sand and iron or steel shot, not further manufactured than crushed or ground, and dry putty, for sawing, polishing, pressure blasting or tumbling purposes	Free	Free
Present Rates Applicable to
The United Kingdom	Most Favoured Nations	General Tariff CountriesFree	25 p.c.	30 p.c.20 p.c.	25 p.c.	30 p.c.10 p.c.	30 p.c.	35 p.c.10 p.c.	17* P-c.	224' p.c.15 p.c.	20 p.c.	25 p.c.Free	Free	Free10 p.c.	20 p.c.	30 p.c.or 10 p.c.	25 p.c.	35 p.c.Free	7i p.c.	10 p.c.Free	125 P-c.	20 p.c.Free	10 p.c.	15 p.c.or 7$ p.c.	10 p.c.	30 p.c.Free	Free	Free
The Budget-Mr. Dunning
507e
537o
549e
S51d
569e
571a
587b
Surgical and dental instruments of any material; surgical needles; X-ray apparatus; microscopes valued at not less than 50 dollars each, retail; complete parts of all the foregoing	 Plywood made of two or more layers of wood glued or cemented together and faced with metal on one	Free 5 p.c.
Rovings, yarns and warps wholly of vegetable fibres other than cotton or jute, not to include materials for sewing, stitching or packaging purposes, imported by manufacturers for use exclusively in their	Free
Filter press cloth made from human hair, imported	
by manufacturers for use in their own factories..	10 p.c.
Yarns and warps composed wholly of wool or in part of wool or hair, imported by manufacturers for use in their own factories in the manufacture of woven fabrics in chief part by weight of wool or hair and not exceeding six ounces to the square yard when in the gray or unfinished condition, under such regulations as may be prescribed by the Minister		Free
and, per pound	
Firemen's helmets; safety helmets for industrial	Free
purposes; parts of such helmets		
(i) Mats with cut pile, of cocoa fibre, .per square foot	3 ets.
(ii) Mats, n.o.p., rugs, carpeting and matting of cocoa	7$ ets.
fibre	per square yard	
Coke of a kind not produced in Canada or coke which, owing to transportation costs, ^ is not available commercially at point of use in Canada, when imported by manufacturers for use exclusively in manufacturing calcium carbide or rock wool or in metallurgical operations, in their own plants		Free
Free
20 p.c.
10 p.c.
27} p.
17} p.c 15 eta.
Free
4 ets. 9 eta.
Free
Free 35 p.c.
15 p.c 30 p.c.
20 p.c. 17} cts.
Free
5 eta.
10 cts.
Free
Free	Free	Free or 10 p.c.171 P-c.	20 p.c.	25 p.c.10 p.c.	25 p.c.	35 p.c.15 p.c.	27} p.c.	30 p.c.Free	10 p.c.	15 p.c.121 P-c.	17} p.c.	25 p.c.171 p.c.	22} p.c.	25 p.c.20 p.c.	27} p.c.	30 p.c.or 221 P.c.	35 p.c.	40 p.c.and	and	and12 cts.	30 cts.	35 cts. lb.10 p.c.	17} p.c.	20 p.c.5 cts.	15 cts.	17} cts.(Free	Free	Freeor 22} p.c.	30 p.c.	35 p.c.land	and	and[75 cts. dozen	$1.50 ton	$1.50 dozen30 p.c.	37} p.c.	40 p.c.30 p.c.	37} p.c.	40 p.c.fFree	Free	Free[Free	$1.00 ton	$1.00 ton
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The Budget-Mr. Dunning

Tariff Item	British Preferential Tariff	Intermediate Tariff597a	Musical instruments of all kinds, n.o.p.; phonographs, graphophones, gramophones and finished parts thereof, n.o.p., including ^ cylinders and records therefor; and mechanical piano and organ players..	15 p.c.	27* p.c.616	(i) Rubber, crude, caoutchouc or India-rubber, unmanufactured 	Free	5 p.c.(ii) Powdered rubber and rubber or gutta percha waste or junk; recovered rubber and rubber substitute	Free	Free618c	Chlorine derivatives of India-rubber insoluble in carbon tetrachloride, in sheets not exceeding three one-thousandths of an inch in thickness, coloured or not but not printed, lithographed or embossed, when for use in Canadian manufactures	Free	5 p.c.652	Toilet or dressing combs, n.o.p.; fancy combs, not being jewellery	10 p.c.	25 p.c.but not less than	per gross	$1.50657b	Parts, unfinished, when imported by manufacturers of cameras, for use in the manufacture of cameras, in their ow . factories	Free	p.c.663c	Soya beans, soya bean oil cake and soya bean oil meal, when imported for use as animal or poultry feeds, or as fertilizer, or when imported for use in the manufacture of animal or poultry feeds or fertilizers.	Free	Free663g	Fish meal	Free	20 p.c.682a	Net floats of aluminum, glass, canvas, cork, or rubber, for use exclusively in commercial fishing	Free	Free
Present Rates Applicable to
The United Kingdom	Most Favoured Nations	General Tariff Countries15 p.c.	25 p.c.	30 p.c.Free	Free	FreeFree	Free	FreeFree	5 p.c.	20 p.c.or 5 p.c.	5 p.c.	25 p.c.10 p.c.	25 p.c.	27$ p.c.Free	5 p.c.	7} p.c.Free	Free	Free15 p.c.	20 p.c.	25 p.c.Free	Free	Free
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Philosophical and scientific apparatus, utensils, instruments, and preparations, including boxes and bottles containing the same; maps, charts, photographic reproductions and other pictorial illustrations, casts as models, animals as research or experimental subjects; mechanical equipment of a class or kind not made in Canada. All articles in this item, when for the use and by order of any society or institution incorporated or established solely for religious, philosophical, educational, scientific or literary purposes, or for the encouragement of the fine arts, or for the use and by order of any public hospital, college, academy, school, or seminary of learning in Canada, and not for sale, under regulations prescribed by the Minister	
Free
Ladder tapes and braided cords, when imported for use exclusively in the manufacture of Venetian blinds	
Free
Billets of wrood, not further manufactured than rough turned to dowel form, when imported by manufacturers of baseball bats for use exclusively in the manufacture of baseball bats in their own factories.
Free
Woven fabrics, wholly of cotton, bleached, when imported by manufacturers of handkerchiefs, for use exclusively in the manufacture of handkerchiefs wholly of cotton, in their own factories	
Free
Woven cord tire fabric, wholly or in chief part by weight of artificial silk or similar synthetic fibres, not to contain silk nor wool, coated with a rubber composition, when imported by manufacturers of rubber, to be incorporated by them in pneumatic tires, in their own factories	
Free
Free
Free
22j p.c
15 p.c.
Free
10 p.o.
27$ p.c.
25 p.c.
Free
Free
Free
7§ p.c.
Free
Free
10 p.c.
22$ p.c.
15 p.c.
Free
10 p.c.
27$ p.c.
25 p.c.
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The Budget-Mr. Dunning
The Budget-Mr. Dunning
[Stage Direction]
2. Resolved, that schedule B to the Customs thereto, and by inserting the following item, Tariff be amended by striking thereout tariff enumerations and rates of drawback of customs item 1049, the enumeration of goods and the rate duties in said schedule B: of drawback of customs duties set opposite
Item No.	Goods	When Subject to Drawback	Portion of Duty (not including Special Duty or Dumping Duty) Payable as Drawback1049	Bituminous coal, imported on or after March 23rd, 1935.	(a)	When converted into coke to be sold. (b)	When converted into coke to be sold; provided that not less than thirty-five per centum, by weight, of the bitum-	50 p.c.inous coal so used, as covered by each drawback claim, was mined in Canada Provided that drawback payable under this Item is in lieu of drawback payable under any other item.	99 p.c.
3. Resolved, that any enactment founded upon the foregoing resolutions to amend the Customs Tariff or schedules thereto shall be deemed to have come into force on the twenty-sixth day of April, one thousand nine hundred and thirty-nine, and to have applied to all goods mentioned
in the foregoing resolutions imported or taken out of warehouse for consumption on and after that date, and to have applied to goods previously imported for which no entry for consumption was made before that date.

[Stage Direction]
1. As the final figures for the fiscal year 1938-39 are not as yet available, all statements dealing with revenues, expenditures, investments and 'balance sheet items are estimated. It is expected that when the books of the year
are finally closed, any variations from the figures shown herein will be of slight importance.
2. The following tables show, by main categories and in detail, revenues, expenditures and the increase in net debt for the fiscal year 1938-39, together with comparable figures for the four preceding fiscal years:
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The Budget-Mr. Dunning

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(000 omitted)
1934-35	1935-36	1936-37	1937-38	Estimated 1938-39$	$	$	S	$Tax Revenues-	Customs import duties	76,562	74,004	83,771	93,456	78,750Excise duties	43,190	44,410	45,957	52,037	51,313War tax revenues-	Banks	1,369	1,281	1,210	1,107	1,026Insurance companies	750	761	775	867	891Income tax	66,808	82,710	102,365	120,366	142,02fSales tax	72,447	77,552	112,832	138,055	119,461Manufacturers', importations, stamps,	transportation taxes, etc	39,745	35,181	39,641	42,764	42,241Tax on gold	3,573	1,413	-	-	-Total revenue from taxes	304,444	317,312	386,551	448,652	435,705Non-Tax Revenues-	Canada Grain Act	1,205	1,213	1,192	680	1,130Canada Gazette	47	49	48	47	47Canals	838	890	1,004	1,866	725Casual	4,337	4,636	6,276	6,597	6,980Chinese revenue	6	6	7	2	2Electricity	485	542	646	692	705Fines and forfeitures	90	295	134	209	250Fisheries	43	42	56	60	54Gas inspection	96	91	93	88	80Insurance inspection	139	147	152	162	172Interest on investments	10,963	10,614	11,231	13,120	13,195Lands, Parks and Forests	516	458	478	541	670Marine	218	222	263	336	367Mariners' fund	181	187	205	206	210Military college	20	20	20	20	20Militia pensions revenue	174	178	187	194	194Ordnance lands	16	16	15	16	20Patent and copyright fees	426	455	464	452	463Penitentiaries	74	68	62	63	70Post Office	31,248	32,508	34,275	35,546	35,250Premium, discount and exchange	752	36	-	27	480Public Works	254	251	274	318	307Radio Licences	1,487	1,574	(>) 990	-	-R.C.M.P. officers' pensions	9	11	10	11	11Weights and measures	407	401	396	393	416Total non-tax revenue	54,031	54,910	58,478	61,646	61,818Total ordinary revenues	358,475	372,222	445,029	510,298	497,523Special Receipts-	Sundry receipts	3,397	320	([DOT]J8.464	3,010	1,317Other credits-	Refunds on capital account	80	27	616	1,543	35Credits to non-active accounts	21	27	45	819	2,802Net credit resulting from various adjustments in Railway accounts authorized by Canadian National	Railways Capital Revision Act, 1937	-	-	-	1,023	-Total Special Receipts and Credits	3,498	374	9,125	6,395	4,154Grand Total Revenue	361,973	372,596	454,154	516,693	501,677
(*) As from Nov. 1936, radio licence lees deposited to credit of The Canadian Broadcasting Corporation. (') Includes $8,000,000 from Canadian Wheat Board taken into the accounts as an offset, in part, to the disbursements in 1935-36 re losses on 1930 wheat pool and stabilization operations.
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The Budget-Mr. Dunning

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(000 omitted) (*)
-	1934-35	1935-30	1936-37	1937-38	Estimated 1938-39Ordinary Expenditure	$	$	$	$	$Agriculture	7,107	9,399	8,741	9,017	9,501Auditor General's Office	377	429	423	463	476Civil Service Commission	221	259	305	358	382External Affairs, including Office of	Prime Minister	1,427	1,290	1,341	1,450	1,101Finance-	Interest on Public Debt	138,533	134,549	137,410	132,118	128,010Cost of Loan Flotations	2,890	3,577	3,839	4,555	4,975Premium, Discount and Exchange (net)	-	-	400	-	-Subsidies to Provinces	13,769	13,769	13,735	13,735	13,752Special Grants to Provinces	1,600	3,975	3,225	7,475	7,475Other Grants and Contributions	467	736	540	560	618Civil pensions and superannuation	943	854	787	712	670Government contribution to Super-	annuation Fund	1,948	1,875	2,019	2,065	2,220Old Age Pensions	14,942	16,704	21,149	28,653	29,141General Expenditure	3,939	3,735	3,579	3,654	3,707Fisheries	1,641	1,710	1,691	1,850	2,078Governor General's Secretary's Office...	133	138	143	144	146Insurance	156	163	172	187	198Justice	2,718	2,748	2,773	2,790	2,784Penitentiaries	2,667	2,377	2,372	2,577	2,735Labour	581	660	720	706	796Technical Education.	91	99	76	49	30Government Annuities-Payments to	272	maintain reserve	146	541	8,941	-Legislation-	House of Commons	1,796	1,486	1,760	1,516	1,815Library of Parliament	71	76	75	79	79Senate	491	491	587	536	605General	95	55	73	57	75Dominion Franchise Office	1,545	498	53	76	51Chief Electoral Officer, including elec-	tions	146	1,089	72	45	100Mines and Resources-	Administration	-	-	-	(i) 1.491	(>) 184Immigration and Colonization	1,269	1,322	1,313	1,163	1,365Indian Affairs	4,362	4,869	4,904	4,897	5,187f Interior	2,750	2,939	2,887)	f -	-(Lands, Parks and Forests	-	-	-	\ 1,910	1,640(Surveys and Engineering	-	-	- J	( 933	2,166Mines and Geological Survey	965	1,040	1,135	658	1,385Movement of Coal & Domestic Fuel	Act	2,124	2,103	2,277	2,521	1,900National Defence-	Militia Service	8,853	10,141	11,346	17,221	16,354Naval Service	2,222	2,380	4,763	4,372	6,623Air Service	2,258	3,777	5,822	10,018	11,355Sundry Services	847	879	992	1,149	878National Revenue (including Income	Tax)	10,166	10,963	11,205	11,870	11,961Pensions and National Health- Treatment and after-care of returned	soldiers	10,220	11,060	11,579	12,109	13,679Pensions, War and Military	43,139	42,790	42,801	42,240	42,170Health Division	809	993	873	957	1,068Post Office	30,252	31,438	31,906	33,762	35,706Privy Council	46	46	45	48	52Public Archives	209	165	160	170	172Public Printing and Stationery	368	109	169	161	192Public Works	9,905	12,945	14,519	12,382	15,670Royal Canadian Mounted Police	5,970	6,165	5,901	6,308	6,482Secretary of State	395	705	655	693	776
(*) Prior to 1937-38 general administration expenses were not segregated from other expenditures of the respective services of the departments which were amalgamated to form the Department of Mines and Resources. The figures for 1938-39 represent only Departmental Administration, other administration costs being included as in other departments, under the respective services.
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The Budget-Mr. Dunning

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for the last five fiscal years-Continued (000 omitted)
-	1934-35	1935-36	1936-37	1937-38	Estimated 1938-39$	$	$	$	tOrdinary Expenditure-concluded	Soldier Settlement	746	762	806	801	784Trade and Commerce	3,057	3,458	5,523	4,070	4,961Canada Grain Act	1,679	1,848	1,739	1,675	1,873Mail Subsidies and Steamship Sub-	ventions	i	2,274	2,426	2,120	2,029	2,012Transport-	Administration	-	-	-	(*) 417	395Air Service	-	-	-	(*) 2,935	3,492Marine Service	5,742	5,857	5,614	4,290	4,417Canadian Radio Commission	1,249	1,500	878	-	-Canadian Travel Bureau	41	[DOT] 248	250	250	250Railways and Canals	4,540	4,002	3,769	3,661	4,757Maritime Freight Rates Act	2,529	2,348	2,506	3,183	2,584Railway Grade Crossing Fund	275	128	54	180	362Total ordinary expenditure..	359,701	372,539	387,112	414,892	416,372Capital Expenditure	Canals	338	458	52	-	-Railways	526	287	203	71	27Public Works	6,243	5,799	3,237	4,359	4,660Total capital expenditure	7,107	6,544	3,492	4,430	4,687Special Expenditure	Unemployment Relief Act, 1930	2	26	-	-	-Unemployment Relief Act, 1931	52	26	-	-	-Unemployment Relief Act, 1932	399	111	-	-	-Unemployment Relief Act, 1933	2,420	494	-	-	-Unemployment Relief Act, 1934	49,114	1,152	-	-	-Unemployment Relief Act, 1935	-	48,027	-	-	-Administration-Relief Acts	-	-	194	378	271Grants-in-aid to Provinces	-	-	28,930	19,493	17,025Dominion share of joint Dominion-Pro-	vincial projects	-	-	12,692	8,841	4,544Dominion Projects	-	-	23,554	13,913	16,221Transportation facilities into mining areas	-	-	1,221	1,324	1,246Railway Maintenance Relief Work	-	-	2,662	-	-51,987	49,836	69,253	43,949	39,307nr	a.	t~\	.Li * tv i [DOT] f	Direct Relief	-	-	5,144	11,925	7,712Feed and fodder and freight thereon...	-	-	3,517	11,352	1,264Freight charges on movement of cattle	-	-	90	-	-Expenses of marketing cattle	-	-	-	337	-Purchase and distribution of food stuffs	-	-	-	972	300-	-	8,751	24,586	9,276Public Works Construction Acts	8,673	29,581	1930 Wheat Crop Equalization Payments	Act	-	6,600	-	-	-Loss on 1930 Wheat Pool and stabilization	operations-	Payment to Canadian Wheat Board of	net liability assumed as at Dec. 2,	1935	-	15,856	-	-	-Loss on 1930 oats pool under guarantee	of bank advances to Canadian Co-	operative Wheat Producers, Limited	-	174	-	-	-Provision for reserve against estim-	ated losses on wheat marketing	guarantees applicable to the fiscal	year 1938-39	-	-	-	-	25,000Total special expenditure	60,660	102,047	78,004	68,535	73,583
0) Prior to 1937-38 general administration expenses were not segregated from other expenditures of the respective Services of the Departments which were amalgamated to form the Department of Transport.
(') Prior to 1937-38 expenditures on civil aviation, now the Air Service Branch of the Department of Transport, were included under expenditures for the Air Service Branch of the Department of National Defence.
The Budget-Mr. Dunning

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for the last five fiscal years-Concluded
(000 omitted)
-	1934-35	1935-36	1936-37	1937-38	Estimated 1938-39$	$	$	$	$Government Owned Enterprises Losses charged to Consolidated Fund- Canadian National Railway System, ex-eastern lines	42,590	41,796	37*449	37,882	48,194Eastern lines	5,818	5,625	5,854	4,464	6,120Prince Edward Island Car Ferry and Terminals	(l) 388Canadian National Steamships	-	270	-	National Harbours Board	-	1,126	250	289	138Trans-Canada Air Lines	-	-	-	111	818Total charged to consolidated fund	48,408	48,817	43,553	42,746	55,658Loans and advances non-active- Canadian National Steamships	487	(Cr.) 333	(Cr.) 1,754	104	6National Harbours Board	1,242	2,456	2,419	1,983	3,303Total non-active advances...	1,729	2,123	665	2,087	3,309Total government-owned enterprises	50,137	50,940	44,218	44.833	58,967Other Charges Write-down of assets chargeable to Consolidated Fund- Reduction in soldier and general land settlement loans	469	488	628	750	960Yearly established losses in seed grain and relief accounts-Department of Mines and Resources	21	27	44	14	49Canadian National Railways Securities Trust Stock-Reduction due to line abandonments during calendar year 1938	(*) -	2,713Cancellation of Canadian Farm Loan Board-Capital Stock	20	10	12Province of Manitoba Treasury Bills..	-	-	-	805	Non-Active Accounts- General Land Settlement Loans	139	Active assets transferred to non-active.	11	-	(*) 18,487	-	-Total other charges	501	515	19,179	1,718	3,734Grand total expenditures	478,106	532,585	532,005	534,408	557,343
(l) Included with Eastern lines in previous years.
(*) An amount of $711,000 representing line abandonments during the calendar year 1937 was included in the adjustments resulting from the Canadian National Railways Capital Revision Act, 1937.
(*) Dominion contribution to Voluntary Debt Adjustment Programme effected in Provinces of Manitoba and Saskatchewan respecting Drought Area Relief that was financed by the Dominion up to January 1,1935-Manitoba $805,000, Saskatchewan $17,682,000.
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The Budget-Mr. Dunning

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(000 omitted)
-	[DOT] 1934-35	1935-36	1936-37	1937-38	Estimated 1938-39$ 359,701 358,475	$ 372,539 372,222	$ 387,112 445,029	i 414,892 510,298	$ 416,372 497,523
Deficit (- \or surplus (+) on ordinary					
	-1,226	-317	+57,917	+95,406	+81,151
					
	60,660 3,397	102,047 320	78,004 8,464	68,535 3,010	73,583 1,317
					
					
	57,263 7,107 50,137 501	101,727 6,544 50,940 515	69,540 3,492 44,218 19,179	65,525 4,430 44,833 1,718	72,266 4,687 58,967 3,734
					
" Government Owned Enterprises...					
					
	115,008 101	159,726 54	136,429 661	116,506 3,385	139,654 2,837
Add deficit or deduct surplus as above.. Over-all deficit or increase of direct net					
114,907 1,226	159,672 317	135,768 57,917	113,121 95,406	136,817 81,151116,133	159,989	77,851	17,715	55,666
revenues 1938-39
3.	The total revenues of the dominion from taxation and other sources aggregated $501,-
677,000.	This represents a decrease of $15,016,000 or 2-9 per cent from the all-time record revenue received in the previous fiscal year, 1937-38.
4.	Total revenue from taxation amounted to $435,705,000, a decline of $12,947,000 from that collected in the previous year. All the main sources of taxation, with the exception of the income tax, recorded decreases.
5.	Income tax receipts totalled $142,025,000, the highest ever reported, or an increase of 18-0 per cent over the $120,366,000 collected in the fiscal year 1937-38. Of the receipts, $85,185,000 was from the tax on corporation incomes; $46,937,000 from the tax on individual incomes and $9,903,000 from the 5 per cent tax on interest and dividends.
6.	The sales tax was the second largest revenue producer. Receipts from this tax totalled $119,460,000, a decrease of $18,595,000 as compared with those for the previous year. This decrease is due in part to the decline in general business activity and in part to the exemption from the sales tax of the major materials used in house construction provided for by the budget of last year.
7.	Other excise taxes, including the 3 per cent special excise tax on imports, the stamp tax on cheques, etc., and the taxes on sugar,
automobiles and rubber tires, matches, toilet preparations, Pullman tickets, telegraph and telephone messages and other miscellaneous commodities, accounted for total receipts of $42,240,000, a decrease of only $524,000 from the previous year.
8.	Receipts from excise duties, mainly on liquor and tobacco, remained practically unchanged at $51,313,000.
9.	The yield from customs duties is now estimated at $78,750,000, a decrease of $14,-
706,000,	or 15-7 per cent from the amount collected in 1937-38. This decrease in customs revenue paralleled the decline in imports which dropped 17-6 per cent in the fiscal year ended March 31, 1939, as compared with the previous fiscal year.
10.	Non-tax revenues, or revenues from services rendered by the various departments and interest on investments, totalled $61,818,000 compared with $61,646,000 in the previous year. The largest non-tax item is the receipts of the Post Office which totalled .$35,250,000 during 1938-39, approximately the same as the total for the preceding fiscal year. The operations of the Post Office last year resulted in a nominal deficit of $456,000. The Post Office accounts do not include the rental value and other costs of premises occupied and equipment used, nor do they include any credit to the Post Office for services rendered to other departments through the free use of the mails.
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The second largest non-tax revenue item is Interest on Investments which totalled $13,-
195,000,	approximately the same as that received in the previous year.
Casual Revenue, including Mint handling charges, Dominion's share of surplus profits of the Bank of Canada, receipts from various provinces for services rendered by the Royal Canadian Mounted Police, and other miscellaneous items, totalled S6,980,000.
11.	Special receipts and other credits totalled $4,154,000 compared with $6,395,000 in the fiscal year 1937-38. The main item in this category is the credit of $2,713,000 on account of line abandonments by the Canadian National Railways, a corresponding charge appearing on the expenditure statement under Other Charges. The decrease in 1938-39 as compared with the previous year is largely accounted for by a non-recurring item in the 1937-38 accounts, receipts of $1,500,000 from the sale of the Sorel shipyards.

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12.	The comments which follow will deal
with expenditures classified by the usual main categories:	Ordinary Expenditures, Capital
Expenditures, Special Expenditures (chiefly for unemployment and agricultural relief), Operating Deficits of and Non-active Advances to Government Owned Enterprises, and Other Charges. All disbursements under these categories are included as expenditure in arriving at the over-all deficit or increase in net debt.

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13.	Ordinary expenditures, which include interest on the public debt and the general administrative expenses of the government, totalled $416,372,000, an increase of $1,480,000 over the previous fiscal year.
There were no very large increases in the ordinary expenditures of any particular department. The largest increase, namely, $3,288,000, occurred in the ordinary expenditures of the Public Works Department. Expenditures of the Department of National Defence increased by $2,450,000 to S35,210,000, due to the accelerated defence programme instituted two years ago. Increased cost of operating the Post Office Department amounted to $1,944,000
and was in large part due to increased air mail and city delivery services.
The largest decrease in ordinary expenditures is found in the amount required for interest on the public debt. This annual charge declined by $4,108,000, due mainly to the refunding at substantially lower interest rates of the 51 per cent Victory Loan issue which matured on December 1, 1937. The item of $8,941,000 for maintaining the reserve of the Government Annuities fund which was included in the expenditures for 1937-38 did not recur in the last fiscal year.

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14.	Total expenditures charged to capital amounted to $4,687,000 compared with $4,430,000 in the previous year. The main items in this category are expenditures arising out of dredging the St. Lawrence ship channel and the construction of airways and airports.

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15.	Special expenditures for the alleviation of unemployment conditions and of agricultural distress amounted in 1938-39 to $48,583,000 compared with $68,535,000 in the previous year. Direct grants-in-aid to provinces declined from $19,493,000 in 1937-38 to $17,025,000 in 1938-39, and the dominion's share of joint dominion-provincial projects, including transportation facilities into mining areas and the construction of highways to promote the development of tourist traffic, decreased from $10,165,000 to $5,790,000. The total cost of public works and other projects including administration for which the dominion was solely responsible, amounted to $16,492,000 as compared with $14,292,000 during the preceding year.
In 1938 drought conditions in western Canada were much less severe and less extensive than in 1937 and the special drought area was confined to certain municipalities and local improvement districts of the province of Saskatchewan. Consequently expenditures under the heading of Western Drought Area Relief dropped in 1938-39 to $9,276,000, allocated as follows: Direct Relief, $7,712,000; Feed and Fodder, $1,264,000; and Purchase and Distribution of Foodstuffs, $300,000.
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The Budget-Mr. Dunning
16.	The following table compares the expenditures made for direct relief and various unemployment relief projects during each of the last two fiscal years:
1937-38	1938-39
Grants-in-aid to Provinces	$ 19,493,000	$ 17,025,000Dominion's share of joint Dominion-Provincial Projects_	10,165,000	5,790,000
Dominion Projects:
Department of Public Works	
7,099,000	5,800,000Department of National Defence	
75,000	368,000National Harbours Board	
1,565,000	-Department of Mines and Resources	
1,475,000	3,336,000Department of Agriculture	
1,937,000	3,492,000Department of Transport	
882,000	2,240,000Miscellaneous and Sundry Departments	
1,259,000	1,256,000
Western Drought Area Relief:
Direct Relief	
11,925,000	7,712,000Agricultural Relief (feed, fodder, etc..)	
11,689,000	1,264,000Foodstuffs	
971,000	300,000$ 68,535,000	$ 48,583,00017.	The following table shows the dominion's relief expenditure of a direct nature since the passing of the first Relief Act in 1930:
(000 omitted)
-	Direct Relief including Grants- in- Aid	Joint Dominion- Provincial Works and Projects	Dominion Works and Projects	Western Drought Area Relief	Write-off of Provincial Loans	Miscel- laneous Relief Expendi- tures	TotalPeriod Sept. 22, 1930, to Mar. 31 1935 Year ended Mar. 31, 1936	
Year ended Mar. 31, 1937	
Year ended Mar. 31, 1938	
Year ended Mar. 31, 1939	$ 77,767 26,570 28,931 19,530 17,025	$ 49,643 10,408 12,472 10,165 5,790	$ 29,977 38,132 27,585 13,847 16,492	$ (*) 15,088 (*) 4,000 8,751 24,586 9,276	$ (*) 18,487	$ 3,532 306 265 407	$ 176,007 79,416 96,491 68,535 48,583Total	169,823	88,478	126,033	61,701	18,487	4,510	469,032
(') Includes $5,000,000 Province of Saskatchewan Treasury Bills written off and charged to expenditure (*) Represents Province of Saskatchewan Treasury Bills written off and charged to expenditure.
(*) Writ ten down to non-active assets as of March 31, 1937.
In the above table, no account is taken of loans to western provinces under Relief Acts, loans to cover labour cost of special railway works programs and- losses borne by the dominion as a result of wheat marketing operations.
18.	The last item in this classification is the provision for possible losses arising from the dominion's guarantee of a price of 80 cents per bushel, basis No. 1 northern, Fort William, for the western wheat crop of 1938. It is impossible to forecast at the present time what will be the ultimate financial result of this wheat marketing programme in view of the incalculable factors determining world supply of, demand for and price of wheat; and it would be unwise to disclose to the wheat markets of the world the present position of the Canadian Wheat Board. It has therefore
been thought advisable to take a purely arbitrary figure of 825,000,000 and to set up this amount in our books for the past fiscal year as a reserve against possible losses in respect of the marketing of the 1938 wheat crop.

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19.	The next major classification of expenditures comprises the losses of, and non-active advances to, government owned enterprises which are operated as separate corporations.
Canadian National Railways
20.	The operating revenues of the Canadian National Railways for 1938 amounted to $182,-
242,000,	a decrease of $16,155,000 or 8T per cent from the preceding year. The decrease in revenues was particularly severe on the lines
The Budget-Mr. Dunning
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operated in the United States, where the decrease was 23 per cent as compared with 5 percent on the lines in Canada. Increased grain movement offset in part large decreases in movement of freight originating at the mine, forest and factory.
Operating expenses of the system decreased by $4,614,000 to $176,175,000, or 2-6 per cent compared with 1937. This decrease was effected notwithstanding increases in wage costs due to the restoration of basic wage rates in Canada and to wage increases in the United States. As a result of these wage increases, operating expenses in 1938 were higher by $6,082,000 than they would have been under the wage scales prevailing in 1937.
The system had a deficit of $3,549,000 before interest charges, compared with income available for interest charges in 1937 amounting to $8,287,000. After payment of interest amounting to $49,839,000 due to the public and $926,000 due to the government, there was a net cash deficit of $54,314,000 for the year compared with $42,346,000 in the previous year, an increase of $11,968,000.
The operating deficit of the Prince Edward Island Car Ferry and Terminals during 1938 was $388,000 as compared with $333,000 in 1937. In previous years, this item was included in the Eastern Lines deficit of the Canadian National Railways; beginning with 1938 this expenditure is being set up as a separate account.
National Harbours Board
21.	The operations of the harbours and facilities under the administration of the National Harbours Board in 1938 recorded a substantial gain over the preceding year. Operating income for the calendar year 1938, after payment of interest to the public but before depreciation and interest payable to the government, totalled $3,640,000. This represented an increase of 33 per cent over the operating income of $2,734,000 reported in 1937.
Financial assistance provided by the government to harbour commissions under the administration of the board and charged to dominion expenditure during the past fiscal year, amounted to $3,441,000. This amount was made up as follows: $138,000 for the operating deficits of the harbours at Quebec and Churchill and the Prescott elevator; $358,000 for non-active advances for the deficit of the Jacques Cartier bridge at Montreal; $2,160,000 for retirement of debentures of the harbour commissions at Halifax, Quebec and Saint John; and $785,000 for capital expenditures at Saint John, Quebec, Three Rivers and Chicoutimi.

Canadian National Steamships
22.	The 1938 operations of the Canadian National (West Indies) Steamships Limited resulted in a surplus of $276,000 after payment of bond interest to the public but before depreciation and interest on government advances. The surplus was paid to the government in partial payment of interest. It compared with a surplus of $189,000 in 1937. An advance of $6-000 was made to the company for capital improvements on vessels under its control.
Trans-Canada Air Lines
23.	The operations of the Trans-Canada Air Lines for the calendar year 1938 resulted in a deficit of $818,000 after interest on capital but before depreciation. This compared with a deficit of $111,000 for the period June 1 to December 31, 1937.
Summary
24.	The total amount charged to dominion expenditures, arising out of operating deficits and non-active advances to all government owned enterprises was $58,967,000. The corresponding total in 1937-38 was $44,833,000. The increase of $14,134,000 was accounted for mainly by the increase in the deficit of the Canadian National Railways. Loans and advances to government owned enterprises which are treated in the Public Accounts as active assets are referred to in a later section.
Other Charges
25.	Other Charges, the final main category of expenditures, amounted to $3,734,000 as compared with $1,718,000 in the fiscal year 1937-38. This item is comprised of the annual writeoffs of Soldier and General Land Settlement loans and seed grain and relief accounts, and the charge to Consolidated Fund on account of line abandonments by the Canadian National Railways which is charged through the Canadian National Railways Securities Trust.

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26.	The grand total of the preceding expenditures, i.e., Ordinary, Capital, Special, Government Owned Enterprises, and Other Charges, is $557,343,000 for the fiscal year 1938-39 as compared with $534,408,000 in the fiscal year 1937-38 or an increase of $22,935,000.
27.	The following table shows the percentage distribution of revenues and expenditures for a number of important items of revenue and expenditure. Receipts from various taxes

The Budget-Mr. Dunning
and other revenue sources are shown as percentages both of total revenues and of total expenditures. Similarly, several of the main items of expenditure or groups of such items are shown as percentages both of total expenditures and of total revenues. This table should only be used for the purpose of drawing broad conclusions as to the relative burdens imposed on the treasury by the several important services or obligations of government.

[Stage Direction]
(000 omitted)
Revenues	Amount (estimated)	Percentage of total Revenues	Percentage to total Expenditures*	%	%Ordinary Revenue-	Income Tax	142,025	28-31	25-48Customs Import Duties	78,750	15-70	14*13Excise Duties	51,313	10-23	9-21119,460 42,240	23-81 8-42	21-43 7-58Manufacturers; importation, stamp taxes, etc	Other tax revenues	1,917	0-38	0-34Total revenue from taxes	435,705	86-85	78-17Non-Tax revenues	61,818	12-32	11-09Total Ordinary Revenue	497,523	99-17	89-26Special Receipts and Credits	1,317	0-26	0-24Other Receipts and Credits- Refunds of capital expenditures and credits on non-active	accounts	2,837	0-57	0-51Grand Total Revenues	501,077	100-00	90-01
The Budget-Mr. Dunning
[Stage Direction]
PERCENTAGE DISTRIBUTION OF REVENUES AND EXPENDITURES, (000 ommitted)
(000 omitted)
Expenditures	Amount (estimated)	Percentage of total Expenditure	Percentage to total Revenue$	%	%Ordinary Expenditure- Interest on public debt	128,010	22-97	25-52Cost of loan flotations- Amortization and other charges	4,975	0-89	0-99Public Debt Charges	132,985	23-86	26-51Subsidies and special grants to Provinces	21,227	3-81	4-23Old Age Pensions	29,141	5-23	5*81Civil pensions and superannuation	670	0-12	0-13Pensions and after-care of soldiers-	7-57	8-41Pensions, war and military	42,170	Treatment and after-care of returned soldiers	13,679	2-45	2-73Total	55,849	10-02	11-14Agriculture	9,501	1-70	1-89Fisheries	2,078	0-37	0-42Legislation	2,725	0-49	0-54Mines and Resources	13,827	2-48	2-76National Defence	35,210	6-32	7-02Post Office	35,706	6-41	7-12Public Works	15,670	2-81	3-12Transport	16,257	2-92	3-24All other	45,526	8-17	9-07Total Ordinary Expenditure	416,372	74-71	83-00Capital Expenditure-	27	Railways	-	-Public Works	4,660	0-84	0-93Total Capital Expenditure	4,687	0-84	0-93Special Expenditure-	25,000	4-49	4-98Reserve for losses on wheat, 1938-39	Grants-in-aid to Provinces	17,025	3-05	3-39Dominion Projects	16,221	2-91	3-23Western Drought Area Relief	9,276	1-66	1 -85Miscellaneous	6,061	1-09	1-21Total Special Expenditure	73,583	13-20	14-66Government Owned Enterprises- Losses charged to Consolidated Fund- Canadian National Railways	54,702	9-82	10-90National Harbours Board and Trans-Canada Air Lines...	956	0-17	0-19Loans and Advances Non-active- Canadian National Steamships and National Harbours Board	3,309	0-59	0-66Total Government Owned Enterprises	58,967	10-58	11-75Other Charges-	3,734	0-67	0-75Write-down of assets	Grand Total Expenditures	557,343	100-00	111-09

[Stage Direction]
28.	As estimated total revenues amounted to
5501,677,000	and estimated total expenditures to $557,343,000, the total over-all deficit for

the fiscal year ended March 31, 1939, is estimated at $55,666,000. In the preceding fiscal year, the comparable deficit was $17,-
715,000.

The Budget-Mr. Dunning

[Stage Direction]
29.	In addition to the expenditures for the year, as already outlined, the dominion has made disbursements for the acquisition of investments which are considered as active assets in the Public Accounts. These active assets are deducted from the total direct debt in arriving at the figure of net debt. During the fiscal year 1938-39, net disbursements on account of active loans and investments totalled §23,524,000 as compared with a net credit of S4,204,000 in 1937-38.

[Stage Direction]
30.	Under authority of the annual Relief Acts, 1931 to 1935, inclusive, the dominion had power to grant financial assistance to a provincial government by way of loan, advance or guarantee without limitation as to purpose or amount. Up to the close of the fiscal year
1935-36, loans had been granted to the four western provinces for purposes other than relief including the retirement of maturing provincial obligations, and, to a limited extent, ordinary provincial government expenditures. Since April 1, 1936, the dominion's lending power has been limited to the making of loans only where necessary to enable a province to pay its share of unemployment relief expenditures pursuant to agreements with the dominion entered into under authority of the relative Relief Act.
Loans made by the dominion during the fiscal year 1938-39 were confined to two provinces, namely, Manitoba and Saskatchewan. The total amount of loans authorized during the year was §15,085,256, and during the period April 1, 1938, to April 21, 1939, the total amount advanced, including §253,000 authorized during the previous year, was §13,262,885. Additional loans not in excess of §2,075,371 may be made before April 30, 1939, and charged to the fiscal .year 1938-39 upon the submission of certified statements of expenditures or commitments by the governments of Manitoba and Saskatchewan. The maximum additional amount which may be advanced is divided, §537,500 for Manitoba and §1,537,871 for Saskatchewan. In addition, the dominion agreed to accept Saskatchewan treasury bills to the amount of SI,250,752 in respect of certain interest accruals on previous relief loans which the province was unable to pay in cash.
During the year repayments of loans previously given were made to the amount of §1,067,339, as follows: Manitoba, $906,501; Saskatchewan, $31,332 and British Columbia, §129,506.
The following tables show the net loans as at April 21, 1939, made to each province during each fiscal year and a classification of such loans on the basis of the general purposes for which the loans were given:

[Stage Direction]
-	Manitoba	Saskat- chewan	Alberta	British Columbia	Total1931-32	s 2,788,812 5,171,904 2,273,283 2,874,631 2,396,226 4,626,000 2,959,188 873,499	$ 10,934,341 7,578,556 5,469,240 10,141,014 14,245,478 6,058,879 11,604,787 12,702,305	$ 4,097,740 1,902,041 4,050,743 1,926,476 13,104,000 805,198 193,000	$ 4,813,124 912,636 1,321,761 7,966,714 12,558,445 3,972,400 1,541,636 -129,506	$ 22,634,017 15,565,137 13,115,027 22,908,835 -.2,304,149 15,462,477 16,29o,611 13,446,2981932-33	1933-34	1934-35	1935-36	1936-37	1937-38	
Less reductions as provided by votes 392 and 393 of further supplementary estimates 1936-37						
	23,963,543 804,897	78,734,600 17,682,158	26,079,198	32,957,210	161,734,551 18,487,055
					
	23,158,646	61,052,442	26,079,198	32,957,210	143,247,496
71492-200J
[Stage Direction]
The Budget-Mr. Dunning

[Stage Direction]
-	Loans Specifically to meet Maturing Obligations and Interest	Loans Specifically for Agricultural Relief, including Purchase of Seed Grain	Loans for Provincial Purposes Generally including Direct Relief and Public Works	Total$ 1,139,455 3,934,341 8,577,000 9,818,845	$ 234,819 15,103,421 3,102,748	$ 22,589.269 59,696,838 14.399,450 23,138,365	$ 23.963,543 78,734,600 26,079,198 32,957,210Saskatchewan	British Columbia	:	23,469,641	18,440,988	119,823,922	161,734,551Less reductions as provided by votes 392 and 393 of Further Supplementary Estimates 1936-37, Manitoba $804,897 and Saskatchewan, $17,682,158 	18,487,055 143.247.496Canadian national railways	dominion made advances to the railway for
31. In addition to paying the net income capital purposes amounting . to 859,794,000, deficit of the Canadian National Railways, the classified as follows:
Under Canadian National Railways Financing and Guarantee Act, 1938,
(capital expenditures and retirement of miscellaneous obligations).$
Under Canadian National Railways Refunding Act, 1938	
Construction of Senneterre-Rouyn Branch Line	
Purchase of Trans-Canada Air Lines Capital Stock	- [DOT] [DOT]
10.755.000
45.314.000
1.925.000
1.800.000
[Stage Direction]
These loans, together with previous advances of $7,283,000 outstanding at the beginning of the year, were repaid to the extent of $50,000,000 from the proceeds of a dominion guaranteed Canadian National Railway Company bond issue dated January 15, 1939. This issue was comprised of S15,000,000 21 per cent Seven-Year Bonds sold to the public at a price to yield 2-40 per cent and $35,000,000 3 per cent Twenty-Year Bonds sold at a price to yield 3-19 per cent. At the close of our fiscal year, temporary loans to the railway remained outstanding in the amount of $17,077,000; this amount is carried as an active asset in the dominion's books.
There was also advanced to the railway company $1,500,000 as a temporary loan pending the passing of its 1939 budget. Loans made in the fiscal year 1935-36 for betterment and repairs to railway equipment were paid off to the extent of $395,000, the amount of the third and final annual instalment. The railway company also paid the first instalment of $517,000 under the terms of a hire-purchase agreement relating to certain equipment purchased by the government in 1935-36 and
1936-37 at a cost of $6,723,000 and leased to the railway.

[Stage Direction]
32.	During the fiscal year the government purchased an additional $140,000 of the capital
rMr. Dunning.]
stock of the Canadian Farm Loan Board and an additional $2,700,000 of its 3i per cent bonds. Loans in the amount of $13,000 made to the board on account of losses under Part II of the act during the fiscal years 1936-37 and
1937-38 were repaid in the year under review. Capital stock in the amount of $12,000 was cancelled and written off. A further amount of $7,000 was advanced as initial capital under the authority of the Canadian Fisherman's Loan Act. As-at March 31, 1939, the total investment of the government in the Canadian Farm Loan Board amounted to $34,420,000.
33.	During the fiscal year 1938-39, 2,720 loans were approved under the Dominion Housing Act and the National Housing Act in the amount of $15,605,000, bringing the total to March 31, 1939, to $30,629,000. During the year the dominion's share of loans actually made less repayments amounted to $2,665,000. Housing loans are made jointly by the government and approved lending institutions and are secured by first mortgage or hypothec, running jointly to the government and the approved lending institution. Loans are normally made not in excess of 80 per cent of the cost or appraised value of the completed property, which, ever is the lesser. However, in the case of owner-occupied houses where the lending value does not exceed $2,500 a loan may be made up to 90 per cent of the said hading value.

The Budget-Mr. Dunning
34.	Under the Municipal Improvements Assistance Act, 1938, the government approved loans prior to March 31, 1939, amounting to
83,143,000	to municipalities to enable them to finance the construction of municipal self-liquidating projects. As at March 31, 1939, the amount actually paid out on such loans was
8815,000.	These loans bear interest at the rate of 2 per cent per annum and are amortized over a period not longer than the estimated useful life of the project. The province in which the municipality is located is required to guarantee the payments of interest on and amortization of any such loan.
35.	There was advanced during the year $789,000 to the National Harbours Board for capital construction purposes at the ports of Montreal and Vancouver. Credits of $97,000 were received during the year on account of loans previously made to these two harbours. The government has received a substantial part of the interest accrued on the obligations issued by these two ports and accordingly these loans are considered as active assets.
36.	The cost of the government's investment in the capital stock of the Bank of Canada increased by S820.000 during the year. Under the provisions of the 1938 amendment to the Bank of Canada Act the government in acquiring all the capital stock of the bank was required to reimburse the bank the amount of
8920.000	paid to the holders of Class "A" shares, being the difference between the price of 859.20 paid to the holders of said shares and their par value of S50.00. The government's holdings of Class "B" shares in the amount of $5,100,000 were paid off and 100,000 new shares of S50.00 par value were purchased.
37.	Loans to the Canadian Pacific Railway Company made in previous years for relief purposes were reduced by repayments of $211,-
000.	In addition the railway company paid the first instalment of $882,000 under the terms of a hire-purchase agreement relating to certain equipment purchased by the government in the fiscal years 1935-36 to 1937-38 at a cost of
85.730.000	and leased to the railway.
38.	During the fiscal year, two provincial governments (Nova Scotia and Manitoba) reduced their indebtedness to the dominion by S105000 on account of housing loans made during the early post-war period.
39.	The Canadian Broadcasting Corporation repaid $50,000 on the loan obtained by it during the fiscal year 1937-38.
40.	Active loans to the Soldier Settlement Board were reduced by payments of 8573,000.
41.	The following statement shows the net changes in active investments during the last fiscal year together with comparable figures for the four preceding years:-

[Stage Direction]
(000 omitted)
-	1934-35	1935-36	1936 37	1937-38	Estimated 1938-30It	$	$	$	*Canadian National Railways	16,579	3,689	4,573	Cr. 27,429	3,859Canadian Pacific Railway	-	1,270	555	Cr. 211	Cr. 211Canadian Farm Loan Board	353	7,933	10,991	3,848	2,834Dominion and National Housing Acts-	Loans	-	82	995	1,678	2,665Municipal Improvements Assistance Act,	1938-Loans	-	-	-	-	815National Harbours Board	393	1,438	323	1,890	692Provinces-under relief legislation	22,909	42,304	15,462	16,299	15,149Provinces-Post War Housing Loans	Cr. 397	Cr. 3,003	Cr. 2,038	Cr. 1,422	Cr. 105Railway Equipment purchased	-	7,244	5,120	89	Cr. 1,399Soldier and general land settlement	Cr. 102	Cr. 566	Cr. 489	505	Cr. 573Roumanian Government	-	-	-	359	Bank of Canada-Capital Stock	-	-	5,100	-	820Canadian Broadcasting Corporation	-	-	-	500	Cr. 50Canadian National (West Indies) Steam-	ships	-	-	450	-Net Advances	39,735	60,391	40,592	Cr. 3,444	24,496Less write-offs-	Soldier and general land settlement	loans	-469	-488	-628	-750	-900Canadian Farm Loan Board-capital	stock	-	-	-20	-10	-12Write-down to non-active assets-	Manitoba and Saskatchewan treasury	bills	-	-	-18,487	-	-Net change in active investments	39,266	59.903	21.457	Cr. 4.204	23.524
The Budget-Mr. Dunning

[Stage Direction]
42.	During the fiscal year under review the government issued obligations in the amount of 8286.785,138. The new issues were floated in the domestic, London and New York markets. Maturing obligations in the amount
of 8215,620,708 were redeemed out of the proceeds of the new issues, the remainder of the proceeds providing cash for the current purposes of government.
43.	The following table gives details of the amounts, terms and purposes of the new issues and the prices at which they were sold:-

[Stage Direction]
Issue	Maturity	Interest	Where	Price		Yield at			Purpose	
					To Govern- ment*		Price to Government			
Date	Date	Rate	Payable	To Public	Public Price	Issued	Refunding Amount	Int. Rate1938	%	$	%	%	%	$	$	%June 1....	June 1, 1944 June 1, 1958	2	Canada	99-375	98-70	2-11	2-23	90,625.000)	90,000,000	2June 1....	3	Canada	99-00	98 04	3-07	3-13	49.200.000)	July 1**..	July 1, 1963	31	London	98-50	97-33	3-34	3 41	48.666.667	1 37.271.230 \ 15,056,007	3July 1....	July 1, 1939	4	Canada (School Lands)	-	100-00	-	4-00	33,293,471	33,293,471	4Nov. 15..	Nov. 15, 1968	3	New York	97-25	95-25	3-14	3-25	40,000,000	40,000.000	21939	Feb. 1....	May 1, 1941	u	New York	-	99-75	-	1-36	20.000.000	-	-281.785.138	215,620.708	Net increase in treasury bills outstanding March 31, 1939, over March 31, 1938	5,000.000	286.785.138	215,620.708	Total amount issued for refunding Durooses...	215,620,708 71,164.430	
286.785.138		
Price to public, less commissions to underwriters and dealers. '* Issued in January, 1938.
44.	During the year the practice of offering fortnightly issues of three months' treasury bills was continued. The last issue of treasury bills during the fiscal year 1938-39 was sold at a discount of 0-643 per cent. The average cost to the treasury of funds obtained by the twenty-five offerings during the year was a discount basis of 0-601 per cent. The record low yield on these offerings was obtained for the issue dated June 15, 1938, namely, 0-465 per cent. The total amount of treasury bills outstanding on March 31, 1939, was $155,000,000, an increase of 85,000,000 over that outstanding at the close of the previous fiscal year.
45.	As at March 31, 1939, the average rate of interest on the dominion's direct funded debt (including treasury bills) outstanding was 3-52 per cent.
46.	As a result of refunding operations carried on since October, 1935, a saving of $9,309,000 in annual interest charges on the direct funded debt has been effected. During this period dominion obligations (excluding treasury bills) fell due and were refunded in the total amount of $769,579,000.
[Mr. Dunning.J
As at March 31, 1930, 84-4 per cent of the dominion's direct funded debt carried coupon rates of interest in excess of 4 per cent. As at March 31, 1939, only 35-6 per cent of the direct funded debt bore interest at a rate in excess of 4 per cent.
By October, 1943, all the dominion's direct funded debt bearing interest at the rate of 5 per cent, an amount of $388,663,000, will mature or become callable. If it should be possible to refund this debt at an average interest rate of 3 per cent, the annual saving in interest charges thereby resulting would amount to $7,773,000.

[Stage Direction]
47.	At the close of the fiscal year there were outstanding unmatured funded debt and treasury bills of the dominion in the amount of $3,385,723,000. Of this total, securities in the amount of $69,994,000 were held in the sinking funds against certain issues payable in London. The remaining amount, $3,315,729,000. was outstanding in the hands of the public. Other liabilities, consisting chiefly of annuity, super-

The Budget-Mr. Dunning
animation, and insurance funds, Post Office Savings Bank deposits, trust and contingent funds, were outstanding on the same date in an estimated aggregate amount of 8326,320,000. Adding the two last named items together gives the amount of the gross liabilities of the dominion, namely, 83,642,049,000. On the other side of its balance sheet, the dominion had active assets of 8484,715,000 representing cash on hand and active loans and investments. The
net debt of the dominion, the difference between the gross liabilities and the active assets, is therefore estimated at 83,157,334,000. The increase over the same date last year amounted to 855,666.000, namely, the amount of the over-all deficit for the fiscal year.
48.	The following is a statement showing the liabilities and assets of the dominion as estimated at March 31, 1939:-
LIABILITIES-MARCH 31, 1939 (estimated)
Bank Circulation Redemption Fund	
Post Office money orders, postal notes, etc., outstanding...
Post Office Savings Bank deposits	
Insurance and Superannuation Funds-
Government Annuities	$
Insurance Fund-Civil Service	
Insurance Fund-Returned Soldiers	
Retirement Fund	
Superannuation Funds	
Trust Funds-
Indian Funds	
Common School Funds	
Contractors' Securities Deposits	
Other Trust Funds	
Contingent and Special Funds	
Outstanding cheques	
Province Debt Accounts	
Interest due and outstanding	
Funded Debt-
Unmatured less sinking funds	
Matured and Outstanding	
$	5,462,000
3,800,000 23,101,000
121,737,000
12.425.000
17.758.000 9,409,000
58.700.000
14,154,000
2.677.000
1.403.000
3.800.000
220,029,000
22.034.000
28.170.000
9.600.000
9.624.000
1.750.000
3,315,729,000
2,750,000
[Stage Direction]
 3,318,479,000
$	3,642,049,000

[Stage Direction]
(estimated)
Active Assets-
Cash, working capital advances and other current assets	J
Bank of Canada Capital Stock	
Canadian Broadcasting Corporation-Loan	
Canadian National (West Indies) Steamships Ltd., Loan	
Dominion and National Housing Acts-Loans	
Municipal Improvement Assistance Act, 1938-Loans	
Loans to Provinces-
Post War Housing Loans	$	3,203,000
Unemployment Relief Loans	 144,950,000
A lberta-Subsidy Overpayment	 469.000
Loans to National Harbours Board-
Montreal	 60,847,000
Vancouver	 24,937,000
38,761,000
5.920.000
450.000
450.000
5.420.000
815.000
148 622,000
85,784.000
The Budget-Mr. Dunning
[Stage Direction]
assets-march 31, 1939-Concluded (estimated)
New Westminster Harbour Commission-Loan	$
Canadian Farm Loan Board-Advances and Capital Stock	
Railway Accounts-
Canadian National Railways-
Advances, Financing and Guarantee Act, 1938....$	1,735,000
Refunding Act, 1938-Advances	 14,929.000
Senneterre-Rouyn Railway Line	 313,000
Trans-Canada Air Lines	 100,000
Temporary Loans	  1,500,000
Purchase of equipment-leased	 6,206,000
Canadian Pacific Railway-
Loan for betterment or repair of railway equipment.	1,070,000
Loan for wages on special works programme	 333,000
Purchase of equipment-leased	 4,848,000
Loans to Foreign Governments-
Greece	 6,525,000
Roumania	 24,329,000
Soldier and General Land Settlement Loans...
Seed Grain and Relief Advances	
Canadian Government Railways Working Capital.. Bond Holding Account	
Deferred Debits-
Unamortized discount and commission on loans.
275,000 34,420,000
24,783,000
6,251,000
30.854.000
40.700.000 2,312.000
16.772.000 328,000
41,798,000
$	484,715,000
Net Debt, March 31, 1939 (estimated)

[Stage Direction]
Net Debt represented by-
A-Expenditure and non-active assets (estimated) March 31,1939.
Capital Expenditures-
Public Works-
Canals	$	240,318,000Railways	:	
429,711,000Public Buildings, harbour and river improvements	291,164,000Military property and stores	
12.057,000Territorial accounts	
9,896,000
983,146,000
Loans non-active-
Canadian National Railways Securities Trust Stock
Canadian National Railways Stock	
Canadian National Steamships	
Railway Accounts (old)	
Loans to Province of Saskatchewan (Relief Acts)....
National Harbours Board-
Quebec	 26,925,000
Chicoutimi	  3,838,000
Churchill	 9,000
Halifax	 12,168,000
Saint John	 16,397,000
Three Rivers	 3,731,000
Montreal (Jacques Cartier Bridge)	 3,672,000
266,613,000
18,000,000
13.864.000
62.791.000
17.682.000
66,740,000
Seed Grain and Relief Advances	 429,000
Soldier and General Land Settlement	 16,613,000
Miscellaneous Advances	 3,536,000
B-Consolidated Fund-
Balance, consolidated fund brought forward from March 31,
1938	$	1,657,413,000
Excess of expenditure over revenue, fiscal year ended March
31,	1939 (estimated)	 50,507,000
[Stage Direction]
 1,707,920,000
$	3,157,334,000
fMr. Dunning.)

The Budget-Mr. Dunning
49.	The following table gives a statement of the unmatured funded debt and treasury bills
of the dominion outstanding as at March 31, 1939, and the annual interest charges thereon:

[Stage Direction]
Date of Maturity	Rate per cent.	Where Payable	Amount of Loan	Annual Interest Charges
			$ cts.	$ . cts.
1939, June 1	1	Canada	20,000,000 00	200,000 00June 1	1	Canada	20,000,000 00	200,000 00July 1	4	Canada	33,293,470 85	1,331,738 83Oct. 15	4	Canada	47,269,500 00	1,890,780 00Oct. 15	21	Canada	7,933,000 00	198,325 00Nov. 15	2	Canada	20,000,000 00	400,000 001940, Mar. 1	3	Canada	115,013,636 82	3,450,409 10June 1	H	Canada	80,000,000 00	1,200,000 00Sept. 1	41	Canada	75,000,000 00	3,375,000 001941, Mar. 15	1	Canada	45,000,000 00	450,000 00May 1	11	New York	20,000,000 00	250,000 00Nov. 15	5	Canada	141,663,000 00	7,083,150 001942, June 1	2	Canada	60,000,000 00	1,200,000 00Oct. 15	3	Canada	40,409,000 00	1,212,270 001943, June 1	21	Canada	20,000,000 00	500,000 00Oct. 15	5	Canada	147,000,100 00	7,350,005 001944, Jan. 15	21	New York	30,000,000 00	675,000 00June 1	2	Canada	90,625,000 00	1,812,500 00Oct. 15	41	Canada	50,000,000 00	2,250,000 00Nov. 15	21	Canada	20,000,000 00	500,000 001945, Aug. 15	21	New York	76,000,000 00	1,900,000 00Oct. 15	4	Canada	88,337,500 00	3,533,500 001946, Feb. 1	41	Canada	45,000,000 00	2,025,000 001947, Oct. 1	21	London	4,888,185 64	122,204 641949, June 1	31	Canada	33,500,000 00	1,088,750 00Oct. 15	31	Canada	138,322,000 00	4,841,270 001950, July 1	31	London	137,058,841 00	4,797,059 431951, Nov. 15	31	Canada	60,000,000 00	1,950,000 001952, May 1	5	New York	100,000,000 00	5,000,000 00Oct. 15	4	Canada	56,191,000 00	2,247,640 001955, May 1	31	London	48,666,666 67	1,581,666 67June 1	3	Canada	40,000,000 00	1,200,000 00June 1	3	Canada	55,000,000 00	1,650,000 001956, Nov. 1	41	Canada	43,125,700 00	1,940,656 501957, Nov. 1	41	Canada	37,523,200 00	1,688,544 001958, June 1	3	Canada	49,200,000 00	1,476,000 00Sept. 1	4	London	73,000,000 00	2,920,000 00Nov. 1	41	Canada	276,687,600 00	12,450,942 001959, Nov. 1	41	Canada	289,693,300 00	13,036,198 501960, Oct. 1	4	London	93,926,666 66	3,757,066 67Oct. 1	4	New York	100,000,000 00	4,000,000 001961, Jan. 15	31	New York	48,000.000 00	1,560,000 001963, July 1	31	London	48,666,666 66	1,581,666 671966, June 1	31	Canada	54,703,000 00	1,777,847 50Perpetual	3	Canada	55,000,000 00	1,650,000 001967, Jan. 15	3	New York	55,000,000 00	1,650,000 001968, Nov. 15	3	New York	40,000,000 00	1,200,000 00Demand	6	Canada	4,000 00	240 00Demand	6	Canada	11,827 40	709 64Demand	31	Canada	9,600 00	336 00Treasury Bills due April 14,1939	[DOT]690	Canada	30,000,000 00	207,000 00Treasury Bills due May 1. 1939.	[DOT]691	Canada	25,000,000 00	172,750 00Treasury Bills due May 15, 1939	[DOT]681	Canada	25,000,000 00	170,250 00Treasury Bills due June 1, 1939	[DOT]670	Canada	25,000,000 00	167,500 00Treasury Bills due June 15, 1939	[DOT]655	Canada	25,000,000 00	163,750 00Treasury Bills due June 30, 1939	[DOT]643	Canada	25,000,000 00	160,750 003,385,722,461 70	119,198,476 15Payable in Canada	2,510,515,435 07	74-15%Payable in New York	469,000,000 00	13-85%Payable in London	406,207,026 63	12-00%3,385,722,461 70	100%Less bonds and stocks of the above loans held as sinking funds ..	69,993,620 41	3,315,728,841 29	
The Budget-Mr. Dunning

[Stage Direction]
50.	Bonds and debenture stocks bearing the guarantee of the dominion outstanding in the hands of the public at the close of the last fiscal year, amounted to 81,085,466,000. Canadian National Railway guaranteed obligations increased during the year by $34,919,000 to $1,054,866,000. This increase was due to the issue of $50,000,000 guaranteed bonds to repay temporary loans previously obtained from the government for capital expenditures and the retirement of matured debt. Of this matured debt, $15,081,000 had been previously guaranteed by the dominion. Guaranteed bonds of harbour commissions were paid off in the amount of $60,000 during the year.
51.	There were also outstanding on March 31, 1939, other contingent liabilities arising out of guarantees given under relief and seed grain legislation. The only increase in these liabilities during the fiscal year arose from the new guarantees given under The Seed Grain Loans Guarantee Act, 1938. Under provincial statutes the provinces of Alberta and Saskatchewan guaranteed loans made by chartered banks to municipalities for seed grain assistance to farmers during the crop year 1938. To make these loans possible. The Seed Grain Loans Guarantee Act, 1938, authorizes the governor in council to add the dominion's guarantee to that of the province. The province is not required to fulfil its guarantee until three years after the date of any loan and the dominion's liability is only to the amount that the province is unable to fulfil its guarantee. The maximum amount of loans authorized to be guaranteed under our 1938 act was $16.-
400,000,	of which $14,500,000 was to be in respect of Saskatchewan and $1,900,000 in respect of Alberta. The precise amount which will bear the dominion's guarantee is not yet determined, but general guarantees have been executed for an amount not exceeding the maximum amounts authorized.
52.	As at the close of the fiscal year, guaranteed bank loans to the Canadian wheat board were also outstanding in the amount of $61,155,470. These loans were obtained by the board for the purpose of financing tlie purchase of the 1938 wheat crop at the fixed price of 80 cents per bushel basis No. 1 northern, Fort William. There were also still outstanding guaranteed bank loans to the Canadian Co-operative Wheat Producers Limited in the amount of 8173,665, relating to the purchase of oats in the year 1935 for account of the province of Saskatchewan. The guarantee of the dominion to the Winnipeg Grain and Produce Clearing Association Limited, referred to in previous budgets, is still outstanding. No liability accrues from day to day

in connection with the guarantee as margin deposits are made to the clearing association daily.
53.	At March 31, 1939, 65,690 Home Improvement Loans had been granted by banks and approved lending institutions to home owners in the amount of $26,228,621. Repayments to the same date in respect of these loans amounted to $13,164,000, or over 50 per cent of the total amount of loans made. The dominion's contingent liability arising out of these loans is limited to 15 per cent of the aggregate of such loans made by each approved lending institution. As 75 loss claims for $19,037 have been paid, the maximum contingent liability as at March 31, 1939, was $3,915,256. In terms of dollar losses to total volume of loans, this loss ratio is only 1/13 of 1 per cent.
54.	Under the Dominion Housing Act, 1935. and the National Housing Act, 1938, the dominion has accepted and is accepting certain obligations arising out of its contracts with approved lending institutions which, while not expressed in the form of a guarantee, may nevertheless be regarded as contingent or indirect liabilities.
The manner in which losses in respect of any loan are to be borne by the dominion and the lending institution is fixed by the contract. The general principle is that the dominion bears two-thirds of the loss if at the time the loss is sustained the principal amount of the loan repaid, less any other amounts due, is equal to or less than the amount advanced by the dominion and one-third of the loss if at the time the loss is sustained the principal amount repaid, less any other amounts due, is more than the amount advanced by the dominion. In the case of small loans (that is for amounts not in excess of $4,000 in the case of a single dwelling place or not in excess of $700 per habitable room in the case of a multiple family dwelling), the share of the loss to be borne by the dominion is not more than 80 per cent and not less than 50 per cent of the loss. The above provisions apply to loans made under both the present National Housing Act and its predecessor the Dominion Housing Act. Under the National Housing Act a new provision has been added to encourage the making of small loans in such small or remote communities and in such districts of other communities as may be designated by the Minister of Finance in any contract. In respect of such loans, the dominion has agreed in contracts with certain lending institutions to pay losses sustained by any such lending institution up to certain amounts determined by the contract which are not less

The Budget-Mr. Dunning
than 7 per cent and do not exceed 25 per cent of the total amount of such loans made in such areas by the lending institution.
The total amount of loans approved at March 31, 1939, under the Dominion Housing Act, 1935, and the National Housing Act,-1938,
was S30.628.894. No losses had been realized by the dominion as of that date.
55.	The following is a statement of bonds and debenture stocks and other indebtedness guaranteed by the dominion outstanding as at March 31, 1939:

[Stage Direction]
Date of Maturity	Issue	Interest Rate	Amount OutstandingJan.	15,	1942....	Canadian National	%	2	$ 20,000,000 00 55.000.	000 00 15.500.000	00 35.000.	000 00 15.000.	000 00 24.238.000	00 700,000 00 50.500.000	00 50.000.	000 00 20.000.	000 00 667,953 04 25.000.	000 00 9,359,996 72 50.000.	000 00 9,400,000 00 50.000.	000 00 70.000.	000 00 65.000.	000 00 7,896,543 54 35.000.	000 00 3,149,998 66 34,229,996 87 34.992.000	00 8,440,848 00 60.000.	000 00 60,000,000 00 19.000.	000 00 18.000.	000 00 22,351,232 47Feb.	15,	1943....	Canadian National	2	Feb.	1,	1944...	Canadian National	2i 3	May	1,	1944....	Canadian National	Jan.	15,	1946....	Canadian National	2* 6	July	1,	1946....	Canadian Northern	April Dec.	1, 15,	1948..	.. 1950..	..	New Westminster Harbour Commissioners	
Canadian National	4! 3	Sept.	1,	1951...	Canadian National	4| 3	Feb.	1,	1952...	Canadian National	Aug.	1,	1952....	Saint John Harbour Commissioners	5	Feb.	15,	1953....	Canadian National	3	July	10,	1953....	Canadian Northern	3	Feb.	1,	1954....	Canadian National	5	Mar.	1,	1955...	Canadian National (West Indies) Steamships Limited	5	June	15,	1955...	Canadian National	41 41 41 31 3	Feb.	1,	1956....	Canadian National	July	1,	1957....	Canadian National	July	20,	1958....	Canadian Northern	Jan.	15,	1959....	Canadian National	May	4,	I960....	Canadian Northern Alberta	3* 3|	May	19,	1961...	Canadian Northern Ontario	Jan.	1,	1962....	Grand Trunk Pacific	3	Jan.	1,	1962....	Grand Trunk Pacific.	4	July	1,	1969...,	Canadian National	5	Oct.	1,	1969....	Canadian National	5	Nov.	1,	1969....	Harbour Commissioners of Montreal	5	Feb.	1,	1970....	Canadian National	5	By drawings	2	Various dates 1939-54	City of Saint John Debentures assumed by Saint	832,384 78 60,833,333 33 20,782,491 67 13,252,322 67 119,839,014 33 1,499,979 67Perpetual.	4	do	5	do	5	do	4	do	Northern Railway of Canada Debenture Stock..	
$ 1,085,466.095 75
Other Liabilities Guaranteed
Bank Advances, re Province of Manitoba Savings Office	$
Bank Advances, re Government of Newfoundland	
Province of Manitoba Treasury Bill	
Province of British Columbia Treasury Bill	" ' "	
Bank Advances, re Canadian Co-operative Wheat Producers Limited (Saskatchewan Oats Account)	
Bank Advances, re Canadian Wheat Board	!!""!!"!!"!	
Winnipeg Grain and Produce Clearing Association, Ltd. Day to day margins of the Canadian Wheat Board (closed out daily)	
Bank Advances, guaranteed under Saskatchewan Seed Grain Loans Guarantee Act, 1936	
Bank Advances guaranteed under Seed Grain Loans Guarantee Act, 1937....
Bank advances, guaranteed under Seed Grain Loans Guarantee Act, 1938___
Loans made by approved lending institutions under Dominion Housing Act,
1935 and National Housing Act, 1938	
Loans made by approved lending institutions under The Home Improvement
Loans Guarantee Act, 1935	
Deposits maintained by the chartered banks in the Bank of Canada	
Principal Amount Outstanding Mar. 31,1939 6,688,965 625,000 4,878,764 626,534
173,665
61,155,470
2,555,113 not determined not determined
indeterminate
3,915,256
205,641,646
The Budget-Mr. Dunning

[Stage Direction]
1.	The following tables and related paragraphs present a comprehensive survey of general economic conditions in Canada during the past year. For purposes of comparison figures for certain earlier years are also provided, and in the case of the more important factors statistics on a monthly basis are given covering the last two fiscal years.
The figures used -throughout are those published by the Dominion Bureau of Statistics, unless otherwise indicated. Where an index or average figure is given for a fiscal, rather than a calendar year, it represents an average of the monthly data during the period concerned. All indexes shown as based on the year 1926 are to be construed as based on the calendar year 1926, and not the fiscal year.


[Stage Direction]
Fiscal Years ended March 31	Mar. 1938	Mar. 1939-	1927	1929	1933	1936	1937	1938	1939	Group I.-Comprehensive Indexes (1926=100)	Physical volume of business	101 -9	122-1	74-8	104-4	115-2	120-8	113-8	108-8	113 ItVolume of manufacturing	101-1	117-5	70-8	103-8	117-6	119-8	108-4	101-8	107-5tMining	103-0	121-1	104-2	150-7	166-5	196-0	194-8	195-7	196-7Forestry	99-7	104-3	64-2	109-2	131-8	130-3	106-5	103-2	110-4Carloadings	102-6	112-5	63-8	71-9	77-9	79-9	72-8	75-0	71-8Electric power output	104-7	136-6	132-4	198-9	218-0	229-0	220-9	222-5	233-1Employment	100-8	113-7	84-4	100-3	104-4	115-7	110-8	112-3	110-9National incomef	100-0	111-2	72-1	80-1	87-6	97-3	900	-	-Dollar value of retail salesf (1930=100)...	93-2	110-1	66-8	71-1	74-0	78-6	77-5	62-7*	60-6*Group II.-Price Levels and Financial Factors (1926=100)	Wholesale prices	98-8	95-8	65-5	72-3	77-2	84-6	76-0	83-1	73-2Cost of JiviiiG	99-6	98-9	79-9	79-6	81-2	83-6	83-9	84-2	82-9Common stock prices	101-8	173-3	52-1	101-2	125-5	117-6	103-8	99-2	103-7Dominion Government bond prices	100-4	102-4	100-3	113-6	117-0	115-1	117-5	116-8	117-9Dividend payments	101-8	123-7	79-9	96-3	112-9	139-0	143-4	146-2	136-6Bank deposits	101-0	116-1	98-5	109-5	116-4	122-0	126-8	121-5	126-9Active currency circulation	101-0	105-4	75-9	93-8	102-3	111-1	113-4	109-6	114-5
Month of February. fNearest calendar year. JPreli minary.
[Mr. Dunning.l

The Budget-Mr. Dunning
summary tables-Continued
Calendar Years
-	1926	1928	1932	1936	1937	1938(	Millions of	Dollars)	Group III.-Gross value of Production in Major Industries	Agriculture	1,714-5	1,806-0	766-8	1,079-6	1,054-1	1,025-9*Forestry	555-8	586-2	349-3	400-3	505-6	401-7*Fisheries	73-1	70-7	33-7	51-1	51-2	49-0*Mining	276-8	313-1	265-0	497-3	662-6	644-5*Construction	385-9	488-4	132-9	258-0	351-9	300-0*Manufacturing	3,100-6	3,582-3	1,980-5	3,002-4	3,623-2	3,266-0*Group IV.-Foreign Trade and International Transactions^	Merchandise exports (all gold excluded^	1.276-6	1,363-6	497-9	950-5	1,012-1	848-7Net exports of non-monetary goldf	30-4	40 1	70-0	131-6	145-1	160-5Total exports, including non-monetary gold	1,307-0	1,403-7	567-9	1,082-1	1,157-2	1,009-2Merchandise imports (all gold excluded)	1.008-3	1,222-3	452-6	635-2	808-9	677-5Total trade	2.315-3	2,626-0	1,020-5	1,717-3	1,966-1	1,686-7Export balance	+298-7	+181-4	+115-3	+446-9	+348-3	+331-7Net tourist receipts	102-5	167-7	155-0	140-9	166-8	149-0*Net interest and dividend payments going abroad	201-0	221-0	261-8	233-8	246-2	242-0*Net capital export (direct estimate)	tt	82-0	11-4	253-7	198-8	160-1*
Preliminary estimate. Certain of these figures have not yet appeared in official publications, or represent revisions of previously published figures.
t Adjusted for earmarked gold. These figures were computed by the Bank of Canada on the basis of official trade returns.
X It should be noted that the export and import figures given in the table above, which have been compiled from official trade returns, differ slightly from the adjusted figures used in making up the Balance of International Payments. In the remaining part of the table certain less important items in the Balance of Payments have not been detailed.
ft Not available.

[Stage Direction]
2.	The index for the physical volume of business in Canada is the most comprehensive single measure of the level of general economic and business activity. It is made up by the Dominion Bureau of Statistics from 46 constituent items weighted, according to their relative importance in the economy as a whole, and is adjusted for seasonal fluctuations. Included in the making of this index are such items as mineral production, manufacturing in its chief branches, construction, electric power output, trade employment, carloadings, imports and exports. Agricultural production as such does not find a place in this index, nor do fishing and lumbering as primary activities, but the processing of and trade in the products of these industries is reflected in the index. Correction is made, where necessary, for changes in the price factor in order that the index shall properly record only changes in the physical volume of business done. 1926 is taken as the base year. Following are presented the index numbers for each fiscal year since 192? and the index for each month in the last two fiscal years.
INDEX OF PHYSICAL VOLUME OF BUSINESS (1926=100)
Fiscal Years ended March 31
1927	1928	1929	1930	1931	1932	1933	1934	1935	1936	1937	1938	1939101-9	108-0	122-1	122-0	105-4	89-3	74-8	84-9	96-4	104-4	115-2	120-8	113-8t
fPreliminary.
[Stage Direction]
The Budget-Mr. Dunning
MONTHLY INDEX* (1926=100)
Fiscal Years	April	May	June	July	Aug.	Sept.	Oct.	Nov.	Dec.	Jan.	Feb.	Mar.	Average1937-38	124-0	122-0	126-0	126-5	123-4	123-8	127-4	127-9	121-4	111-8	106-7	108-8	120-81938-39	112-4	110-7	108-4	109-1	110-5	119-2	118-6	123-4	115-6	113-0	111-7	113-11	113-8f
Seasonally adjusted. fPreliminary.
It will be seen that business activity as measured by this index reached a level, in the fiscal year 1937-38, that was very nearly as high as any of the pre-depression years. The peak in activity, which it will be noted wad higher than the average for 1929, occurred in November, 1937, at 127-9. From there the index declined rapidly to 106-7 in February, 1938, a drop of 16-6 per cent. During the spring and summer of 1938 activity remained fairly stable and then rose sharply in the autumn and fell back somewhat this past winter. It will be noted, however, that the figures for the first three months of 1939 are 3 [DOT] 2 per cent above those for the corresponding period of the previous year.

[Stage Direction]
3.	The gross value of agricultural production in 1938 remained only very slightly below the levels of the two previous years. In general this occurred because lower prices offset increased production. This was particularly true for wheat; the crop amounted to 350,010.000 bushels compared with 180,810,000 in 1937,
but the average price received by farmers for their wheat crop, up to December 31st, was estimated at 59c. compared with SI.02 the previous year. The better yield was sufficiently widespread to reduce very considerably the area of crop failure.
In dairying pastures were good throughout the dominion and there was a long open season. Supplies of milk and butter were, therefore, plentiful and butter stocks on hand have been large in recent months. Factory production of cheese was lower during the first three quarters of 1938 than in the corresponding period of the previous year, but it has increased substantially during the last six months.
Lave stock marketings during the past year were much lower than during 1937 when the drought forced disposal of many cattle in the west. Live stock prices have recently improved, however. Because feed prices have declined drastically since March, 1938, live stock production has been substantially more profitable than would be implied by the figures given for gross income in the table below. Tobacco acreage and production continue to increase steadily.
GROSS VALUE OF AGRICULTURAL PRODUCTION (Millions of Dollars)
	Calendar Years					
1926	1928	1932	1936	1937	1938*1,714-5	1,806-0	766-8	1,079-6	1,054-1	1,025-9442-2	451-2	154-8	205-3	184-7	205-4662-8	673-8	297-7	407-0	371-5	323-5277-3	297-6	159-1	211-4	228-4	230-0178-4	197-9	65-2	131-0	141-0	137-083-6	106-7	42-1	53-2	51-8	50-043 1	48-8	32-2	43-8	41-9	41-07-4	6-8	6-1	9-4	17-1	19-719-7	23-2	9-6	18-5	17-7	19-3
* Subject to revision.
GENERAL INDEX OF FARM PRICES Monthly Index*
(1926=100)
Fiscal Years	April	May	June	July	Aug.	Sept.	Oct.	Nov.	Dec.	Jan.	Feb.	Mar.	Average1937-38	91-4	87-8	83-7	92-5	84-9	86-3	86-5	83-9	84-2	86-3	85-1	83-0	86-31938-39	82-5	77-3	76-6	71-5	64-2	63-8	63-8	64-9	64-6	64-8	64-7	65 1	68-7
Seasonally adjusted. (Mr. Dunning.l

The Budget-Mr. Dunning
[Stage Direction]
4.	Although the production of gold, copper, lead, zinc, platinum, natural gas and crude petroleum all reached new peak figures in 1938, the value of all mineral production for the year was down about 2-7 per cent from 1937. Despite the higher volume, lower prices, particularly in the case of the base metals, resulted in a reduction in values. With the exception of gold and petroleum the value of production in all categories was down substantially from the previous year.
Petroleum production, in Alberta, increased rapidly during the year despite marketing
limitations. In the Turner Valley field, 38 wells were brought into production, substantially extending the proven area of the field. Another recent development of considerable interest is the report of significant evidence of a large and apparently commercial deposit of high grade iron ore in Ontario west of Fort William.
Employment in mining averaged slightly higher in 1938-39 than in the previous year, a reflection of the high level of operation maintained throughout the year despite lower prices.
VALUE OF MINERAL PRODUCTION (Millions of Dollars)
	Calendar Years					
1926	1928	1932	1936	1937	1938240-4	275-0	191-2	361-9	457-4	444-8Gold	36-3	39-1	71-5	131-3	143-3	105-917-5	28-6	15-3	39-5	68-9	58-014-4	22-3	7-2	43-9	59-5	53-919-2	15-6	5-4	15-0	21-1	14-011.1	10-1	41	11-0	18-2	11-713-9	12-8	5-8	8-3	10-3	9-659-9	63-8	37-1	45-8	48-8	43-91-3	2-0	3-0	3-4	5-4	11-866-8	80-7	41-8	63-7	81-9	76-0

[Stage Direction]
Monthly Index* (1926 = 100)
Fiscal Years	April	May	June	July	Aug.	Sept.	Oct.	Nov.	Dec.	Jan.	Feb.	Mar.	Average1937-38	185-2	191-4	201-5	215-3	212-3	203-8	186-9	207-9	183-8	179-1	188-8	195-7	196-01938-39	212-7	199-4	176-6	192-1	198-6	202-1	201-4	206-6	183-1	176-8	190-9	196-7	194-8
Seasonally adjusted.
EMPLOYMENT IN MINING Monthly Index*
(1926 = 100)
Fiscal Years	April	May	June	July	Aug.	Sept.	Oct.	Nov.	Dec.	Jan.	Feb.	Mar.	Average1937-38	151-1	152-6	155-3	155-7	154-5	157-8	159-4	154-3	156-2	154-0	154-5	156-6	155 21938-39	156-6	155-0	156-7	156-7	154-4	156-2	156-4	156-5	157-2	159-1	160-7	163-7	1:7-4
Seasonably adjusted index as at first of month.

[Stage Direction]
5.	The value of forestry production in 1938 was substantially below that of 1937. The decline was most evident in the newsprint, wood pulp and eastern lumbering industries. Newsprint mills were forced to curtail production due both to a reduction in consumption and to the working off of publishers' stocks accumulated in the previous year in anticipation of price increases. While mill stocks now are
somewhat above last year's levels, publishers' stocks by February had been reduced to only slightly more than half the abnormal volume of February last year.
Lumbering activity in eastern Canada in 1938 was much below 1937. In British Columbia, however, timber shipments to overseas markets were slightly above the previous year. Recent lumbering activity in British Columbia as reflected in the amount of timber
The Budget-Mr. Dunning
[Stage Direction]
scaled during the first three months of 1939 shows an increase of 59-7 per cent over those months of 1938.
Logging employment, which reflects woods operations of all the forest industries, has in recent months been at levels only about onehalf of those of a year ago. This lower level follows upon an accumulation of stocks of pulpwood and saw-logs last year, as well as the reduced level of production of paper, woodpulp and lumber during the past few months as compared with a year ago.
FORESTRY PRODUCTS (Millions of Dollars)
-	Calendar Years					
1926	1928	1932	1936	1937	1938555-8	586-2	349-3	400-3	505-6	401-7-
121-1	144-1	85-5	105-2	126-4	105-0*
						
	61-9	47-7	12-6	36-9	45-4	35-9
						
	52-1	45-6	18-9	31-2	41-8	27-7
						
Preliminary.
PHYSICAL VOLUME OF FORESTRY PRODUCTION Monthly Index*
(1926=100)
Fiscal Years	April	May	June	July	Aug.	Sept.	Oct.	Nov.	Dec.	Jan.	Feb.	Mar.	Average1937-38	138-0	133-6	142-5	139-2	136-7	153-3	133-8	127-5	135-1	109-7	113-3	103-2	130-31938-39	100-4	91-9	96-7	101-4	102-2	110-2	107-1	112-8	111-7	120-7	111-6	110-4	106-5
Seasonally adjusted.
LOGGING EMPLOYMENT Monthly Index*
(1926 = 100)
Fiscal Years	April	May	June	July	Aug.	Sept.	Oct.	Nov.	Dec.	Jan.	Feb.	Mar.	Average1937-38	168-4	120-8	142-1	175-8	189-2	218-9	240-8	246-6	245-3	223-3	200-1	171-1	195-21938-39	146-1	135-8	121-9	121-1	90-4	89-5	91-0	105-3	114-8	103-9	98-4	87-5	108-8
* Seasonally adjusted index as at first of month.

[Stage Direction]
6.	The fisheries catch on both the east and the west coast was good as regards quantity and the salmon catch was of high quality.
Prices and the demand for eastern fish, for halibut and for the cheaper varieties of salmon, were lower than the year before. As a consequence the value of output and exports declined in comparison with 1937.
FISHERIES (Millions of Dollars)
	Calendar Years					
1926	1928	1932	1936	1937	1938Gross Value of Production	
Salmon marketed (in above)	
Value of fish exported	73-1	70-7	33-7	511	61-2	48-8*19-6	17-9	8-0	13 9	12-4	12-0*36-0	36-3	18-5	24-9	28-0	25-6
Preliminary. (Mr. Dunning.]

The Budget-Mr. Dunning

[Stage Direction]
7.	Activity in manufacturing revealed a considerable diversity of movement during the fiscal year 1938-39. Although the general index dropped from 119-8 in the previous year to 108-4, a decline of about 10 per cent, some industries, particularly those manufacturing foodstuffs, tobacco and boots and shoes, suffered relatively slight declines, while others, particularly textiles, steel and automobiles were down appreciably more than the general index. Figures for the first three months of 1939, however, show a substantial increase over
the same months of last year in the general index.
Manufacturing employment averaged about 4-8 per cent lower in 1938-39 than in the preceding fiscal year. The peak was reached in October, 1937, when the index stood at 118-5, but succeeding months brought a decline to a low point of 107-5 in August, 1938, some 6-4 per cent below the same month of the previous year. In recent months the comparison has become more favourable, however, and March figures show a decline of only 3-2 per cent from March a year ago.

[Stage Direction]
(1926=100)
	Fiscal Years ended March 31								
1927	1929	1933	1936	1937	1938	1939	1938	1939101T	117-5	70-8	103-8	117-6	119-8	108-41	101-8	107-5fSelected Industries-	1000	97-1	83-4	91-9	105-8	101-8	102-2	93-6	104-0102-3	138-2	107-1	139-3	153-9	178-3	182-1	191-5	230-9101-5	97-7	84-0	110-1	108-4	114-2	109-7*	115-2*	120-8*101-6	103-4	71-9	113-0	123-3	128-4	108-9	130-8	121-0104-5	169-0	40-4	135-9	150-8	177-4	139-1	161-2	130-0100-7	145-2	26-9	80-4	98-8	93-1	77-2	62-2	75-1104-7	146-6	138-4	201-2	208-1	221-3	207-3	167-6	179-6
[DOT]12 months ending February and month of February. tPreliminary.

[Stage Direction]
Monthly Index* (1926-100)
Fiscal Years	April	May	June	July	Aug.	Sept.	Oct.	Nov.	Dec.	Jan.	Feb.	Mar.	Average1937-38	120-3	122-3	125-1	127-2	121-4	122-9	133-6	132-4	120-5	108-6	101-3	101-8	119-81938-39	103-2	104-7	103-5	101-3	100-9	114-2	113-2	125-3	111-3	111-1	105-0	107-5t	108-41-
Seasonally adjusted tPreliminary

[Stage Direction]
Monthly Index* (1926=100)
Fiscal Years	April	May	June	July	Aug.	Sept.	Oct.	Nov.	Dec.	Jan.	Feb.	Mar.	Average1937-38	112-1	113-2	114-7	115-9	114-8	117*9	118-5	117-8	117-5	115-9	114-5	112-9	115-5.1938-39	111-7	109-7	110-2	109-5	107-5	110-6	109-0	109-9	111-3	111-3	110-0	109-3	110-0
Seasonally adjusted index as at first of month.
The Budget-Mr. Dunning

[Stage Direction]
8.	The value of total construction, as indicated by the figures of contracts awarded, was 13.8 per cent less in the latest fiscal year than in the one preceding, but about one-third of this decline appears to have been due to lower construction costs. Contrary to the general trend, not only of construction but of most business activity, contracts for residential construction in the past year showed an increase of 16-5 per cent over the preceding year, and during the first quarter of 1939, showed an increase over the same period in 1938 of 91-1 per cent. Loans approved under the National Housing Act, which went to finance a substantial fraction of this residential building, were 77 per cent greater in 1938-39 than in 1937-38. Loans under the Home Improvement Plan were at their maximum during the spring and summer of 1937, declined during
the following six months, recovered during the summer of 1938 and for the past seven months have exceeded the same months in the two preceding years. In fact the total for the last fiscal year was only about 3J per cent below the previous year, which decline was probably no more than could be explained by the fall in building costs.
In other than residential construction the decline from 1937 was severe. Of a drop of $39 million in contracts other than residential between fiscal year 1937-38 and fiscal year
1938-39, $21 million are accounted for by the 57 per cent decline in contracts for roads and streets, and $17 million by the 51 per cent decline in industrial construction. Residential and other private construction, especially industrial and commercial, still remain very far below their pre-depression levels.
CONTRACTS AWARDED (Millions of Dollars)
Fiscal Years ended March 31	March, 1938	March, 19391927	1929	1933	1936	1937	1938	1939	Total Contracts Awarded	380-8	500-2	104-3	163-0	161-9	218-8	188-6	10-4	90Residential	111-0	137-4	26-0	36-9	49-6	54-1	63-0	2-1	3-7All other	269-8	362-8	78-3	126-1	112-3	164-7	125-6	8-3	5-3
MONTHLY INDEX OF CONTRACTS AWARDED* (1926=100)
Fiscal Years	April	May	June	July	Aug.	Sept.	Oct.	Nov.	Dec.	Jan.	Feb.	Mar.	Average1937-38	101-7	66-2	74-1	52-8	60-9	59-0	61-0	49-1	76-0	55-7	38-9	59-9	62-91938-39	65-3	53-2	53-1	53 8	55-7	54-1	55-2	50-4	74-8	45-6	69-1	53-0	56-9
Seasonally adjusted.
LOANS APPROVED UNDER NATIONAL HOUSING ACT* (Thousands of Dollars)
Fiscal Years	April	May	June	July	Aug.	Sept.	Oct.	Nov.	Dec.	Jan.	Feb.	Mar.	Total1935-36	_	214	152	159	142	89	48	8041936-37	432	2S1	698	690	518	424	372	301	450	407	317	506	5.3961937-38	865	821	919	1,049	753	551	742	636	500	456	342	1,190	8,8241938-39	832	1.496	2,097	1,707	1.031	1,241	1,269	1,740	1,241	646	763	1,542	15,605
Grand Total.
30,629
"Dominion Housing Act prior to August, 193S.
LOANS APPROVED UNDER HOME IMPROVEMENT PLAN (Thousands of Dollars)
Fiscal Years	April	May	June	July	Aug.	Sept.	Oct.	Nov.	Dec.	Jan.	Feb.	Mar.	Total1936-37	_	_	682	516	303	306	598	2,4051937-38	1,240	1,606	1,592	1,342	1,146	1,206	1,185	916	613	377	367	533	12.1231938-39	956	1,325	1,437	1,233	1,138	1,311	1,224	968	648	403	409	650	11,702Grand Total	26.230
[Stage Direction]
The Budget-Mr. Dunning

[Stage Direction]
9.	The lower level of general business activity in 1938 was reflected in a decline in railway freight and passenger traffic and operating revenues, despite the greater volume of traffic in grains and ores. During recent months car-loadings have been much below the levels of the previous year but the figures for March
show an increase over those for January and February, and a substantially smaller decline from the previous year. This lower level of carloadings in the first quarter of 1939 compared with 1938 is common to almost all categories of freight loaded, only grain and coke showing substantial increases.

[Stage Direction]
Calendar Years	Mar. 1938	Mar. 19391926	1928	1932	1936	1937	1938	AIL Railways Operating Revenues (millions of dollars)	493-6	563-7	293-4	334-8	355-1	337-0*	25-9	25-9Net Operating Income (millions of dollars)	49-2	57-9	-62*9	-34-8	-31-2	t	t	tCarloadings (thousands of cars)	3,267	3,706	2,179	2,494	2,635	2,429	200	191Railway Payrolls (millions of dollars)	260-4	287-8	181-1	182-6	193-4	195-0*	is-o:	H-7t
Preliminary. tNot available.
MONTHLY INDEX OF CARLOADINGS* (1926 = 100)
Fiscal Years	Apr.	May	June	July	Aug.	Sept.	Oct.	Nov.	Dec.	Jan.	Feb.	Mar.	Average1937-38	80-2	78-9	7S-5	85-8	82-7	85-1	77-0	79-5	84-4	77-2	75-0	75-0	79-91938-39	71-4	71-8	68-7	71-5	76-3	81-0	76-0	74-2	73-7	70-7	66-7	71-8	72-8
Seasonally adjusted.

[Stage Direction]
10.	Exports of merchandise, from which gold is excluded because its movement is subject to special forces, showed a fall of IS [DOT] 1 per cent in the fiscal year just ended, as compared with the previous year. The decline was due chiefly to the fall of 19-2 per cent in our exports to the United Kingdom and the fall of 16 per cent in those to the United States, because exports to other empire countries and to other countries as a group, fell only very little. Our exports to the United States fell during the late months of 1937 and the early months of 1938. as production in that country declined, but they recovered during the summer and fall of last year and in the first three months of 1939 they have been 16 per cent above the same months a year ago. Exports to the United Kingdom were well maintained until the spring of 1938 but since that time each month's exports have been below that of the corresponding month the year before. Net exports of non-monetarv gold (which include
an adjustment for earmarked gold) have continued to increase. The decline in the March figures shown above was due to the timing of shipments last year rather than to a fall in production.
Imports in the latest fiscal year show a decrease of 17-6 per cent in comparison with the previous year, with the result that the excess of exports, including gold, over imports was slightly higher than the year before.
The decline in the value of exports was due very largely to the decline in their price as the volume of goods exported was generally well maintained. In the case of imports, however, there was a much smaller decline in price and the majority of the decrease was the result of lower volume.
Exports of wheat in the past fiscal year show the greatest decline in value of any of the commodities, reflecting the severe fall in wheat prices. Exports of wood pulp and paper also declined substantially, though in the first quarter of this year paper exports have been
The Budget-Mr. Dunning
[Stage Direction]
8-8 per cent above a year ago. The tonnage of copper exported reached a record high level in the past year but lower prices brought the value below that of the year before, although values in the last two months have been higher than the same months last year. Exports of planks and boards fell off in 1938 but in each of the first three months of this year have
shown an increase over a year before. It will be noted that exports of fish and of milk products in 1938-39 were about the same as in 1937-38, while exports of fruits and vegetables were increased by more than 21 per cent. These three groups of exports have all been higher in recent months than they were a year ago.

[Stage Direction]
(Millions of Dollars)
			Fiscal Years ended March 31						Mar.f
	1927	1929	1933	1936	1937	1938	19391	1938	1939
Merchandise Exports (all gold									
excluded)		1.260-7	1,376-5	476-9	774-3	991-1	991-2	841-6	74-2	700
Net Exports of Non-Monetary									
Goldf	
Total Exports, including Non-	34-8	36-5	70-7	120-6	137-3	147-7	167-5	17-0	15-3Monetary Gold	
Merchandise Imports (all gold	1,295-5	1,413-0	547-6	894-9	1,128-4	1,138-9	1,009-1	91-2	86-8excluded)	1,030-9	1,265-7	406-4	562-7	671-9	799-1	658-2	65-1	58-4Total Trade	2,326-4	2,678-7	954-0	1,457-6	1,800-3	1,938-0	1,667-3	156 3	145-2Export Balance	+264-6	+147-3	+ 141-2	+332-2	+456-5	+339-8	+350 9	+26-1	+28-4Merchandise Trade by Countries (all gold excluded) United Kingdom-	Exports	448-0	431-7	185-1	319-8	406-8	407-8	326-9	27-9	Imports*	163-9	194-0	86-5	117-9	129-5	145-0	116-0	8-8	7-2Other Commonwealth Countries-	Exports	94-3	107-0	38-2	78-2	88-2	108-7	103-5	10-6	Imports*	50-2	63-4	33 9	59-8	68-7	88-2	66-0	3-1	lOUnited States-	Exports	472-5	508-9	144-7	286-5	364-4	343-3	288-5	23-4	25-4Imports*	687-0	868-0	232-5	319-5	393-7	487-3	417-0	31-2	27-0Other Countries-	Exports	245-9	328-9	109-0	89-8	130-8	130-0	122-7	12-3	Imports*	129-8	120-3	53-5	65-5	80-0	78-6	65-9	3-9	3-fiPrincipal Commodity Exports	Non-Monetary Goldf	34-8	36-5	70-7	120-6	137-3	147-7	167-5	17-6	15-8Paper, chiefly Newsprint	123-2	148-4	77-2	97-1	117-8	129-9	115-0	9-5	10-1Wheat and Wheat Flour	421-8	493-6	147-5	168-0	245-0	139-5	100-3	6-2	5-1Copper and its Products	14 9	28-0	12-3	31-0	40-2	57-3	53-9	5-1	5-5Nickel	12-9	23-9	7-5	41-6	45-9	61-0	49-6	6-1	4-9Planks and Boards	59-8	47-7	111	27-6	40-3	43-7	37-1	3-1	3-4Meats	29-4	19-2	6-7	24-2	36-1	41-4	35-3	3-3	3-4Wood Pulp	49-9	44-9	17-8	28-1	33-2	40-0	26-8	2-9	2-5Automobiles and Parts	36-4	45-4	7-8	27-1	' 22-3	28-3	25-3	3-3	2-9Fish	34-5	34-9	16-6	24-4	25-1	26-3	26-1	2-5	2-5Fruits and Vegetables	18-7	12-0	11-4	16-1	13-6	16-6	20-2	0-7	1-0Milk and its Products	41-6	35-8	11-7	10-8	14-4	17-7	17-6	0-4	0-9I"P°rt figures by countries given for fiscal year 1939 and for the monthly comparison are those for the 12 months ebruafy an°/?r	montfi of February, respectively, the March imports by countries not being available at time
oi matting up tnis table.
returns C^USteC* tor earmarketl sold. These figures were computed by the Bank of Canada on the basis of official trade t Preliminary.
employment and unemployment
11.	The general index of employment in all industries recorded a decline of 4-2 per cent in the fiscal year 1938-39 from the previous fiscal year. Lower employment in manufacturing and logging was principally responsible for the decline, since other components of the index, notably mining, construction and main-

tenance and trade recorded slight increases. In general employment fell off to a smaller extent than business activity during the recession of the summer and autumn of last year, but the upward movement since that time has, on the other hand, been relatively slower than that of general business recovery.

The Budget-Mr. Dunning
The average number of all persons in receipt of material aid to which the dominion has contributed during the twelve months ending February, 1939, was 6-6 per cent less than in the fiscal year 1937-38, a decline shared proportionately by both agricultural and urban registrations. Increased registrations of employable unemployed and of persons on relief in urban centres during the past autumn and winter reflect the contraction in employment, particularly in manufacturing, indicated on the following page. In February, 1939, the number
of employable unemployed persons on relief was 190,000.
The average number of wage-earners unemployed, as estimated by the Dominion Bureau of Statistics, recorded an increase in the twelve months ending February as compared with the previous fiscal year. These estimated figures show an average for the calendar year 1938 of 407,000, which may be compared with an average of 337,000 in 1937, of 646,000 in 1933, and of 107,000 in 1929.

[Stage Direction]
(1926=100)
Fiscal Years ended March 31	March	March 1,1927	1929	1933	1936	1937	1938	1939	1938*	' 1939*AU Industries	100-8	113-7	84-4	100-3	104-4	115-7	110-8	112-3	110-9Manufacturing	100-8	112-7	81-8	99-2	104-7	115-5	110-0	112-9	109-3Logging	100-2	116-6	42-7	124-5	153-4	201-6	107-4	1711	87-5Mining	101-2	115-5	97-2	125-8	140-7	155-2	157-4	156-6	163-7Transportation	100-4	106-7	82-7	81-7	84-6	85-2	84-3	84-5	85-9Construction and Maintenance	101-4	120-2	77-1	94-3	83-6	104-0	110-0	98-2	129-7Trade	100-8	118-2	114-4	123-4	128-4	132-5	133-4	130-4	133-4
Seasonally adjusted.

[Stage Direction]
Monthly Index* (1926=100)
Fiscal Years	Apr.	May	June	July	Aug.	Sept.	Oct.	Nov.	Dec.	Jan.	Feb.	Mar.	Average1937-38	109-1	110-4	114-3	116-8	116-8	118-4	119-6	119-8	118-8	117-8	114-7	112-3	115-71938-39	111-2	111-5	111-9	111-4	109-0	110-6	111-0	109-7	111-3	111-3	110-6	110-9	110-9
* Seasonally adjusted index as at first of month.
EMPLOYABLE UNEMPLOYED IN RECEIPT OF MATERIAL AID From the National Registration-Department of Labour (thousands)
Fiscal Years	Apr.	May	June	July	Aug.	Sept.	Oct.	Nov.	Dec.	Jan.	Feb.	Mar.	Average1937-38	245	215	182	160	143	117	122	136	154	168	175	175	1661938-39	169	154	138	132	124	115	124	143	162	181	190*	-	151t
* Subject to revision, f 12 months ending February.
The Budget-Mr. Dunning

[Stage Direction]
From the National Registration-Department of Labour ___________________(thousands)____________
Fiscal Years	Apr.	May	June	July	Aug.	Sept.	Oct.	Nov.	Dec.	Jan.	Feb.	Mar	A verage
All Persona-													
1937-38	1,160	1,038	901	793	744	725	802	877	957	1,015	1.044	1.045	9251938-39	1.024	956	885	836	758	554	641	787	896	976	1.012*	-	8611Agriculture-	1937-38	326	300	265	229	233	269	331	363	377	383	389	392	3211938-39	392	380	364	339	287	109	168	252	292	308	318*	-	300tUrban-	1937-38	834	738	636	564	511	456	471	514	580	632	655	653	6041938-39	632	576	521	497	471	445	473	535	604	668	694*	-	5641
Subject to revision. t 12 months ending February.

[Stage Direction]
Estimated by Dominion Bureau of Statistics (thousands)
Fiscal Years	Apr.	May	June	July	Aug.	Sept.	Oct..	Nov.	Dec.	Jan.	Feb.	Mar.	Average1937-38	407	327	294	277	245	225	242	291	381	403	436	456	3321938-39	437	400	387	407	368	346	378	398	472	485	491	-	419*
[DOT] 12 months ending February.
[Stage Direction]
12.	The general index of wholesale prices, as shown below, fell by about 11-9 per cent between March, 1938, and March, 1939. A substantial part of the fall in the general index is due to the importance in our index of wheat and other grain prices which declined rapidly during 1938. A remarkable feature of price movements during the past year was the decline even in prices of fully and chiefly manufactured goods, which dropped 10-8 per cent from March, 1938, to March, 1939. Prices of finished goods are normally much more stable than others.
The very substantial decline in prices of what we sell abroad as compared with the relatively slight decline in prices of what we buy abroad is a striking feature of the figures shown in the table below. The fall in wheat prices has been the principal factor in this unfavourable movement in the terms of our trade with the rest of the world.
It will be noted that retail prices and the cost of living have declined by about 3 per cent and 1-5 per cent respectively since March, 1938. A substantial decline in food prices and small declines in fuel and clothing have largely been offset by a rise in rents.
[Stage Direction]
Indexes-(1926=100)
Fiscal Years ended March 31	Mar.	Mar.1927	1929	1933	1936	1937	1938	1939	1938	1939Wholesale Prices	98-8	95-8	65-5	72-3	77-2	84-6	
98-5	95-2	70-4	73-6	75-7	79-7	76-1	79-0	
									
	990	95-9	Cl *3	69-7	76-4	85-5	72-1	82-5	68-1
									
	100 0	94-2	54-9	62-6	71-3	811	65-9	79-7	60-7
									
	100-0	96-1	70-5	78-0	82-1	89 0	82-2	84-2	80-9
									
Retail Prices		99-5	98-9	71-3	74-6	73-9				77-3
									
	99-6	98-9	79-9	79-6	81-2				82-9
									
t For the fiscal years 1927, 1929 and 1933 figures for nearest calendar years are given.
WHOLESALE PRICES Monthly Index*-(1926 = 100)
Fiscal Years	April	May	June	July	Aug.	Sept.	Oct.	Nov.	Dec.	Jan.	Feb.	Mar.	A verage1937-38	86-2	851	84-6	87-5	85-6	85-0	84-7	83-1	82-7	83-8	S3-6	83-1	84-61938-39	82-3	80-3	80-1	78-6	76-0	74 5	74-1	73-5	73-3	73*2	73-2	73-2	760
'Seasonally adjusted.
[Stage Direction]
The Budget-Mr. Dunning

[Stage Direction]
13.	Financial conditions during the past year have reflected the continued easy money position at home, the modest revival in business and the disturbances due to repeated crises abroad. Both our stock and bond markets have followed the general trend of the American markets, though they show a somewhat smaller net upward movement. Long term interest rates, indicated in the table below by the yield on dominion bonds, averaged lower than in any previous fiscal year. Short term rates were lower on the average than in preceding years, though occasional months have shown higher rates.
In the field of foreign exchange the year was marked by a decline of nearly all currencies relative to the American dollar. The premium on the American dollar in terms of the Canadian dollar rose during the spring and summer of 1938 to an average of about 1 per cent in June, and since that time has fluctuated between 0-3 per cent and 1 per cent in terms of monthly averages. Sterling exchange has declined from about S5.00 in March, 1938, a year ago, to about S4-70 recently.
Total net new bond issues in 1938 were approximately SI 19 million, compared with S60 million in 1937, the increase being accounted for by Dominion and Canadian National Railway issues. As in 1937 there was a small net retirement of corporation bonds. The amount of bonds payable in foreign currencies retired in 1938 was $69 million compared with $121 million in 1937, and S194 million in 1936. It is estimated that there was a total net export of capital amounting to about S160 million, but that there was a net sale of securities to foreigners of about S29 million, mainly in the form of Canadian common and preferred stocks.
Between March, 1938, and March, 1939, the Bank of Canada increased its total reserves by nearly 14 per cent. It increased its holdings of gold substantially, but reduced its holdings of securities by a smaller amount. The result was an increase in the cash reserves of the chartered banks of S14 million. Canadian deposits oi the chartered banks in turn rose by S106-4 million, which constituted an increase of 4-5 per cent. Both the investments and the current loans of the banks increased, the increase in current loans amounting to 6-4 per cent.

[Stage Direction]
Fiscal Years ended March 31	Mar.,	Mar.,1927	1929	1933	1936	1937	1938	1939	1938	1939Security Prices and Yields	Indexes of Common Stock Prices	(1926=100)	103-7101-8	173-3	52-1	101-2	125-5	117-6	103-8	99-2	102-4	222-2	60-1	161-8	207-6	192-2	171-8	164-0	171-494-1	59-0	116-7	132-0	112-7	118-8	111-4	118-2Dominion Bonds-Average Yields (%)	4-82	4-64	4-94	3-57	3-23	3-32	3-03	3-14	2-97Dominion Treasury Bills-Average Yield (%)	-	1-193	[DOT]778	[DOT]739	[DOT]601	[DOT]554	[DOT]656Banking and Currency (Millions of Dollars)	Bank of Canada-	172-5	194-8	206-0	217-5	205-5	233-9Total Security Holdings	-	-	-	116-7	135-8	166-6	179-5	173-1	158-4Active Note Circulation	-	-	-	49-7	70-6	95-9	107-8	100-0	107-2Government Deposits	-	-	-	24-6	23-1	23-7	24-0	23-4	19-3Chartered Banks' Cash Re-	214-7	230-6	243-1	259-5	242-8	257-4Chartered Banks-	Canadian Deposits	1.978-0	2.274-0	1,929-0	2,145-2	2,280-1	2,390-6	2,482-0	2,379-0	2,485-4Notice Deposits	1.355-7	1,507-0	1,378-3	1,467-0	1,530-6	1,584-7	1,649-6	1,623-4	1,700-4557-8	682-4	473-1	578-6	646-0	684-0	705-0	648-0	705-2517-8	517-0	726-2	1,116-0	1,370-3	1,430-7	1,450-5	1,438-4	1,499-0Current Loans in Canada	957-7	1,212-9	997-9	810-1	685-6	744-1	799-4	752-5*	800-6Call Loans in Canada	145-5	260-1	109-0	80-3	104-0	94-3	64-5	62-9	55-7
319S
The Budget-Mr. Lawson
Hon. J. E. LAWSON (York South):: Mr. Speaker, I am sure I but express the view of every hon. member of this house when I indicate to the Minister of Finance (Mr. Dunning) my gratification at his having recovered in health to such an extent as to be able to discharge this day and on this occasion so arduous a task, and do it so well. I should like also to congratulate the minister on the new system which he inaugurated to-day, which I believe is an adaptation of a combination of the systems in vogue in the imperial parliament and in Australia, of laying upon the table of the house a so-called white paper containing schedules which were tedious to read, hard to listen to, and conveyed little information when they were heard. I am sorry, however, that I cannot continue my congratulations to the point of extending them to the government in respect of the policies which have been indicated to-day by its Minister of Finance.
I should like to take this opportunity of joining with the minister in paying tribute to one who has now gone from the service of this country and to whom the minister referred, the late Hon. Mr. Sedgewiek. I concur in all that was said by the Minister of Finance with regard to that most estimable gentleman. When the tariff board was first appointed I felt that if that quasi-judicial body were left without political interference we should begin to have something like a scientific tariff at the end of five or ten years. I sincerely trust that when this government chooses a successor to the office of chairman of the tariff board it may choose one with the same high qualifications that were possessed by the late lamented chairman of that body.
I wish to make just one or two comments to-day, Mr. Speaker, while they are in my mind. As I listened to the early part of this budget address I could not help but be struck by the fact that eveiy time we have a decline in the physical volume of business in this country the minister ascribes it to world conditions; but every time trade improves he ascribes it to the marvellous powers of the present government in the matter of the negotiation of trade agreements.
The next thing that struck me was one sentence with respect to public spending. The minister said:
We dare not, we cannot, contract our expenditure until our industries and our people generally are 'spending more freely.
In large measure I agree with that statement, but the thought that crossed my mind was this: How on earth can you expect pri-

vate industry and individuals to risk their capital and venture into private enterprise when year after year this government presents a fiscal and economic policy of uncertainty affecting the conditions under which such industries will have to operate? This was brought to my mind perhaps more forcibly than usual by the fact that just before I entered this house to-day a gentleman was telling me of the results of one change in one tariff item, plus this contemplated removal of the excise tax. As a result one industry in this country employing 300 men, with an annual payroll of $297,000, will have to close its doors when this change becomes effective, unless, by some juggling of other tariffs such as we have seen in the past, that industry is given relief from the results of the Canada-United States trade agreement.
I have just one other word of comment at this time. As I listened to the minister's long dissertation upon the problems with which the government were confronted and the necessity for expenditure, I fully anticipated that when he reached the proper point he would announce a deficit somewhat similar to the deficit of 1938, which amounted to some $17,000,000. I must confess, however, that when he announced a deficit of $30,-
666,000,	together with another estimated $25,000,000 for wheat-and I hope I am not giving away any great secret when I venture to suggest that the sum required for this purpose may be considerably larger-resulting in an overall deficit of $55,666,000, the thought came to my mind that this affords the taxpayers little prospect for some years to come of any relief from the burden of taxation.
It is not possible for me, Mr. Speaker, not having had an opportunity to examine in detail the schedules and figures filed to-day, to deal at further length at this time with the budget. I therefore move the adjournment of the debate.
Motion agreed to and debate adjourned. TORONTO HARBOUR COMMISSIONERS



AUTHORITY TO CONSTRUCT AND OPERATE TORONTO ISLAND AND MALTON AIRPORTS

[Stage Direction]
Hon. C. D. HOWE (Minister of Transport) moved the second reading of Bill No. 95, respecting the Toronto harbour commissioners.
Motion agreed to, bill read the second time, and the house went into committee thereon, Mr. Sanderson in the chair.
Sections 1, 2 and 3 agreed to.

Toronto Harbour Commissioners
On schedule A.
Thomas Langton Church: How is it that Toronto has to pay for its own airports at the island and at Malton, in respect of the purchase of equipment, site, and maintenance, while other municipalities through which the same trans-Canada system passes, have these identical landing fields and airports built at the expense of all the people of Canada? There is one policy for the city of Toronto, a city which pays a great amount of taxes, and a different policy for other places. Is there a policy applying to the whole country, and if so, why is there different treatment in different localities? Some localities have to provide and maintain a national service at the expense of the local taxpayers.


Clarence Decatur Howe: The Department of Transport has followed a policy of assisting municipalities on the route of the trans-Canada air lines to bring their airports up to a standard. It has not been the policy of the department to build airports for municipalities wholly at the government's expense, except in cases where airports have been required for reasons other than that of serving the particular community to which it may be adjacent.
I have in mind the airport at North Ray. North Bay is a junction point in the service from Montreal to Winnipeg and from Toronto to Winnipeg. An airport in that locality was required. The city was not in a position to take any part in financing the construction of the airport, and the government decided it should be built and operated at government expense for reasons other than its service to the city of North Bay. The federal government has made a larger contribution to the airports at Toronto than it has made to any municipal airport in Canada thus far. I believe the arrangement made, a mutual one involving Toronto, the federal government and the provincial government, has worked out reasonably to the satisfaction of all concerned.


Thomas Langton Church: I am not objecting to the principle of the bill. But is the city of Toronto on a branch line from North Bay, or is it on the main line?


Clarence Decatur Howe: I am not sure what interpretation is placed upon the situation, but I may say that at the present time, and ever since the passenger service started, the plane from Toronto has proceeded directly through to Winnipeg, and a plane from Winnipeg has
gone through to Vancouver. I presume if there is any question of branch lines, it could be said that Montreal is on a branch line, because the Montreal plane goes as far as North Bay and is consolidated there with the Toronto plane. However, I trust Montreal will not make an issue of this, as Toronto has been disposed to do.


Mr. LAPOINTE (Quebec East):: It is a question of words.


Mr. ROSS (St. Paul's):: I do not like to ask a question at this time, but since the hon. member for Broadview (Mr. Church) has brought it up perhaps I should ask if a direct service between Montreal and Toronto is contemplated. I notice that by going around it now takes four hours to go by plane from Toronto to Montreal.


Clarence Decatur Howe: There is a plane running
between Toronto and Montreal, but its purpose is really to complete the trans-Canada service rather than to act as a direct service-between those two cities. At the moment we are actively engaged in putting in auxiliary facilities which will permit us to operate a route from Montreal to Ottawa to Toronto and thence to or at western Ontario and United States cities.


[Stage Direction]
Schedule agreed to.
Bill reported, read the third time and passed., DAIRYING INDUSTRY

[Stage Direction]
The house resumed, from Monday, April 24, consideration in committee of Bill No. 88, to encourage the improvement of cheese and cheese factories-Mr. Gardiner-Mr. Sanderson in the chair.
Section 9 agreed to.
Bill reported, read the third time and passed LIVE STOCK AND POULTRY

[Stage Direction]
Hon. J. G. GARDINER (Minister of Agriculture) moved the second reading of Bill No. 101, respecting stockyards, live stock and live stock products and hatcheries.
Mr. STEVENS:: We have not the bill, Mr. Speaker.


Mr. MacNICOL:: No, it is not on the file. How can it be read a second time?
Live Slock and Poultry


Mr. GARDINER:: I understand that the bill has been distributed. It is my intention to move, after the bill receives its second reading, that it be referred to the committee on agriculture and colonization, so that discussion need not necessarily take place at the moment with regard to it.
By way of explanation I might say that the present Live Stock and Live Stock Products Act was enacted in 1923. It is deemed expedient to reenact it, incorporating certain changes which experience in administration and changed conditions, particularly in transportation and marketing methods, have indicated as desirable. Generally, certain definitions throughout the act have been amended to meet such changed conditions, and provision is made for an advisory committee composed of representatives of an industry to assist in measures dealing with the marketing of any particular product.
With respect to the first part of the bill, under the present act the department has exercised jurisdiction over stockyard operations through the live stock exchanges, but owing to there being an insufficient number of operators to constitute an exchange, live stock exchanges do not exist at six of the eleven stockyards throughout Canada, and on that account administration of the act has not been entirely satisfactory. It is apparent that to exercise proper supervision at all stockyards it is preferable and feasible to vest greater administrative authority in the management of the stockyard. Provision is made for the continuance of live stock exchanges where they now exist, and for the establishment of others at stockyards where they may be considered feasible and desirable.
In part II there are no important departures from the present act, except for the inclusion of more desirable definitions and the clarification of the powers of the governor in council. Greater stress has been laid on the importance of grading, inspection, and branding or marking of live stock and live stock products, in order to keep step with the government's policy of assuring returns to the producer commensurate with the quality of the live stock produced and of educating the consuming public to buy by grade. In this respect it is provided that products which are below the standard of quality or grade designated on the container or package shall be deemed to be misbranded.
Part III of the bill provides that what has previously been done by regulation in connection with hatcheries and poultry in gen-

eral shall be incorporated in the provisions of the bill itself. In moving, Mr. Speaker, that the bill be now read a second time I suggest that it then be referred to the committee on agriculture and colonization.


Thomas Langton Church: Mr. Speaker, the principle of this bill, which is now being moved for second reading, should be plain to the committee. We have a committee on agriculture, and I cannot understand why a bill of such magnitude as this should not be referred to that committee.


James Garfield Gardiner: It is being referred.


Thomas Langton Church: I am absolutely opposed to the principle of this bill, and to all these artificial barriers and burdens which are being placed on agriculture by the minister. Almost every day he introduces a new bill adding more regulations and provisos which will in my opinion only encumber the agriculture industry. It will not add to marketing efficiency and will be a restraint on the proper administration of the department.
The explanatory note says that the Live Stock and Live Stock Products Act was enacted in 1923, some sixteen years ago, and that now it is deemed expedient to reenact it, incorporating certain changes that experience in administration have indicated as desirable. The bill also deals with poultry and many other agricultural activities. In my opinion the committee should know how this legislation is going to affect our export trade to the old country. There may be a scarcity of food over there in an emergency, and may not the effect of all these new restrictions and regulations be to prevent necessary reservoirs of food from being stored in England? I believe the time has come when the house should mark time on all these regulations which the minister is bringing down, because in my opinion many of them are not in the public interest.
This particular industry is also under provincial regulation. Is there any overlapping or duplication of restrictions? The minister has a small standing army of officials under various statutes and advisory boards, and by this bill provision is made for an advisory committee.	All these agencies,
inspectors and graders, and the increased number of departmental officials, are imposing an additional burden on industry at a time when there should be fewer restrictions. The Ontario legislature said a month ago that they were ready to cooperate with the dominion and, as a legislature, to strike off

Live Stock and Poultry
half the burden of taxation of their estimates or whatever other proportion might be agreed upon by all parties there, notwithstanding constitutional practice. We here should do the same.
Before we pass this bill at this late stage of the session I should like to know if the live stock industry, the stockyards and the poultry industry have been notified of the provisions of the bill and have agreed with respect to them. Who is demanding this legislation? Is the legislation necessary norw? With the session nearly over, a bill of this magnitude might well be left over until trade and commerce as represented by the live stock and poultry and other agriculture industries have a chance to be consulted. Have the views of the provincial ministers of agriculture been obtained, and if so, how many of them approve of this bill and how many disapprove?


Mr. M. C. SENN (Haldimand):: Mr. Speaker, this legislation was before the house last night in the form of a resolution. It was allowed to go through its formal stage before the house and through committee without any discussion, because the bill was not before the house and its provisions, of course, were unknown.


John Ritchie MacNicol: It came before us only
now.


Mark Cecil Senn: To-day it is' before us for
second reading without having been in the hands of hon. members at all. I have no doubt that certain changes need to be made in the Live Stock and Live Stock Products Act. but I think the minister would be wise and would not lose any time if he would give us some opportunity to consider the various features of the bill before it passes second ' reading. After all, the second reading of a measure is equivalent to adopting the principle and assenting to the changes which are being effected, and I suggest to the minister that it would be wiser if, before the second reading, he would allow us a little more time in which to study the matter.


James Garfield Gardiner: If that is the general
feeling of hon. members I have no objection, but I suggest that the bill has been very fully discussed with all those who are connected with the stock exchanges and with those who are owners or managers of stockyards. Some of the individuals associated with these organizations are now in the city; I do not know that all of them are here; but I should like to see the bill go to the committee on agriculture in order that any who so desire may come to Ottawa and discuss certain features of the bill with the committee. For that
reason I should like the bill to go to the committee as soon as possible, although I have no wish to rush it if it is the desire of hon. members that it should be held.
Practically everything which is contained in the bill is either in existing legislation or has been put into effect under legislation. There is just one outstanding change in connection with the management of the yards. Previously the management was under exchanges, but as I have stated, live stock exchanges do not exist at six of the eleven stockyards, and for that reason it has been thought wise to place the management largely under the ownership of the yards rather than under the exchanges.


Mark Cecil Senn: That is, the companies?


James Garfield Gardiner: Yes, which actually own the yards. There is to be some change in connection with the matter of charging fees, as against charging the costs of operating the yards against the feed which is used for the live stock, and certain matters of that kind, which are of considerable importance to those who are shipping stock. I do not know that there is anything for which the bill needs to be held up; any changes which any hon. member desires could be made, I believe, as a result of discussion in the committee.


Henry Herbert Stevens: I am not rising to object to the bill in its present form, or to its going to the committee on agriculture. I wish, however, to take advantage of this occasion to deal with one broad, general phase of it. I do so because I am not a member of the committee on agriculture, and of course, in concurring in the second reading one concurs more or less in the principle of a bill. The minister will correct me if I am wrongfully interpreting the facts, but I understand that the original stockyards bill was passed for the purpose of developing or stimulating central public markets where producers might bring their stock with the assurance of a fair and impartial market. Although I have not had time to read this bill. I assume that it preserves that principle.


James Garfield Gardiner: That is the intention, yes.


Henry Herbert Stevens: I should like to give utterance to one or two thoughts, and in doing so I shall delay the house only a moment. Because of the increasing numbers of live stock which now reach the abattoirs and packing plants direct by way of trucking, in comparison with the numbers which go to open, public stockyards, there has arisen a situation which certainly ought to be faced, and I hope
Live Stock and Poultry

that the committee on agriculture will give attention to it when they come to consider the bill. I have under my hand various reports of the Department of Agriculture which I shall not detain the house by reading, but anyone who peruses those reports must be struck with the steadily increasing quantity of this commodity which now goes direct to the packing plants.
Another feature is, I think,-although I am speaking without preparation, because I did not know this matter was coming up to-day- that there is a disparity between the inspection, grading and classification of cattle which come to the live stock yards and of cattle which go direct to the packing plants. There is also some laxity in. the weighing of the live stock which go direct to the packing houses. It must not be recklessly stated that I am charging that there is anything particularly wrong, but after all the duty of parliament is first to the producer of live stock, and particularly to protect him in the control of his commodity once it leaves his hands, because there is no class of people who are in a more disadvantageous position to protect their own interests than are the farmers. When cattle, hogs, sheep or cows leave the farm they come immediately into the hands of someone else, either a common carrier or a trucker; then they go to the stockyard or the packing plant. When they go to the stockyard there is reasonable assurance, because of supervision, that the weighing is carefully and properly done. That is another feature which should, I think, be carefully checked and provided for in any new legislation. When the live stock goes to the packing plant there should be some method of protecting the interests of the producer and vendor, through some government agency to supervise the weighing.
The main point I wish to emphasize is the desirability of giving added protection to the farmer, so that he may be assured that when his live stock leave his control his interests will be looked after so far as classification, grading, manner of sale and so forth are concerned. It would not be difficult for me to indicate many alleged and, I believe, many actual abuses which now exist and which should be guarded against, but it is not my intention to delay the house. Having said this, while I am not speaking for the hon. member who addressed the house a moment ago, or for any others, I personally am not objecting to the second reading. I did not rise for that purpose; I rose only to emphasize certain points.


Mr. WILLIAM HAYHURST (Vegreville):: Not having the bill before us, we cannot discuss it intelligently; and, being a member

of the committee on agriculture, I certainly should like to see the measure brought before that committee so that we may discuss it from every point of view.


James Garfield Gardiner: It is going there.


William Hayhurst: In western Canada we are chiefly interested in the quality of live stock, and our main objection has been to the mixing of dairy cattle with beef cattle, and things of that kind. I do not know what is contained in this bill in that respect. We are also interested in poultry, an industry which has developed greatly in the west during the past few years. The matter of marketing has received a good deal of consideration by the Department of Agriculture, and, I believe, with some success. I hope the committee on agriculture will have an opportunity of discussing this bill.


Mr. J. H. BLACKMORE (Lethbridge):: I believe that this bill should not be given second reading until we have had an opportunity to read it. There are too many matters involved in it, and I should like to have an opportunity to study the bill.


Mark Cecil Senn: If I may have the privilege of saying one more word, after hearing the minister's second explanation I am of opinion that the committee on agriculture is the proper place to deal with the bill, particularly in view of the fact that, as the minister states, the amendments are not drastic. There are no drastic changes in the bill. I would mention, however, that there is already a very important matter before the committee on agriculture, and it will probably be some time before that committee finishes its work. I think this bill should be referred to the committee on agriculture.


James Garfield Gardiner: Some of these men are quite a distance away from Ottawa, and the sooner they know that the bill is to be referred to the committee on agriculture, the more likely they are to be able to come here and make the representations they desire. For the information of the leader of the Social Credit group, I can assure him that there is nothing new in the bill, so far as principle is concerned, which could not be dealt with in the committee on agriculture. Those features that are really new are matters which I should like to have go to the committee on agriculture in order that outsiders may appear and make representations. Those matters have to do with the question raised by the hon. member for Kootenay East (Mr. Stevens). Trucking is a new departure in the transportation of live stock, and the relationship of the trucker to the stockyards and the packing plants and all that sort of thing are

Small Loans-Mr. Ilsley
more or less involved. The drover also has some opinions in that regard. These are not questions of principle, but all these individuals should have the right, I submit, to come here and discuss these matters, and we should like to have sufficient notice given them. I trust the house will allow the second reading of the bill now so that I can move that it be referred to the committee on agriculture. That, I believe, would best meet the convenience of all concerned.


Mr. E. E. PERLEY (Qu'Appelle):: I was not present last night when the minister spoke on the resolution, and as we have just had the bill handed to us, since the minister moved the second reading, we have had no opportunity at all of looking into it. For my part, I should like to have studied it to some extent. I do not, however, wish to block its reference to the committee on agriculture. As the hon. member for Kootenay East (Mr. Stevens) said, there are many phases in the marketing of live stock, and in recent months I have heard of many injustices perpetrated in the live stock yards.
The minister mentioned that already there were a number of men here who might be heard before the committee. The committee on agriculture is at present busy on a bill and we are not getting on very fast with it. We have been on one section for four sittings and we are likely to be on it for one or two more. This measure deals with questions affecting agriculture, but there are four other bills standing in the minister's name for second reading, and I think he might tell us whether any of these bills are to be referred to the committee. If so, the committee on agriculture will be a very busy one. We are all trying to facilitate the business of the house so as to get through, but some of these bills may be extremely contentious. This bill may prove so when it is referred to the committee. I think the minister might give us a statement with regard to some of the other bills standing for second reading.


James Garfield Gardiner: It is not contemplated that any of the other bills should go to the committee.


Mr. T. C. DOUGLAS (Weyburn):: I am willing to see the bill referred to the committee on agriculture without further discussion, because that is probably the best place to study it. I would point out, however, that the house had been sitting over two months before the agriculture committee met, and now we are referring a second bill to that committee. On the order paper there are two or three other bills which, in my opinion, ought to be referred to that committee. It is unfortunate that all these bills,
some of which, I think, ought to be sent to the committee, are being brought in so late in the session. I trust, however, that the fact that this bill is being referred to the committee at this stage will warrant referring other bills to the committee later on, because some of the other bills are quite important, particularly those referring to the marketing of wheat. I agree that the bill should go to the committee.
Motion (Mr. Gardiner) agreed to, bill read the second time and referred to the standing committee on agriculture and colonization.



SMALL LOANS


[Stage Direction]
Hon. J. L. ILSLEY (Minister of National Revenue) moved the second reading of Bill No. 97, respecting small loans.
He said: This is an important bill. It is substantially the one that was agreed upon by the banking and commerce committee last year, or at least by the majority of that committee. The bill has passed the Senate without amendment and now comes to the House of Commons. It stands in my name on the order paper, and perhaps I should explain briefly its provisions.
My knowledge of this bill and of its subject matter has been obtained within the last year. I have not been a member of any of the committees that have considered the matter in the last few years. I am convinced from my study of the bill and of its subject matter that a real and extensive evil exists in Canada to-day. That evil is usually called the "loan shark" business. There is a class of business known as the small loan business. It is not carried on by the chartered banks of Canada, and apparently cannot be carried on satisfactorily by them. The Canadian Bank of Commerce is engaged in this business to a limited extent, but none of the other banks has engaged in it nor have they expressed any desire to do so. In fact, the manager of one has expressed his desire to keep his bank out of it.
The need for small loans that cannot be obtained from banks is met by three classes of lenders in Canada. There are in the first place the small loan companies incorporated by this parliament under private or special acts. There are three of these companies. These companies during 1938 lent sums aggregating §9,701,658. The total loan balances outstanding due these companies at the end of 1938 was $4,764,031, and the total of interest and fees received by these three companies in 1938 was $1,096,478.
Small Loans-Mr. Ilsley
[Stage Direction]
These companies do only part of the small loan business that is done in the dominion. Another part of this business is done by the provincially incorporated companies. We have not a complete or accurate record of the number of provincially incorporated small loan companies carrying on business in Canada, but a questionnaire was sent out by the Department of Insurance last year which was answered by forty-six provincially incorporated small loan companies. Therefore we know that forty-six companies incorporated by the provinces are operating. We do not know exactly how much these provincially incorporated companies lent in 1938, but we know that the amount was approximately S6,500,000 and we know the loan balances at the end of the year were approximately $3,000,000. That is the second class of lenders carrying on this business in the dominion.
Then there is a third class of lenders, that is the individual money lenders. No one knows how many of these there are. By money lenders I mean persons carrying on the business of money lending. It is perhaps fair to say, and I am convinced it is true, that the greatest abuses of money lending are found in the transactions to which these individual money lenders are parties. Indeed, the evidence given before the banking and commerce committee last year shows that the cost of loans made by some of these individual money lenders was very high indeed, running up, in some instances, into thousands per cent per annum.
May I bring before the committee some typical cases. They would be extreme cases, but there were placed before the banking and commerce committee last year instances taken from press reports of loans made by unregulated lenders, the rates for which loans amounted to over 100 per cent per annum. In one instance a loan of $45 for eight months involved a charge of 7-27 per cent a month or, converted to an annual basis, 132-1 per cent per annum. Another loan of $50 involved an annual rate of 119 per cent per annum. The lowest rate involved in a dozen or more loans dealt with was 68 per cent per annum, while one $10 loan involved an annual rate of over 91,000 per cent per annum. In the case of a loan which was reviewed by the courts in Toronto last year, the rate was found to be over 5 per cent a month, or over 80 per cent per annum.
Relief workers, persons engaged in humanitarian activities, persons who come in contact with the poor, tell of many pathetic cases of exploitation by loan sharks of persons in needy circumstances. And there has been a growing demand not only from these persons

but from all persons interested in the welfare of this country for legislation which would effectively curb what is called the loan shark evil. As I say, there is no way of knowing how much money these individual money lenders are lending in the various parts of Canada, but it is known that they are operating on quite a large scale in the cities. It is exceedingly difficult to regulate these persons; it is almost impossible to have a routine of inspection of offices when these offices are in back alleys or where there are no offices at all. For that reason among others it has been found in other countries that it is necessary to permit legitimate money lenders under the law to receive a fair return on the money they lend so that capital will enter the field and so that people in extremely needy circumstances, who cannot borrow from the banks or from others, will have a source from which to borrow some money without being thrown into the hands of these 20 per cent a month people, who inevitably operate, and operate in large numbers where there are no legitimate money lending companies which can carry on legally.
The house may be interested, and I was very much interested when I came to study this matter, in the existing legislation. I now wish to state in a few words, very simply, what the existing legislation is.
For a great many years, I think from 1858 to 1906, there was on the statute books no legislation regulating the rate of interest that might be charged. We had no usury laws. I am not sure that my historical facts are absolutely accurate; it does not make very much difference. But in 1906 the Money Lenders Act was passed. The Money Lenders Act limits the rate of interest which may be charged by money lenders on loans up to $500 to 12 per cent per annum. The Money Lenders Act has been practically a dead letter in this country. It has not been susceptible of enforcement, for this reason: If a person, a money lender, lends money and charges a rate of interest or makes, in respect of a loan, charges that amount to more than 12 per cent per annum, as most of them do, it is impossible for the courts to separate the part of the charge which is interest proper, pure interest, from the part which is taken to cover investigation of the paying ability of the borrower, documents such as wage assignments and chattel mortgages-there are usually such documents-expenses of trips to make investigation, expenses for registration of documents, and that sort of thing. So that prosecutions which have been held under the Money Lenders Act, in the comparatively﻿APRIL 25, 1939
Small Loans-Mr. Ilsley
small proportion of cases in which any evidence could be obtained, failed because the courts decided that, there being no limit on the amount that could be charged for other services and expenses, violation of the Money Lenders Act could not be established. Therefore the law is in a most unsatisfactory condition so far as regulation is concerned. That is true under both sections 6 and 7 of the Money Lenders Act. The principle of the two sections is slightly different, but both sections are continually evaded or avoided, and this can be done legally.
The house may be interested in the rates that are being charged at the present time. Apart from what I have told the house, I do not know what rates are being charged by individual money lenders. All sorts and kinds of rates arg being charged. Serious exploitation is going on.
Nor with regard to provincially incorporated companies can I tell the house with any definiteness what rates are being charged. All sorts of practices, perfectly legal practices, exist, which are authorized usually, I think, under the provincial legislation under which the companies operate. In the case of one company whose loan contracts were analysed by the department of insurance, a company in my own province, the rate of interest, including costs of loan, was found to be something over 50 per cent per annum.
Apart from the Money Lender's Act there is no check or regulation of these companies. We do have a clause in our Loan Companies Act which limits the rate which can be charged to 2J per cent per month. If I remember correctly, that provision was inserted in 1934, but it applies only to dominion incorporated companies, so there is no effective regulation of the rates charged by provincially incorporated companies, which rates are, in a good many instances fairly high.
I now come to dominion incorporated companies, which lend about $10,000,000 a year. Under their acts the charges on loans, including all costs, are as follows:
Amount of loan $ 50 	 100 		Per cent per month 	 2-5 	 2*5
150 			 2-5
200 			 2-4
250 			 2*2
300 				 . .. 2-1
350 			 2-0
400 			 1-93
450 			 1-88
500 			 1-84
Of the loans made by these companies, 7 per cent in number, or 17 per cent in amount come between $350 and $500. That is a very small end of their business. Above $500 there
is no regulation whatever; and the bill I am presenting, as I shall explain in a few minutes, provides that instead of these rates, which on 83 per cent of the money loaned are 2 per cent and over a month, running up to 21 per cent, the maximum cost of the loan shall be 2 per cent a month.
Perhaps I should say something about the bill itself. I want to disabuse hon. members of any mistaken ideas they may entertain on this point. The 2 per cent a month is not a limitation on interest; it is a limitation on the cost of the loan. The only act on the statute books which limits the rate of interest is the Money Lenders Act, and that remains; we are not repealing thAt act. If the present bill passes and any borrower within the range of $500 from any loan company, dominion or provincial, or from any individual money lender, is able to show that the interest proper, the pure interest that is being charged, is over 12 per cent per annum, he will be able to invalidate the transaction. But he will not be able to show that, or they have not been able to show it in the past, because it is impossible to distinguish interest proper from the other charges that are also made against the borrower.
Mr. WOODSWORTH:: Then the minister admits that a court action would not be possible under this measure?


Mr. ILSLEY:: No; under the Money Lenders Act.


James Shaver Woodsworth: But under this one also?


James Lorimer Ilsley: Oh, no; court action is absolutely possible under this measure. That is why we are passing it. This bill defines the cost of a loan to include everything, all the expenses of the loan. It proVides that every contract must show on its face what the charge is, and that charge for all purposes, no matter if it is a loan of only $10 or $20 for a week, must not be and cannot be at a rate of more than 2 per cent a month, not calculated or paid in advance.


James Shaver Woodsworth: What I meant was that no one could enter action on the ground that the interest was more than 12 per cent?


James Lorimer Ilsley: They might, but I do not think so. I do not have any faith in that; I think if it had been, possible the Money Lenders Act would have been invoked in the past. I do not think that is an effective way; I believe we are just deceiving ourselves if we think the Money Lenders Act is any curb on this sort of thing. That is why we must have an act that is a curb, and that is why this legislation is being introduced.
Small Loans-Mr. Ilsley

Hon. members may say to 'themselves, as would be very natural, that 2 per cent a month seems like quite a lot, and they may wonder if it would not be possible to make it less than that. Hon. members should remember that we are not talking about a loan of a thousand or fifteen hundred dollars on a mortgage. We may be and are talking of loans of $50 and SI00 for a short time, a few months; and universal experience in this small loan business has shown that if by law you deny the right to charge as much as 2 per cent a month in the case of these small loans, no one will legally make loans. That has been the universal experience. Hon. members who followed the proceedings before the banking and commerce committee must have been convinced of that. State after state of the United States union has tried to get this rate down to 1| per cent or 1 per cent a month, and the universal experience has been that the lending companies have folded up and left the state; they would not bother with it. Then the loan sharks have moved into the state, anl the business has gone on to a 20 per cent a month basis. So really we are doing harm rather than good if we make the rate too low, no matter how good a speech we may make on the subject or what an appeal we may make to people who do not understand the situation. The fact is that we will just be making the situation worse rather than better if we do not make this percentage sufficient.


Mr. WALSH:: Is that 2 per cent a month on the balance or on the entire loan?


James Lorimer Ilsley: It is on the balance outstanding, and if the balance is outstanding more than fifteen months the rate is less than that. The amounts loaned must be repaid in equal monthly instalments; the amount is not calculated in advance, and is on the balance outstanding. In England the law is that 4 per cent per month is prima facie regarded as a reasonable rate; and if the borrower seeks to invalidate the transaction the burden is upon him to show that an unreasonable rate has been charged if that rate is 4 per cent or less. That is taken as the standard of reasonableness in that country in regard to loans of this class. Then I have before me the rates that have been legalized in the various states along the Canadian border, as follows:
Per cent
State	per month
Maine	 3
Massachusetts	 2 to 3*
Michigan	 3 J
New York	 2$ and 3*
Wisconsin	 1, 2 and 2J*
Iowa	 2ito3*
Oregon	 3
* Graduated.
IMr. Ilsley.]
I think this measure is the most severe of any of the laws I have read, with the possible exception of the Wisconsin law. It must be remembered that if this bill passes the house, as I hope it will, it is not necessarily final. It is something to adopt and work under, so that if there are any abuses under it they can be corrected in future. However, it is a severe act, as acts go, having in mind the experience of other countries. Not only are we putting this provision in the bill, but we are putting similar provisions in the criminal code, so that it will be a criminal offence for the enforcement of which the attorneys general of the provinces will have some responsibility. They will have responsibility if more than two per cent is charged by money lenders in the provinces. Therefore we get the benefit of the supervision [DOT] which the attorneys general will give in connection with the enforcement of the law, and the supervision which the department of insurance will give.


Henry Herbert Stevens: Where is the amendment to the criminal code disclosed?


James Lorimer Ilsley: It is in the criminal code amendments introduced by my colleague the Minister of Justice (Mr. Lapointe).


Henry Herbert Stevens: Which have passed?


Ernest Lapointe: No; it is on the order paper.


James Lorimer Ilsley: I believe the Minister of Justice will follow me.


Ernest Lapointe: The bill is distributed.


Henry Herbert Stevens: I believe it is Bill No. 90?


James Lorimer Ilsley: Yes; it links these sections. I may say some hon. members felt that if the attorneys general had some supervision, some additional security might be given to persons who might possibly be exploited. So the provision is made in the criminal code whereby, if more than two per cent is charged, it becomes a criminal offence. We are giving the superintendent of insurance the fullest powers of inspection, inspection of not only licencees under this measure, but also of the unlicenced money lenders. The limit is set at $500. Over that amount there is no regulation. Some hon. members might think we should have stopped at $400 or $300, but if we had, there would have been no regulation over that amount. We thought that $500 was a logical maximum, because it is the maximum in the Money Lenders Act. We are allowing the Money Lenders Act to stand beside this measure, for what it is worth, and we are leaving the limit at $500.

Small Loam
Lawyers in the house will be interested in the constitutional basis of the legislation. They will say, "Are you passing legislation that you have the power to pass?" All kinds of opinions have been given during the past few years, but the Department of Justice is satisfied that this legislation is within our jurisdiction.
I shall not read any opinions, but will state briefly the two grounds on which the Department of Justice advises we have jurisdiction. Experience has shown it is impossible to try to control pure interest or interest proper unless the same authority at the same time has power to control and regulate additional charges. Therefore this legislation is legislation ancillary to interest legislation, necessary to the proper enforcement of interest legislation. That is the first ground.
The second ground is that this is criminal legislation. We are making it a crime. We say there is nothing-


Mr. LANDERYOU:: It is a crime, all right.


James Lorimer Ilsley: We are making it a crime under this legislation, and we have powers under the provisions of the criminal code. I know we cannot make everything a crime, but I think we can make this a crime, and that it will stand in the courts. So on those two grounds we consider we have the constitutional authority to pass this legislation.
For the first time the legislation brings under control all classes of money lenders. It includes not only dominion companies, but provincially incorporated companies, and individual money lenders. It brings the real charges out into the open, so that he who runs may read, and so that no one may say to the borrower, "You are to be charged seven per cent"-or be charged ten per cent, or twelve per cent. There must be a statement of exactly what is to be charged. He is charged that much, no more and no less, not in advance and only on the outstanding balance.
We believe the rate is high enough to permit the legitimate money lending company to live and to carry on, but we do not think it is too high, or so high as to permit them to derive undue profits, in the light of the experience of such companies elsewhere, and in view of what others have found out to be practical in this line of business. It provides for control by the attorneys general, in discharging the responsibility of enforcement of the criminal law, and it provides for control by the superintendent of insurance.
It does not raise the interest rate now chargeable. Under the Money Lenders Act the rate now chargeable is 12 per cent, and it will remain the same. Finally, I would say 71492-202
in support of the bill that it is supported by the superintendent of insurance, and while we each have to discharge our own reponsi-bilities, my experience has been that what passes Mr. Finlayson is not usually opposed to the public interest.


Mr. STIRLING:: When the minister says
that two per cent a month covers the charges, does he mean that it is to cover all those supplementary charges to which he previously referred, and that two per cent would be the total which could be collected by a lender?


James Lorimer Ilsley: It is the total that can be
collected for everything, including solicitors' fees.


Grote Stirling: Search?


James Lorimer Ilsley: Yes, and registration fees
and disbursements-everything.	It covers
travelling costs incurred in investigation. Everything must be covered by that two per cent. No more can be charged.
I believe I have nothing more to say about the bill. I can explain the various clauses in committee and answer questions regarding them. But I would appeal to the house to pass it. It may be that there will be members who will have a little different idea about what should be done concerning this, that or the other section. We have been doing that for three or four years. For that time we have been giving expression to our different ideas as to what ought to be done about this sort of thing. Here we have an admirably drafted piece of legislation. I did not draft it, so I am free to say that. I repeat that it is an admirably drafted bill. It is a sound bill	in every way; of
that I am satisfied. There is a great demand from all the people of Canada for the passage of this bill-not just for some bill, but for this bill. I am sure the public are appreciative of the enormity of the evil we are seeking to remedy. They will blame, and justly blame, this parliament if, after working on the matter so long we throw this bill out at this stage because some little part of it does not suit some of us.
At six o'clock the house took recess.
After Recess
The house resumed at eight o'clock. PRIVATE BILLS



CONSIDERED IN COMMITTEE-THIRD READINGS

[Stage Direction]
Bill No. 66, to incorporate the Canada Board of American Missions of the United
[Stage Direction]
Civil Service Act
[Stage Direction]
Lutheran Church in America.-Mr. Casselman.
Bill No. 68, for the relief of Jean Winifred Hunter Urquhart.-Mr. Walsh.
Bill No. 69, for the relief of Sarah Theresa Norman-Mr. Ahearn.
Bill No. 70, for the relief of Helen Kathleen Yuill.-Mr. Hyndman.
Bill No. 77, for the relief of Constance Lillian Talbot Mais Pocock.-Mr. White.
Bill No. 78, for the relief of Edith Cecilia Shaw Mayne.-Mr. Walsh.
Bill No. 55, to change the name of Ancient Foresters' Mutual Life Insurance Company to Toronto Mutual Life Insurance Company. -Mr. Cleaver.
Bill No. 67, respecting the Sterling Insurance Company of Canada.-Mr. Bertrand (Laurier).
Bill No. 56, to incorporate The Associated Canadian Travellers.-Mr. McPhee.

[Stage Direction]
Bill No. 98, for the relief of Helen Kerr Hogg Molson.-Mr. White.
Bill No. 99, for the relief of Adele Adfeldt Grunau.-Mr. Bercovitch.
Bill No. 100, for the relief of Jeanne Beauregard Desnoyers.-Mr. Bercovitch.
Bill No. 102, to incorporate Universal Eucozone Limited.-Mr. Lawson.
Bill No. 103, respecting the New Brunswick Railway Company.-Mr. Emmerson.


[Stage Direction]
The house resumed from Friday, March 17, consideration of the motion of Mr. Lapointe (Matapedia-Matane), for the second reading of Bill No. 24, to amend the Civil Service Act.
Mr. W. R. TOMLINSON (Bruce):: Before speaking on this bill I should like to read the text of it in order that it may :be placed on the record. Section 1 reads:
Section three of the Civil Service Act, chapter twenty-two of the revised statutes of Canada, 1927, as amended by subsection two of section thirteen of chapter forty of the statutes of 1932, is further amended by adding at the end thereof, the following subsection:
"(9) The secretary of the commission shall be appointed by the governor in council."
That is the proposed amendment. We always look to the explanatory note to ascertain if possible the reason for amendments of an act. The explanatory note to this bill reads:
The position of secretary to the civil service commission already exists under the civil service classification. The purpose of this bill is to

provide that the appointment of the incumbent thereof shall be made by the governor in council.
It seems to me that this is another bill to take away powers of the civil service commission, the appointment in this case being that of the secretary of that body. The two civil service commissioners and the chairman are appointed by the governor fn council; and now it is proposed to deprive the commission of the power to select its own secretary from the civil service. At the present time there are, I believe, two acting secretaries of the commission-


John Ritchie MacNicol: Why two?


William Rae Tomlinson: -the English secretary and the bilingual secretary. Formerly we had one secretary, Mr. Foran, who has since retired. This particular amendment has impressed upon me the fact that we are raising in this dominion a racial question. Probably the English-speaking people themselves have been more or less to blame. There is no doubt that we have forced upon French-Canadians certain appointees who could not speak the language of the people with whom they had to do business. The result is that the people of Quebec now feel that they have not been fairly represented in the civil service of Canada. I have often wondered what these commissioners do, and whether their main duty is to see that when an appointment is made either a Frenchspeaking or an English-speaking person is appointed, as the case may be, losing sight of the chief object, namely, the actual merits of the person receiving the appointment. This has caused more trouble in the service than anything else, and it will continue to do so unless some remedy is found.
If there is at the head of an organization someone who is constantly urging something in particular to the disadvantage of others, it is bound to cause friction, and that is what I contend with regard to the commissioners themselves. It must be admitted that the English-speaking citizens of Canada have refused to adopt any of the customs of the French-Canadian. We have more or less refused to learn their language, but they have not refused to learn English. It stands to reason that when an appointment is made in Quebec, the French-Canadian suffers from the fact that in the past we attempted to force upon him English-speaking persons who could neither speak nor understand his language.
I suppose this explains the presence on the order paper of a couple of bills this year and one last year. With Bill No. 3, introduced

Civil Service Act
a year ago, I agreed in principle. I did feel that we should not ask the French-Canadian to do business with an English-speaking person through an interpreter. The bill was passed. This year, however, I notice that an attempt is being made to convey to the civil service commission, not merely the idea that we are in favour of the bilingual principle, but that the person appointed must be a French-Canadian as well. I want to be fair, because I think we are losing something in drawing a straight line of distinction whereby, for example, I would not endorse the appointment in my district of a person who happens to speak my language unless that person was English as well. And the same principle would apply throughout the province of Quebec. It would be most ridiculous; for I know that in the London district the engineer is a French-Canadian, and so far as I am concerned I must say that as long as that man does his work properly he will remain there. After all, if we box ourselves up we cannot have unity. If I am not willing to learn the customs of my neighbour and he is not willing to learn at least some of my customs, I cannot be friendly with him, and I shall not be able to improve my mind-because no one can say that any one race has all the brains in the country.
I feel that is what these bills imply. I still say that we were to blame in the past and we probably brought this on ourselves, but I do think the sponsors of these bills should bear with us and realize that we are making a great mistake in attempting to carry our remedy too far. Even in Ontario, where there are a great many French-Canadians, to say that no one but an English-speaking person should be appointed is unfair. I repeat, we are losing the benefit of intermingling, the benefit of the other man's ideas, and we are certainly not promoting unity in Canada.
I do not think we should appoint commissioners simply to say this is an English appointment or that is a French appointment, and allow that to be the guiding principle. They should be able to get together and assist in the endeavour to bring about goodwill among the different races in Canada. I think that is a part of their duties in view of the large number of appointments which must be made in the service from day to day, and they can put that idea into practice if they so desire. I do not believe, however, that we should take any action which would tend to a greater division among the races. I know the sponsor of this bill very well, and I do not believe that he has this in mind.
I do not understand why the secretary of the civil service commission, whose duty is 71492-202J
now purely secretarial, should be appointed by the governor in council. We all know that a secretary sometimes assumes the duties of the whole commission and advises and more or less controls same. We were informed in committee that the only duties of the secretaries at present acting are secretarial; that the commission now formulate their own program and administer the act. I cannot agree with the suggestion that the commissioners themselves should be appointed from the service, because, after all, while you are in a service which is dealing with all phases of life you sometimes get in a rut and continue in that rut. I think it is an improvement to bring in new blood, new ideas, into any commission. Although I agree with the principle of promotions within the service, the merit idea, yet I believe that the appointment of the commissioners themselves should remain with the governor in council, the government in power; because, after all, the government is responsible and must answer to the people within a reasonable time. Therefore we should not attempt to confine these positions to one particular class of people.
Further, while it is satisfactory to have two secretaries, one English and one French, one bilingual secretary would do. We must realize that large sums of money are spent on government services. It appears ridiculous to have two secretaries to do only secretarial work, in other words take dictation from the commissioners, type the letters, probably mail them, and take telephone calls. One salary could be saved. And I would say to our English-speaking ptopulation that if we refuse to learn the French language and thus equip ourselves for bilingual positions it is our loss. We are losing something in life. On the other hand, if a French-Canadian is willing to become bilingual and is capable of filling the position there is no reason why he should not receive the appointment. And if an English speaking person who is bilingual applies there is no reason why he should not receive it. We must try to get away from this idea of always saying one is French and another is English; there is too much of that to-day.
For these reasons I cannot support this bill.


Mr. ANGUS MacINNIS (Vancouver East):: I wish to speak briefly in opposition to this bill. I listened to the hon. member (Mr. Lapointe, Matapedia-Matane) who moved the bill, but I could not learn much from him because he spoke in French. However, I read his speech in Hansard carefully, and with all due regard to the hon. gentleman I must say that he failed to convince me that there is
Civil Service Act


Hon. FERNAND RINFRET (Secretary of State):: Mr. Speaker, this is a very short bill, containing only this sentence:
The secretary of the commission shall be appointed by the governor in council.
The explanatory note does not do much more than repeat that sentence in a different way. It states:
The position of secretary of the civil service commission already exists under the civil service classification. The purpose of this bill is to provide that the appointment of the incumbent thereof shall be made by the governor in council.
While -the bill does not contain anything else, the speech made by the mover and the circumstances under which the bill was introduced permit us to see that what was in the mind of the mover was that certain qualifications should be possessed by the secretary of

Civil Service Act
the commission. But, as has been pointed out even in editorials published by newspapers which favour my hon. friend's point of view in this matter, the bill would not actually bring about that result. It is quite easy to imagine a government not having unanimous views about the qualifications that should be possessed by the secretary of a commission, so the mere transferring of a position from one to the other would not, in a statutory way at least, cure the evil or bring about the result my hon. friend has in mind.
I have looked through all the acts and amendments concerning the civil service commission, and I have been impressed with the fact that there is no mention of the secretary in any of them. Apparently it has not occurred to anyone, since the inception of the commission, to suggest any change in the position of the secretary. I attribute that situation largely to the fact that the gentleman who occupied that position until last year had done so from the beginning, and apparently there was no desire to change his status or to dispute his jurisdiction in the least. If hon. members turn to the act as it appears in the revised statutes of 1927 they will find set out in section 3 how the commission is to be appointed by the governor in council; how the chairman is to be appointed, the tenure of office and everything else concerning the commissioners themselves, but they will not find a word about the secretary. I have carefully read through the civil service regulations and find the same situation; they contain nothing concerning the appointment, the qualifications or the-work of the secretary.
It was only in 1932, when a special committee was appointed to study the operations of the act, that a recommendation was made in this connection, part of which was read by the hon. member for Vancouver East (Mr. Maclnnis), suggesting that the work of the secretary be lightened and that the executive duties be transferred to someone else. This recommendation, however, was not acted upon; and when the previous government brought in amendments to the Civil Service Act, which were assented to May 26, 1932, nothing was done about changing the status, the method of appointment or anything else concerning the secretary.
Last year the committee dealt extensively with the secretary of the civil service commission. I am not going to act as arbiter between the chairman and the secretary, or express the least opinion as to the sittings of the committee which dealt with that question. I have in my hand, however, the report of the committee which sat last year, as it
appears in the votes and proceedings of June 29, and I find that in that report there is a recommendation embodying and endorsing the recommendation made by the committee of 1932. I will not read it, because the hon. member who preceded me has done so. I will point out simply that in the report the committee recommended that the secretary of the civil service commission be called upon to perform only those duties which are peculiarly those of a secretary.
Since that time the secretary of the commission, who had acted as such since the first days of a civil service commission in Canada, has been superannuated. I can inform the house the commission of to-day have taken action on the recommendation of last year's committee and have recommended a separate position to take care of the executive part of what had been the customary, if not the statutory, duties performed by the former secretary. The commission have also recommended that two joint secretaries be appointed to deal with the correspondence. That is the situation at the present time.
This year the sittings of the special committee on civil service matters have been revived. I understand from the chairman that this committee held its last sitting this morning, and that the report is almost ready and will be available in a few days. Had the debate on this bill been resumed at an earlier date it was my intention to suggest that the subject matter of the bill be placed before the special committee. However, the committee having completed its work, there will be no purpose in such reference. I understand, further, from the speeches I have heard to-night, that the position of secretary was discussed both this year and last year, and that, therefore, there would be nothing further upon which that committee could report.
Under those circumstances and with the expectancy that the whole Civil Service Act may be up for discussion at some time during the present session, may I say I feel we are serving no useful purpose in extending the debate to greater lengths. I would suggest that as the sponsor of the bill has attained his end of creating a discussion occupying some reasonable time, he might be willing to withdraw his bill.


Mr. A. J. LAPOINTE (Matapedia-Matane):: Mr. Speaker, the purpose of introducing my bill having been attained, I am satisfied to withdraw it.
Bill withdrawn.
3212	COMMONS
Small Loans-Mr. Tucker



SMALL LOANS


[Stage Direction]
The house resumed consideration of the motion of Mr. Ilsley for the second reading of Bill No. 97, respecting small loans.
Mr. W. A. TUCKER (Rosthern):: Mr. Speaker, first of all I should like to congratulate the minister in charge of the bill upon his clear-cut presentation of the case for second reading of this bill. As hon. members are aware, this matter occupied the attention of the banking and commerce committee at several meetings extending over a period of two sessions, and I think any person who endeavoured to follow the proceedings of that committee will agree that most unremitting and earnest attention was given to the problem.
The situation which confronted members of the committee-or so it seemed to me- was this: Many of us felt that a rate of two per cent a month, an effective rate of 26J per cent per annum, was too high to ask people who wished to borrow small sums of money to pay. We knew that those who borrowed more than $500 or perhaps $1,000, $1,500 or more, could get money at 6 per cent or 7 per cent per annum, and to say that those who wished to borrow smaller sums should have to pay an effective rate of 26J per cent per annum was felt by many members of the committee to be unfair. That, I believe, was the cause of much of the difficulty experienced in the committee.
Those who felt that some legislation should be passed argued first of all, as the minister pointed out this afternoon, that, with the law as it stood, private money lenders could charge any rate they wished, and get away with it. It was pointed out that provincial companies could charge any rate they wished and get away with it, and that dominion small loan companies were actually charging, in many instances, up to 2i per cent a month. While in one decision it was suggested they had no right to do so, in another decision their right was upheld, and so there seems to be considerable doubt as to the legal effect of their charter in that regard. In any event it must be admitted that if it were found they did not hare the right to charge the rates they are charging they could cease to do business as a dominion company, incorporate as a provincial company, and then go ahead and charge any rates they wished. So it was pointed out to those of us who felt that a rate of two per cent was exorbitant, that if we stopped the legislation going through by arguing about it further we were actually permitting people to exploit unmercifully those who needed small sums of money, and
[Mr. A. J. Lapomte.)
that there would still be no control over them whatsoever.
I must admit that the thought that this parliament might be drawing to a close, that it might now be in its last session, that we had spent two sessions wrestling with the problem and that if we did not pass some measure we would actually be leaving a bad situation no better than it was before, had a great deal to do with the attitude I have decided to take towards this bill.
In that connection it should be remembered that shortly after assuming office the present attorney general of Ontario found this was such a crying evil in this province that he decided to bring to court some people who were charging exorbitant rates of interest, rates which, I believe, amounted to over 50 per cent per annum. They were brought for trial before His Honour Judge O'Connell presiding at the county court judge's criminal court of the county of York. When acquitting those charged, this is what Judge O'Connell had to say:
These harsh and inequitable transactions might be effectively dealt with, if not actually stopped, by legislation making it a criminal offence, with appropriate penalties, to charge, impose or collect in respect to a loan for less than $500, interest, and for services of any kind, nature or description whatsoever in connection therewith, a sum of money amounting in the aggregate, in respect to both interest and charges, to more than two and one-half per centum per month on the monthly balance owing by the borrower. This, of course, is merely a suggestion prompted by the evidence coming before me during the present trial.
So the judge-who had the opportunity to consider these cases, although it was proved beyond doubt that these people were charged more than 50 per cent per annum, found he could not do anything under the law as it stood, and suggested that the law be amended by making it a crime to charge such rates, just as is suggested by the government to-day, except that the judge suggested two and a half per cent while the government sets an overall rate of two per cent. My attitude was in the committee, and still is, that two per cent a month is too high a rate to charge, but I took the attitude that we must be realistic and that it was better to prevent charges of over 50 per cent per annum-as the minister has pointed out it sometimes amounts to 1,000 per cent-than to continue arguing about the matter indefinitely.
Furthermore, if at this session we pass this bill and the companion amendment to the criminal code setting a roof of two per cent a month, there is nothing to prevent us from carrying on our campaign for lower rates of interest from now on. At least a step forward will have bee*- taken.

Small Loans-Mr. Tucker
There is another point which should be considered by this house. I argued strongly before the committee that some of the provinces were very much interested in the development of credit unions and cooperative credit institutions, and that if these small loan companies were permitted to go into a province and charge two per cent a month they might, by a program of advertising, get such a hold on the province as to prevent the credit institutions from experiencing that development of which I believe they are capable. I am quite satisfied that the full possibilities of cooperative credit institutions have not been exploited to anything like the extent they should be. There seems to be the idea that credit unions can flourish only in urban communities, but I am satisfied that they can operate successfully in farming districts as the people become more cooperative-minded.
Coming from Saskatchewan, where we have just passed a credit union act, I wanted to see it given every chance of success, and I did not want to see these loan companies coming in and perhaps hindering the development credit unions might otherwise have. So I, with some other members, took the attitude that if the provinces were given some say in the matter I would not have nearly the objection to this bill that I was expressing at that time. The suggestion was made in many different forms that we should set a top roof of two per cent and say that one per cent should be counted as interest and the balance as a service charge for all other items included in the two per cent, which would enable the province, if it desired, power to prohibit the last mentioned one per cent.
That in effect is what this bill accomplishes; for I wish particularly to draw to the attention of the house the fact that the bill introduced by the government to-day is different from the bill recommended by the banking and commerce committee in one particular that is important from that point of view, and that is that this bill, as pointed out by the minister, does not repeal the Money Lenders Act, as the bill recommended by the committee did. I rather gathered from what the minister said that he did not think that was of any great importance, but to me it is of great importance, for this reason: The dominion by this bill is not authorizing two per cent a month as interest. It is leaving a top roof as interest pure and simple of 12 per cent per annum, and it is saying that the top roof for all charges, including interest, shall be two per cent a month. In other words, 12 per cent is interest, and the balance of two per cent a month covers all other charges to the borrower.
Somebody may say, the minister did say, that you cannot distinguish between interest and other charges, but here is the essential point as I see it. The province, if it sees fit, can. after this bill is passed, prohibit money lenders from making any other charge than the interest charge authorized by law under the Money Lenders Act. Charges for investigation, drawing documents, and so forth, certainly come within provincial jurisdiction, under the heading, in section 92 of the British North America Act, of "property and civil rights within the province," and so, after we have passed this bill, with the Money Lenders Act left in existence the province will still be left in full charge of the situation, to the extent so many of us urged before the committee. In other words, I am satisfied that the province, after this bill passes can, if it wishes, prohibit any other charges outside of interest, and the Money Lenders Act declares that the interest can be only 12 per cent per annum. So the province of Quebec, for example, which is interested in the development of the caisses populaires, could, after this bill is passed, prevent these loan companies from operating and charging two per cent a month. It would only need to pass a law, within its jurisdiction under property and civil rights, prohibiting them from making a service charge for drawing documents, making investigations and so forth, or any other charges except the 12 per cent interest under the Money Lenders Act. Then the Money Lenders Act could be enforced. The reason why it could not be enforced up to now was that when cases of exorbitant charges were brought into court the defendants said: We are charging only 12 per cent interest, and the balance is for our trouble in making investigations, drawing documents and so forth. The county court judge would say:	I cannot differentiate between these charges; perhaps 40 per cent of the 50 per cent may be for service charges and so forth, and the other 10 per cent for interest, I cannot distinguish between them. But with the Money Lenders Act and this bill in force, the province controls the situation. So one reason that has moved me to think we should acquire control of the situation to the extent that this bill will enable us to do has been the fact that the minister and the government have seen fit to take out of the bill the provision repealing the Money Lenders Act.
Another reason is this:	Some of us argued
strongly before the banking and commerce committee that the making, of exorbitant charges against needy boiTOwers certainly
Small Loans-Mr. Tucker

should be made a crime. We argued that while the superintendent of insurance sitting here in Ottawa might think he could control this evil throughout the length and breadth of Canada, on the other hand at least an alternative control would be a good thing. After all, the administration of justice is committed to the province. They have the police force under their control; they have- their attorney general's department with its law enforcement officials and so forth. With the charging of over two per cent made a crime even a private citizen seeing the law being broken might not bother to let the superintendent of insurance know, but he might tell a policeman who could lay a charge. A good many loan sharks, private individuals, do business in small offices or from their homes and so forth, and we argued: How in the world could the superintendent of insurance enforce the law?
Therefore I felt it to be a powerful reason why I feel I can support the minister in urging the second reading of this bill, that he proposes to make it a criminal offence to charge more than two per cent interest to the borrower. The effect of that as stated is this: If any one of us knows that in our town or village or community anybody is charging more than two per cent a month interest, we do not have to write to the superintendent of insurance or anybody else. We can either go ourselves and lay a charge against the person who did it or bring it to the attention of a law enforcement officer, and it may be said that man is -breaking the law no less than if he were breaking into a store and the law set in motion. I am satisfied that by putting such a provision into the criminal code we are doing more to control this evil than could be done by any other single means, because it will then be the duty of every policeman from one end of this country to the other to lay a charge if he knows that the law is being broken. This will ensure more complete enforcement than leaving it to an official in Ottawa no matter how efficient. So I commend most highly the minister and the government for being willing to write this into the criminal code of the country.
Personally I should like, however, to see the height of the roof which we are putting on, which makes it a criminal offence, put lower than two per cent a month. But, we had witnesses, including some experts from the United States, appear before our committee, and the minister has so well indicated the situation they outlined that I will not

do any more than mention it. They argued that if you are going to have legitimate companies in the field at all you must let them charge even more than two per cent a month; thus the experts wanted the rate put higher than that now proposed, but the superintendent of insurance said that the rate must be reduced to two per cent a month if he was to recommend the bill, and that is the form in which it comes before us. The suggestion is that if we are to let them go into the business at all we must allow them to charge two per cent a month.
In that regard, let me say that the reason why I support the bill is not that I believe we should let them charge two per cent a month. But the s:tuation is that to-day they are charging that much, and more. Provincial companies are charging more than that. Private companies are charging more than that. The reason why I am supporting the bill is that it cuts down the rate which is being charged, and I look to the time when it will be again cut substantially. In his report for the year ended December 31, 1937, the superintendent of insurance said this:
The experience of the companies up to date shows that a flat monthly rate of 2 per cent is an adequate rate to yield a fair profit to the lenders. The two companies which applied for legislation at the last two sessions of parliament accepted the amendments made to their bills to provide for such a rate. The report of the committee in 1938 included a draft bill providing for that rate.
I do not think that is quite correct. I believe that the draft bill had the rate in blank.
It is therefore to be hoped that some means will be found of making such a rate effective for the companies generally. Should it be later found that a lower rate is justified the legislation can be modified accordingly.
Therefore I suggest to this house that, now it is agreed by everybody that we should bring the rate down to two per cent, we should not argue and oppose the bill because we would like to get the rate down to one per cent-as I personally should like to do-but we should all agree to give at least this measure of lowered rate, and those of us who want to lower it further can continue our agitation to have it lowered. I concluded that was the proper attitude for me to take.
There is one thing in this bill to which I should like to draw the minister's attention. The first part of the bill would indicate we are providing that no one can charge more than two per cent a month. The second part of the bill seems to indicate that these companies may charge two per cent a month. I

Small Loans-Mr. Tucker
should like to have it made perfectly plain that when we say these dominion companies may charge two per cent a month we are giving the power to charge it only if it is within the law of the province where they are doing business to make that charge. I think that the proper place to have that section which provides that they may make that charge is in the private bills themselves instead of in part II of this bill, in order to make it plain that the general law of the land, both provincial and dominion, shall apply to these companies, and that the special act of incorporation which says they may charge that amount gives them the power to charge it only if it is otherwise legal to do so. However, I will bring up that point when the bill is in committee.
With regard to the question of preserving provincial jurisdiction, I think everybody who is studying the trend of affairs to-day realizes that more and more the tendency is for big corporations, trusts and combines secretly to get together to control the economic life of this country. They do not do it in such a way that one can definitely prove that they are in a trust or combine. That has happened especially, I believe, in regard to the farm implement industry, and as I see it the only hope of contending against the trend towards trusts and combines getting a stranglehold of the people of our free democracies, and especially Canada, is by throwing more and more our weight and strength behind the development of cooperative institutions along all lines which will enable the people to band together and protect themselves against exploitation by cartels, trusts and combines. So, Mr. Speaker, I am one hundred per cent behind the idea of credit unions.
I have a suggestion to make to the government. I remember that when I made it last year, the Minister of Justice (Mr. Lapointe) was good enough to applaud it, and I hope he feels about it the same way to-night.
Good work is being done in developing credit unions in Quebec and Nova Scotia; credit union laws have now been passed, I believe, in every province of Canada; and in the United States there are credit union laws in almost every state. President Roosevelt, with his consuming interest in such matters, saw to it that a credit union law was passed for the whole of the United States, and it has been found useful in that country. In other words, there is great development under both state and federal credit union laws, and I suggest that the government should give serious consideration to setting up a federal credit union law for this country. I also
suggest that serious consideration be given to an amendment to the Bank of Canada Act which will enable the central credit union organization in each province to use the Bank of Canada for rediscount purposes and put the Bank of Canada behind the cooperative banking institutions as it is behind the commercial banks of this country. Giving them the right of rediscount in the Bank of Canada should be helpful. I have not time to enlarge upon that, but it is something which should be considered.
There is another matter. We all know that in order to make the people conscious of what can :be done along the line of cooperation, a great deal of education is necessary. I suggest in all seriousness that this year we should have had an appropriation to pay at least two men, one in the east and one in the west, to educate people along the lines of cooperative credit. Or the money that that would require could be given to the Canadian association for adult education, which is doing great work along that line, to help them further. After all, when the government is giving these companies the right to charge two per cent a month, it is not asking too much to suggest that it should put at least ten thousand dollars in the estimates to develop cooperative credit institutions and foster the support of them throughout the country.
There is another matter with which I should like to deal before I conclude. I do not wish to take more than sufficient time just to cover some of the important points. It was brought out before the committee that one of our banks, the Canadian Bank of Commerce, had seen fit to set up a department to deal with the so-called small loans. Evidence was given by their representative that during the twenty months from June, 1936, until the time the evidence was given they had made small loans to the extent of 18,800,000. That was in addition to the small loans which they made in the ordinary course of business. To indicate how important is the action of one bank, I should like to compare the $8,800,000 lent by this one small loan department with the amount that all three federal small loan companies lent in 1937; the total amount of their loans that year was only $10,410,000. In other words, in twenty months one bank in its small loan department lent almost as much as these three companies lent in 1937, the last year for which I have figures. This indicates to me definitely that if the other banks had entered the field, as this one did, there would not be very much

Small Loans-Mr. Tucker

demand from small loan companies for this money that is costing 26i per cent per annum interest.
Someone may say, however, " Oh, but these people who are borrowing this money are not creditworthy; there is too big a risk, and so the rate must be high." Well, according to the figures given the committee the losses of the small loan companies on loans of $28,919,000 during four years amounted to only $41,873, or -14 per cent, a little over one-tenth of one per cent. What does that mean? It means that the people who are paying this high rate of interest are really creditworthy; they are repaying their loans.
This brings me back to something I suggested at the opening of my speech. We have given the chartered banks of Canada valuable privileges on the understanding that they will handle the credit requirements of the Canadian people, and that does not mean just the Wealthy people; it means not only the rich but those of more limited means. And what have we before us to-day? We have one bank trying to meet the situation while the other banks have failed to do so. The average rate charged by the Canadian Bank of Commerce was 10-5 per cent per annum, much less than borrowers have to pay to the small loan companies.
From my place in the House of Commons I feel impelled to say this. If the banks are not prepared to live up to the obligations resting upon them as a result of the special privileges they have been given by the people of Canada, as set out in the Bank Act and in the Bank of Canada Act, then if it is my privilege to sit in this house when the banks come for a renewal of their charters I will say to those that have not entered this field and supplied credit to poor people who are creditworthy, "You have not discharged your responsibility to the Canadian people and do not deserve a renewal of your charter."
If the banks could be persuaded to enter this field; if credit unions were fostered, I personally do not believe that there would be any need for this high interest money. I support this measure, but I do so in order to bring under control those people who are charging all over the country far higher rates than 26i per cent. I support the bill in order to get something in the criminal code which will indicate to these people who are exploiting the needs of their fellow men to the extent of, in many instances, as high as 100 per cent per annum that they will be put into gaol if they continue. I do it also in the hope that the legislature of the province from
[Mr. Tucker.:
which I come, realizing their powers under this bill, as I understand it, will promptly, at their next session, pass a law that no charges can be made except interest as set out in the Money Lenders Act. Other provinces can do likewise and thereby we shall have brought this festering sore on the body politic of Canada under permanent control.


Henry Herbert Stevens: It is highly desirable that we should know precisely what we are doing in connection with this bill, and in what I am about to say I am not unmindful of the amendment to the criminal code. But that is not in this bill; we must get that clear. Nor have we any definite assurance that the amendment to the criminal code, to which reference was made this afternoon, will pass. As a matter of fact, what we are doing in this bill is putting the imprimatur of parliament upon a rate of interest of 26t per cent for deserving small loans.
The hon. member (Mr. Tucker), who has just taken his seat, has given the house some interesting information, and he has taken a position with which I am not quarreling, but I do say that with the continuance of the Money Lender's Act and an adequate amendment to the criminal code, there is no need for this bill at all. And the minister says that he intends to continue the Money Lenders Act provided we pass the amendment to the criminal code. I say that for this reason. This bill will not restrict or control a single money lender apart from those who are incorporated under it.


James Lorimer Ilsley: Why not? There is an
inspection set up all over the country by the superintendent.


Henry Herbert Stevens: The superintendent will
not and cannot inspect the money sharks.


James Lorimer Ilsley: There are forty-six provineially incorporated companies that are not now inspected.


Henry Herbert Stevens: He cannot inspect them.


James Lorimer Ilsley: Why not?


Henry Herbert Stevens: Because they do not come under his jurisdiction.


James Lorimer Ilsley: They will, after this bill
passes.


Henry Herbert Stevens: My hon. friend is a lawyer, and I am not, but I question that. Invading the sacred precincts of law, I suggest that there is without doubt a question in the minds of many whether by translating the word "interest" into "costs" this parliament can acquire jurisdiction over transactions of this sort. Parliament's right to control is limited under the

Small Loans-Mr. Stevens
British North America Act to the control of interest rates. That is pretty generally accepted. I am aware that the Department of Justice officials have a fairly comfortable conviction that they may be able to sustain this, but it is not by any means certain. That, however, is not particularly what I wish to emphasize. What I emphasize is this. We are saying to the people of Canada that companies are justified in charging 26J per cent interest on small deserving loans. That is my first point. I know there is a danger that one will be charged with being prejudiced against certain individuals because one questions certain principles, but I can assure these companies that I am not questioning their transactions as they are carried on, so far as we know. I do question, however, the justice of their charging 26| per cent to a very large proportion of their borrowers.
My hon. friend has quoted the percentage of losses-I believe he said [DOT] 14 per cent, or a little more than one-tenth of one per cent. Look at Ottawm. Many, I venture to say most, of the borrowers are civil servants with permanent jobs who, through sickness or because of operations in the family or through some misfortune or another, find themselves forced to borrow $300, $400 or $500. They have a permanent job; they have assurance that they can pay; there is no question about it; yet they are charged 26i per cent; and parliament by this legislation is saying that this is a fair and just rate of interest; for as sure as we pass this legislation it goes out to the country that we are approving this rate of interest. My hon. friend reminds me that the advertising of these companies bears the legend "under the supervision of the dominion government." That is something to which I distinctly object. I want to make it clear that I am not supporting this legislation, because I cannot bring myself to justify the charging of 26J per cent to deserving, safe borrowers.
In the second place, if the amendment to the criminal code presently before the house [DOT] in another bill is passed-which by the way is the method that I have advocated for years-and if we maintain the Money Lenders Act as it is at present with its limit of 12 per cent, then I think there is no need of this legislation at all. We have these three companies; they are carrying on under private charter, there is no reason why they should not continue to carry on. But all that the minister told us this afternoon about loan sharks, provincial companies and so forth, will be controlled and controlled only through the criminal code, not through this bill.
71492-203i
So I rose simply to make my position clear, because I have taken a strong stand on this matter for years. I am not disposed, to try to block the legislation, but simply say that parliament in enacting it gives its sanction to a rate of interest of 26J per cent, which I believe to be unnecessary.
I entirely agree with the statement of the hon, member for Rosthern (Mr. Tucker) that the banks of Canada ought to follow the example of the Canadian Bank of Commerce and inaugurate a small loan system or department. I think the wisest thing would be for all the banks to join together and set up a small loan bank if you like, or company, financed by all the banks, so that it would have the experience, direction and control of the banking fraternity of this country and the financial strength that is inherent therein, and set up small loan organizations in all the different centres of Canada so as to make credit available to deserving people at the more reasonable rate of interest charged in the case of the Canadian Bank of Commerce.
It may be said that the Canadian Bank of Commerce will lend only under an endorsement, and that these small loan companies lend on chattel mortgages and such collateral security. There is no difficulty for the banks to work out a similar system to that of these small loan companies, occupy that field and advance the moneys at a much lower rate of interest. As a matter of fact, the largest company operating now in this class of selected loan companies under dominion jurisdiction obtains its money abroad. The last time I saw its statement the company had some $6,000,000 borrowed from the parent company in the United States. There is no reason why there should not be, under the direction and control of the chartered banks, a subsidiary small loan concern which could borrow its funds from the banks. As already pointed out, this class of business, generally speaking is reasonably safe, as evidenced by the sum of $28,000,000 lent in a period of four years with a loss of only about $40,000, a phenomenally low rate of loss.
So I am by no means satisfied that this legislation is a step in the right direction, because I feel that parliament, having enacted it, will wash its hands of the responsibility which we owe to the small and needy borrower.


James Shaver Woodsworth: My feelings on this subject are very much like those of the hon. member (Mr. Stevens) who has just taken his seat. The Minister of National Revenue (Mr. Usley) presented this bill in a remarkably clear and convincing manner. There is no

Small Loans-Mr. Woodsworth

doubt that it is an important question and that legislation is very much needed. The minister also suggested that it has the endorsa-tion more or less of the superintendent of insurance, and any of us who have been associated in the banking and commerce committee or in the department with the superintendent of insurance have a high regard for his judgment in a matter of this kind.
On the other hand, I believe that in putting interest and costs together we bring about a confusing situation. I am not a lawyer, so I cannot tell just iwhat the constitutional difficulty may be in bracketing these two factors in this way. I know it is difficult to say just where interest stops and costs begin. If I go to a bank to borrow money I go into a very fine building, which may have cost hundreds of thousands of dollars. The bank is handsomely equipped; there are high priced officials and numerous clerks. I presume the rate of interest which I pay there for an ordinary commercial loan includes the costs. And if a poor man has to pay anything like two per cent a month, while a business man can secure his credit at a very much lower rate, there is something fundamentally wrong. I hesitate, like the hon. member for Kootenay East, to take any action that seems to sanction by legislative authority a rate of two per cent a month. Like the hon. member for Rosthern (Mr. Tucker) I do not want to be in the position of blocking the only thing that can be secured, because I know gross evils are prevalent; the bootlegging of credit and that sort of thing is very serious, but I am sorry that after all the evidence taken a year ago by the banking and commerce committee this seems to be the best the government can do. So far as I recall, no evidence was given to the banking and commerce committee to show that the two per cent rate is really necessary. I know there were witnesses who said that had been found desirable in other places. Further, there is no doubt that some financial interests are spending a great deal of money at the present time making a drive for the passing of this legislation.


James Lorimer Ilsley: They do not like it in this form.


James Shaver Woodsworth: Well, they may not, but my desk has been cluttered up for days with propaganda against loan sharks-


Henry Herbert Stevens: There has been more propaganda about this bill than any bill that has been before us in the last ten years.


James Shaver Woodsworth: I think that is true, but these companies have overplayed their hand; their activities have made me very

suspicious of this legislation. Someone is anxious to get it through, or there would not have been such an outcry against the loan shark. The minister says universal experience has shown that if the rate is too low, legitimate money lenders give up their business. Well, they may have left certain areas, but I think the minister went too far, because he immediately added that in most countries four per cent or three per cent is the amount charged.


James Lorimer Ilsley: It is four per cent in England.


James Shaver Woodsworth: Then, if it is four per cent in England, and if in the United States three per cent is found necessary, two per cent is altogether too low. The minister has said too much in making such a statement. Our evidence has come almost entirely from the companies concerned; there have been no independent inquiries so far as I know.


Mr. MARTIN:: Mr. Henderson, from the Russell Sage foundation of the United States, was an independent witness.


James Lorimer Ilsley: I said I thought this was the most severe legislation I had read, with the possible exception of the law in Wisconsin.


James Shaver Woodsworth: Quite so, but my point is that if the minister is correct when he says universal experience has shown that if the rate is too low, legitimate money lenders give up their business, then on his own evidence this rate of two per cent a month is too low and will not accomplish the purpose for which it is designed.


James Lorimer Ilsley: I think it is about right.


James Shaver Woodsworth: That is the minister's opinion, but we have not very much evidence to substantiate it. One of the most interesting witnesses we had before the banking and commerce committee last year was Mr. A. B. MacDonald of St. Francis Xavier university in Nova Scotia. To-night I glanced over his evidence, from which I should like to read two or three brief extracts. He was speaking of social credit unions-


Some hon. MEMBERS:: Not social credit unions.


James Shaver Woodsworth: No; credit unions, not social credit. I apologize to Mr. MacDonald. In answer, I think, to the Minister of Finance (Mr. Dunning), he said:
There is another characteristic of credit unions that perhaps it would be well to develop here. The group is responsible for operating the credit union; it owns, controls and operates it in a democratic manner. Since the ownership is vested in the group, at the end of the year the net profits are paid back to the members

Small Loans-Mr. Woodsworth
in the form of dividends on shares or interest on deposits. I should say that the credit unions in the province of Nova Scotia paid on an average 4J per cent interest on the money the members saved up during the year.
That is, without resorting to any highly capitalized company or anything of the kind these poor people were able to draw reasonable interest on the money they saved to put into this business of lending. I think that is rather important. Further, these were very poor people who needed to borrow. Mr. MacDonald went on:
Perhaps right here it would be interesting for me to give you some idea of what the members borrow money for. The credit union at Stellar-ton, Nova Scotia, is a community credit union it being in a mining town. In 1936 they made 460 loans, totalling $12,484.50. One hundred and seventy-one of these loans were made to buy clothing; 32 to buy furniture; 13 to buy other necessities; 78 to pay bills; 24 to pay taxes; 23 to pay insurance; 34 for medical purposes; 10 for educational purposes; 25 for vacation purposes; 19 for business purposes; 24 for the purchase of vehicles and 6 for building purposes.
There we have the great variety of needs of these people. Now, as to interest rates, the witness was asked by the hon. member for Essex East (Mr. Martin):
Q. Your rate is about one per cent a month?
He replied:
I should say the average rate on loans in the province of Nova Scotia would be between six and seven per cent per annum.
It is a far cry from 24 and 26i per cent to 6 and 7 per cent. Then the witness went on:
The board of directors again has the power under the rules and regulations to fix the interest rate.
And again:
By Mr. Martin:
Q. If a member of a credit union borrows money does he now pay one per cent a month?
A. That is the maximum rate, and we are endeavouring to get all of the credit unions to adhere to that rate.
That is one per cent a month, just about half or possibly a little less than half the rate proposed in this bill. Then, in answer to the hon. member for Halton (Mr. Cleaver), the witness said:
The credit union creates a friendly fraternal background. When a group of people come together to build up an institution which is going to help each and every one of the group, the result is that there is a desire to escape the disgrace and odium which would fall upon a person who is not playing the game squarely.
Thus there seems to be very little loss indeed. There are two other brief passages I should like to quote:
Q- -would you expect a small loan company to carry on business at the rate of interest, for instance, that a credit union is able to give?
A. I do not see how a small loan company could operate on the same interest charges as those charged by credit unions, because the overhead charges of the latter are kept at the very minimum. There is no need for advertising or investigation work or expensive office equipment, renting elaborate quarters and all that.
Well, if we are going to attempt to solve this problem by arranging that certain companies will provide for advertising-and as the hon. member for Kootenay East (Mr. Stevens) says, even at this stage advertising has been done on a very large scale-for investigation work, for expensive office equipment and for the renting of elaborate quarters, and undoubtedly for making very fair profits out of it, we shall have to understand what is involved and undoubtedly the people will have to pay their two per cent. But why cannot the government adopt another method of meeting the needs of the poor people?
In reply to a question asked by the hon. member for Essex East and a remark thrown in by the Minister of Finance, the witness said:
As I see it, there is a question of meeting the credit needs of the average consumer, and it is a national one. Certainly, we have not enough organizations taking care of that need. The second point is this: In order that that need will be adequately taken care of adult educational work is needed all over Canada. Now, we have in Canada what is known as the Canadian association for adult education. I do not know what finer national contribution they could make than to carry on a vigorous program on consumer credit throughout Canada through their organization; and the dominion government, recognizing the national need, and recognizing the importance of this work, could assist the Canadian association for adult education by promoting in every province in Canada adult education on the theme of consumer credit-particularly in regard to credit union work. That is one way.
That suggestion was passed on this evening by the hon. member for Rosthern; it was made originally before our committee last year. Why cannot the government undertake to do something of that kind? Why could it not foster credit unions? Why could it not do something in the way of showing the people how to help themselves? There, it seems to me, is the big problem before us.
Now we come back to what I said a while ago. I would rather have this piece of legislation than absolutely no legislation at all. I would rather have the people paying 50 per cent than two or three hundred or even one thousand per cent. I would rather have them paying 24 per cent or 26 per cent than paying 50 per cent.


Paul Joseph James Martin: Or paying a thousand pel cent.
Small Loans-Mr. Woodsworth


James Shaver Woodsworth: Or a thousand per cent, as the hon. member for Essex East has said. This arrangement may be better than nothing. But why should we be satisfied with second best or third best? Why should we be satisfied with an inferior kind of legislation, legislation which does not ultimately solve the problem? We might possibly still our consciences, as the hon. member for Rosthern has said, by thinking this is a step in the right direction. But I am reluctant to acquiesce in that kind of thing when I know there is the possibility of bringing in legislation along much superior lines. .


James Lorimer Ilsley: Has the hon. member any suggestion? If he has any practical suggestion I should like to hear it.


James Shaver Woodsworth: I made a practical suggestion a minute ago.


James Lorimer Ilsley: What was it? To foster credit unions?


James Shaver Woodsworth: Yes.


James Lorimer Ilsley: How do you foster them?


James Shaver Woodsworth: We can carry on an educational campaign, for one thing.


James Lorimer Ilsley: It is being carried on in Nova Scotia.


James Shaver Woodsworth: By a college, a denominational college, which has done excellent work. But why should we leave the care of the poorest people in the country entirely in the hands of philanthropists?


James Lorimer Ilsley: How would the hon. member foster credit unions?


James Shaver Woodsworth: I have just given Mr. MacDonald's suggestion; then there are other provinces. Why can this plan not be carried out in all the other provinces? They have it in a small way in other places. This Is a practical suggestion; I cannot see there s anything impractical about it.


James Lorimer Ilsley: But it is so lamentably inadequate that it is hardly worth while discussing.


James Shaver Woodsworth: The minister thinks it is lamentably inadequate?


James Lorimer Ilsley: It certainly is.


James Shaver Woodsworth: When it has been proved to be a wonderful boon in places where it is carried out?


James Lorimer Ilsley: It is being carried out.


James Shaver Woodsworth: In extremely restricted areas. But we need it in every

province, in every area in Canada. For the life of me I cannot understand why this government cannot undertake to do these things. We may be driven, as it were, to accept this imperfect and inadequate legislation, but why should we have to do so?


James Lorimer Ilsley: I wanted to get the hon. member's substitute suggestion.


James Shaver Woodsworth: I did give my substitute suggestion.


James Lorimer Ilsley: I have it.


James Shaver Woodsworth: I think, as the hon. member for Kootenay East has said, if we have an amendment put into the criminal code, and enforced, we do a great deal in that negative way to accomplish the purposes of this bill.


James Lorimer Ilsley: But we leave these three companies free to charge 30 per cent per annum.


Henry Herbert Stevens: No, no.


James Shaver Woodsworth: Do you, under the
criminal code as proposed?


James Lorimer Ilsley: Under their present charters.


James Shaver Woodsworth: Under the criminal code as proposed? Surely that is not correct.


James Lorimer Ilsley: No, that is incorrect. There would be some criminal action.


James Shaver Woodsworth: In a negative way we accomplish our purpose by the amendment to the criminal code. At the same time let us build up credit unions so that people can help themselves. It seems to me that in this way we travel then along the lines which can be permanently justified.
I am not prepared to offer any amendment to-night. That is obviously quite impossible, but I would urge that the government, with plenty of time to work out this kind of thing, should bring in legislation more in keeping with the urgent necessity of the case.


Thomas Langton Church: Under my 1935 proposal the banks could handle loans up to $500. There might be an assignment of wages for security or as a consideration, or there might be security of some collateral of another kind. It could be handled by the province or by the municipalities, or by agencies like the Red Cross, the banks and insurance companies, as trustees, with the guarantee of the government at three per cent or less. The Minister of Finance said the other day the government can borrow money for two-thirds of one per cent. If so, why do they not act here?
The loan companies charging high rates are not the companies that are referred to on the back of the bill. Hon. members would be surprised to hear the rates that some of the old companies are charging and of the way they foreclose at will. They got high rates in good times and should reduce rates. Some of these companies charge $4,000 for a loan of S6.000 for ten years. Then, with respect to private mortgages, some of our most respected citizens are charging $4,000 for a loan of $6,000 for ten years. I know one loan company that has charged up to $6,000 for a loan of $9,000 for nine years. So I say that all these companies should come under proper regulation and the better class of mortgage companies as well. Does anybody know of anything that we have attempted to do in this parliament to control these companies? You make regulations and appoint boards to deal with telephones, insurance policies, real estate mortgages and the gasoline tax, but there is no real regulation at all of any of them. They are a law to themselves. If a private citizen has a complaint to make he is told to see the attorney general of the province because the enforcement of all federal law is entirely on the provinces, and the government replies to any complaints made here: "No information." Regulation is non-existent.
Under this bill it is proposed that the superintendent of insurance shall regulate these companies, but no regulation, human or divine, can control these loan shark people, the way they do their business, because they adopt a policy of secrecy, and it is impossible to check them up by any system of inspection.
I believe that the present bill should start off with a rate of one, not two, per cent. That would get rid of some of these companies and wind them up. They no doubt have, a few of them, vested rights, and something might have to be done along that line. But undoubtedly parliament should step in and give the industrial worker a break, and take this whole business of personal loans for the future over to the chartered banks. It may be needed

for only two or three years. Wages might be assigned as security. These borrowers can offer just as much security as there is behind some of the loans that have been made to federal harbours and to bankrupt provinces, one of which owes from fifty to sixty-five million dollars which will never be paid back. Why not set up a fund of five or ten million dollars to be loaned to industrial workers on the security of an assignment of their wages, in much the same way that assistance was given to farmers under the Farmers' Creditors Arrangement Act and to fishermen when the act was extended to them in 1935 by the late government? This new policy can be handled by the banks for the government who guarantee it.
In conclusion, I believe that this legislation will not be a success if the bill is passed. You will not be able to have proper inspection. This means that we shall be back to where we started because there is no way of regulating these people and their shark methods. This form of personal loan is in its infancy in Canada and is unregulated, and we should try to keep it in infancy and not encourage its growth along the lines indicated by the bill. I urge that consideration be given to our industrial workers in the large cities, where unemployment is the greatest, and that they be given the same fair treatment as has been given by the federal government to the farmers and fishermen of this country, and others. Let us take this matter over and end this shark system, and let us nationalize this small loan business in the public interest and of the industrial workers who are suffering so much.


John Charles Landeryou: Mr. Speaker, I listened to the minister (Mr. Usley) stating it was his desire that this bill should pass; but I wish that the government would carry out their promise to issue currency and credit in terms of public need, and I would also remind the house of the Prime Minister's statement that "usury, once in control, will wreck any nation." There are many thousands throughout the length and breadth of this country who are in receipt of what we have called deficit incomes. In a period of financial stringency they find themselves in need of a comparatively small amount of money to meet some emergency, and they are forced to pay 26-8 per cent interest for that money if this bill passes. In other words, we are giving the sanction of parliament to a rate of 26 per cent interest.
I have in my hand a pamphlet issued by one of these small loan companies. This particular one is issued by the Central Finance

Small Loans-Mr. Landeryou
Corporation, and at page 4 I find this under the heading "Is there a real need for cash credit?"
We all know about the credit facilities which are available in connection with the purchase of goods. We refer to this as "instalment buying." The need for this service is readily recognized. But many of us fail to realize another need and the problems involved in meeting it. This is the need of the consumer for a source of cash credit to meet emergencies like sickness, accident, death, temporary unemployment and entanglement in debts that demand immediate payment.
Our own experience proves that there is a real demand for cash credit. During the last four years, Central Finance Corporation in the province of Ontario alone, made 86,204 loans, totalling $15,213,781. The business has increased from less than $1,500,000 annually to more than $6,250,000 in four years in one province. Such a demand should be equally well supplied in the other provinces.
These small loan companies fasten themselves upon some industrial area where there is a large population and loan to needy borrowers money-for what purposes? I find from page 245 of the banking and commerce committee report, No. 5, that they loan money to meet expenditures as follows:
The purposes of borrowing are given as medical, dental and hospital.
The number of customers of the Central Finance Corporation is given as 4,459, who borrowed money to pay overdue bills. What does that mean? It means that there are thousands and thousands of people who borrow money or desire to borrow it to meet overdue bills. They are people with deficit incomes, who have been encouraged through advertising and high pressure salesmanship to purchase on the instalment plan goods which industry produces and is unable to sell for cash. So the goods are sold on the instalment plan of a dollar down and a dollar when they can catch the fellow at home. These people with deficit incomes are unable to meet the payments as they fall due; they get behind in their commitments; the loan shark company comes along and says, "I will come to your rescue," and it loans him the money at from 24 to 26 per cent interest. The position is simply this, their last state is worse than their first. That is the evidence which was given by a witness before the banking and commerce committee: they are far worse off after they get the money than they were before they borrowed it. How can we allow these loan shark companies to loan money at 26 per cent interest to these people to meet overdue accounts on instalment purchases? Many thousands of people in this country buy a table and a few chairs,
a bed and some blankets, and some needed household utensils, on which they have to pay 12 per cent interest because the goods were bought on the instalment plan. Then, because they have not enough money to meet their payments on the due dates, they are harassed; the loan shark companies claim them as their victims, and the government will not do anything for them except pass a bill legalizing a rate of interest of 26 per cent.
Who else borrowed and for what purpose? The report shows that 1,766 customers borrowed to pay arrears of taxes. Many people are afraid of losing their homes because their taxes are in arrears, and in order to pay those taxes they are forced to become victims of these loan sharks and pay 24 or 26 per cent interest on the money they borrow.
Again, 1,529 borrowed money to buy fuel. Not having been able to secure during the summer sufficient salary or wages to buy their winter supplies of fuel, they became victims of these loan companies. Yet parliament is sanctioning a rate of 26 per cent, permitting these sharks to loan money to people who need fuel to keep themselves warm in winter. It is outrageous.
It also appears that 1,745 borrowed money to meet real estate mortgages and interest. Others borrowed to pay their insurance. All these were needy borrowers, but their credit was good. Evidence has been given before the banking and commerce committee that less than one per cent of all the money that these companies have loaned is lost; at least that represents the arrears carried on their books, it may not be lost." These people are suffering from deficient incomes; they are being robbed of a decent wage in industry or a decent income as primary producers and forced to become victims of these loan sharks. The government says that there is no alternative, that if we do not pass this bill these people will be forced to have recourse to private loan sharks who will lend them money at rates of interest as high as 1,000 per cent.
With such a state of affairs, nothing is done. The minister suggests that nothing can be done. Why, the government is going to the moneylenders and borrowing at less than half of one per cent. I know that many citizens can borrow from the banks at 6 per cent. Yet these deserving citizens, for whom no provision has been made except through the loan department of one commercial bank, and who are forced to become victims of usury, receive no consideration from the government. May I
Small Loans-Mr. Landeryou


James Lorimer Ilsley: What bill -was the hon. member talking about?


John Charles Landeryou: It was a private bill.


James Lorimer Ilsley: Not this bill.


John Charles Landeryou: 
Mr. W. H. MOORE (Ontario):: 
Henry Herbert Stevens: Not unanimously.


William Henry Moore: It was not unanimous, but it was passed by a majority. I am afraid there was very little in the committee's proceedings that was quite unanimous.
Then the minister appeared and made the statement that in the opinion of Mr. Finlay-son, superintendent of insurance, we had a fair chance of securing the required money at 2 per cent a month. We accepted that rate as a tentative one. I confess that I do not know whether the rate will work or not. I do not know that anyone knows. It is a lower rate than the usual rate in the United States; it is lower than the rate in Great Britain; and we are a debtor country whereas they are creditor countries. Mr. Finlayson answered that, because the matter was brought before the committee; he said he was convinced by the operation of the three companies which have come under his supervision that they can operate on a rate of 2 per cent a month.


Mr. SLAGHT:: Was he cross-examined?


William Henry Moore: Mr. Finlayson was cross-examined most of the time.
The bill is before the house. It is designed to correct abuses that exist to-day and will exist until this bill is passed; there is no doubt about that. If in the light of experience under this legislation the rate can be reduced in the future, then it is within the power of parliament to reduce it.


Mr. J. A. MARSH (Hamilton West):: While I am not enthusiastic about this legislation,
I hope it is the beginning of better legislation to be brought in by this parliament or the next. I think we are agreed that the Money Lenders Act has failed miserably to correct the abuses of the loan sharks. I regard this bill as a measure of legislation, thinking that a half loaf is better than none. Any one of us who has known anything about the activities of loan sharks in our cities realizes the need of some effective legislation along this line. We have in our midst a vicious octopus that has been bleeding the industrial workers of our cities. I do not like 2 per cent a month interest any better than any other hon. member, but if the passage of this legislation will be the means of putting out of business the man or the company that is getting 100 per cent or 90 per cent or 200 per cent or 50 per cent, then I must support the bill.
I have asked myself several questions. Is there a need? There is. Have the banks satisfied this need; are they prepared to take care of it? Evidently not. Are the borrowers good risks? I think the evidence before the

committee proves that they are. If my memory is right, the number of people who did not make good their loans was one-tenth of one per cent. Will such legislation curtail the activities of the loan sharks and partly correct the abuses that we find to-day? I think the answer is that it will. For these reasons I support the bill.


Mr. D. A. McNIVEN (Regina City):: Like others who have previously spoken, I am not wildly enthusiastic about this legislation. Reference has been made to the evidence adduced before the committee that the rate of interest prevailing in Great Britain is 3 per cent, 3J and 4 per cent a month. But I point out that in Great Britain there are conditions prevailing that we have no desire to duplicate here; they have had a relief roll, or a large number of people on the dole, for a long time. It was pointed out also that many of the states of the United States have rates varying from 2i per cent to 4 per cent, and the officers of the Russell Sage foundation in giving evidence stated that a company could not function at a lower rate of interest. Again I point out that at the present time they have some 11,000,000 unemployed in the United States and a condition there that we have no desire to perpetuate in this country.
I cannot understand the abundance of propaganda to which we have been subjected during the last three years, when those who were sponsoring three private bills for the amendment of already existing legislation, differentiating themselves, levelled broadside after broadside against what they termed the loan shark. So far as I am concerned I see no difference except in degree between the business carried on by these people and some others whom they condemn in such strong terms. We are told that the people responsible for this propaganda carry on a business that is beneficial to the needy and the poor. A Mr. Bunce, I do not know who he is-


William Henry Moore: Mr. Bunce was an official
from the state of Iowa.


Donald Alexander McNiven: Thank you.
Mr. Bunce, describing the small loan operations as "a business that helps the poor, the needy and the distressed," also warned against fixing too low a maximum interest rate on small loans as this would encourage monopoly and would deprive scattered population areas of service.
When we turn to the booklet issued and widely circulated by the small loan companies, we find that in 1935 the Central Finance Corporation loaned to 23,897 borrowers a total of $4,227,713, and that the average monthly income of these borrowers was $145, or an average yearly income of over $1,700.

Small Loans-Mr. McNiven
This is the class of customer that favoured the Central Finance Corporation; yet one witness before the committee referred to the customers of these small loan companies as the poor, the needy and the distressed.
Just in passing, may I say that I was surprised to find editorials appearing in leading newspapers across the country, and to find copies of these editorials coming to my desk in almost the same mails. In one of these editorials I found this declaration: "Control the salary buyer and the loan shark." Those who are alleged to charge anywhere from 30 to 700 per cent were described as salary buyers. What I say to you, Mr. Speaker, is that in 1935 the Central Finance Corporation had 23,987 customers, each a salaried man in receipt of an income averaging $145 a month. Why should men in that position be compelled to go to a loan shark and pay 2, 2i or 3 per cent a month? I have a special regard for those groups of men who find themselves in difficulties and who honestly desire to pay their obligations, and in order to do so find their way to the loan shark.
A moment ago some reference was made to the Canadian welfare council, and I find here a reference to the evidence of Miss Charlotte Whitton:
Experience of the Canadian weltare council a workers, the committee was told by Miss Charlotte Whitton, director, showed that all charitable and philanthropic resources "do not in the present circumstances prove adequate to the need and, therefore, you are left wholly to the consideration of the commercial field. . . . Short term borrowing over a very broad stratum of low income families and individuals is extensive and will continue."
Then they go on to quote Mr, Dobson, president of the Candian Bankers' Association, who-
-told the committee that he believed "small loan companies would always find a field in which to operate, since there was a class of borrowers which the banks .	.	. could not
reach, though banks might well advertise more extensively the service they are prepared to offer borrowers."
I	should like to join in the request that was made by the hon. member for Rosthern (Mr. Tucker), the hon. member for Kootenay East (Mr. Stevens) and others who have spoken, and to ask the minister and the government to bring special pressure to bear upon the banking system of this country in order that they may enter that field and follow the lead which has been established by the Canadian Bank of Commerce, which I
believe is entitled to our deepest gratitude for the work it has done. As the hon. member for Rosthern pointed out, that bank loaned more than these three loan companies put together, and at an interest rate less than half that charged iby these companies. I do believe that the banks of this country should get together and canvass the situation. If even a fraction of the money they spent on that useless series of advertisements that they published in the newspapers of this country last year could be spent in catering to this kind of investment they would do far more to perpetuate their position and obviate criticism than could be done by all the advertising of that kind they could carry on for the next ten years.
The banks have gained experience during the last three years. Only this afternoon the Minister of Finance (Mr. Dunning) told us that under the home improvement plan some 65,000 borrowers had obtained from Canadian banks unsecured loans repayable within three years, and that the loss on loans exceeding $26,000,000 was only $19,000. On a previous occasion I mentioned a conversation I had with a bank manager in Saskatchewan, who told me that the banks had overlooked a profitable field of investment which was made known to them through their experience with the home improvement plan. He told me that his branch had made three-quarters of all the loans in a city of 60,000 people; that there had not been a single default; that they had not lost a dollar; that every borrower had met his payments as and when they matured. I think, if some pressure were brought to bear upon the banks, they would realize this problem, and I believe that in view of the consideration they have received from the people and from parliament they might enter this field and make a contribution to the solution of a problem that is a cankef upon the body politic.
The other phase of the matter which I should like to develop for a moment has been touched upon already; that is, the credit unions. I was glad to hear the eulogy of Mr. MacDonald, and I should like to add a word in praise of Mr. Desjardins who, I think, first introduced la caisse populaire in the province of Quebec. I understand that now there are some 371 credit unions in that province, and that the loss in the operation of those unions is almost negligible. Not
Small Loans-Mr. Blackmore

long ago I ran across an item in a local paper which stated that because of the legislation introduced by various states of the union fixing the rate of interest at 2( per cent per month and up, the federal government of the United States some two years ago adopted a general law for the formation of credit unions. Since then, some hundreds of credit unions had been formed, and I think they loaned some $13,000,000 to their members, with a loss of only $1,070.
I was going to say that at the last session of the legislature of Saskatchewan a credit union bill was passed. Since then, some twenty-two credit unions have been formed, and they are functioning profitably to-day. A minute ago an hon. member referred to the class of individuals who receive loans from these companies. I was particularly interested in the number of civil servants. Out of a total of 23,987 borrowers there were 4,462, or 18 per cent, civil servants. We owe the civil service one of two duties, either to pay them a remuneration sufficient to render it unnecessary for them to appeal to loan companies or, second, to provide them with a facility which will make it unnecessary for them to go to a loan shark for assistance.
The next largest group was the group connected with the manufacturing industry, to which reference was made by the hon. member for Broadview (Mr. Church), and which comprises 11-47 per cent of the total. I found that 4-93 per cent of the borrowers were engaged in banking, insurance and real estate businesses. We find that 9-7 per cent were engaged in the retail trade.
I happened to be in the committee one morning when one of the witnesses was giving evidence. He was asked if the Canadian Bank of Commerce was interfering with their business and, as I recall it, his reply was, "They sure are; they have already taken 191 of our customers." All through the evidence they indicated, and in their literature they advertise that their service is an emergency. Yet we find the representative of one of the companies stating the bank has taken 191 of their customers.
This brings me to my conclusion, and it is this: Once an individual finds himself in the hands of these small loan companies, life for him is a continuous chain of emergencies. It is just one emergency after another until he succeeds in getting out of their hands, or out of their clutches. Far better would 
it be for a borrower tempted to go to one of these companies to go to his creditors and state the facts. Any man who is in receipt of a monthly income of $145 can talk business to his creditors on a basis which would not require him to go to these companies.
I am somewhat disappointed in the legislation. I am more fearful about it than I was before I saw the bill. I notice that according to paragraph (f) of section 2 a small loan company is described as a company incorporated by special act of parliament, and authorized to lend money on promissory notes or other personal security, and on chattel mortgages. I anticipate now that there will be a flood of applications for registration under this measure. Then we shall have the question of vested interests, just as we had with those companies which were corporated in 1928 and 1929. We shall be told that because they have a dominion charter and have made investments, therefore they ought to be privileged to continue operations. We shall then be told that they cannot function at two per cent, and we shall be asked to raise the rate to 2J per cent or to three per cent.
I suggest, Mr. Speaker, that we use our ingenuity and our ability to further the cause of the credit union, and in the meantime exert the maximum of pressure upon the banks to serve this field.


John Horne Blackmore: Mr. Speaker, I do not feel disposed to accept this bill. I see many things about it which are entirely as they ought not to be. It is high time now-the monetary knowledge and experience of the world is sufficient to enable people who so desire, to know and understand -that this dominion government created money and used it to help these people who need it. If the government do not propose to do the lending themselves, then certainly they can support the banks, as has been suggested by two or three hon. members, so that the chartered banks of Canada can engage in this small loan business, and enable the people to keep out of the hands of all kinds of small loan companies.
It is a significant fact that the people who borrow these small amounts are already more or less poor. When they procure a small loan they become poorer. What we want in Canada is a means whereby we may enable people to become better off. Certainly we

War Munitions
shall not do it by passing laws like this. If the law were necessary, it would be a different matter; but it is absolutely unnecessary. If we think it is necessary, then I say our thinking needs to be readjusted.
There is another important matter which I believe is involved, and that is the question of where the money going into these loans is coming from. A great deal of it comes from across the line. Already we pay too much interest on money coming from outside this country. It is high time we began to realize that money which we need in Canada can be originated here, and that the interest can be paid to Canadians, instead of to people across the line.


Some hon. MEMBERS:: Eleven o'clock.



ADJOURNMENT-BUSINESS OF THE HOUSE

Ernest Lapointe: To-morrow, if the Minister of National Defence (Mr. Mackenzie) is able to do so, he would like to make his statement on defence, the house being in committee on one item. Afterwards, however, we would get through some legislation, including this bill, which has just been discussed; Bill No. 90, respecting the criminal code; the bill to provide for the training of . young people to fit them for gainful employment, and the third reading of Bill No. 6, to amend the Pension Act. Then, if time permits, we might go into supply on pensions and labour.


Henry Herbert Stevens: I have been asked to
direct the attention of the minister and the government to the fact that there is a growing practice of not following the order indicated. The result is that many hQn. members are not present when matters in which they are particularly interested come up. To-day Bill No. 104, having to do.with stockyards, live stock and live stock products and hatcheries, was passed, although it was not mentioned last night. Then, Bill No. 88, was mentioned only tentatively-"We may then take up"-and the order was not followed.
The result was that some hon. members were not in their seats, and we were unable to find them in the short time the bill was before the house. So, if the government would endeavour to follow the order they indicate, I am sure it would facilitate business.


Ernest Lapointe: So far
as the business to-morrow is concerned, we shall follow the order I have just indicated, but I repeat that in regard to National Defence there will be only the statement of the minister, and then we shall take other legislation, going into supply on defence later.


[Stage Direction]
At eleven o'clock the house adjourned, without question put, pursuant to standing order.
Wednesday, April 26, 1939