[Stage Direction]
Third and final report of standing committee on railways and shipping owned, operated and controlled by the government.-Sir Eugene Fiset.


[Stage Direction]
Mr. A. MacG. YOUNG (Saskatoon):	I
desire to present a petition which I have received, signed by several hundred citizens in the constituency of Saskatoon. The first paragraph of the preamble reads:
Whereas war materials, particularly scrap iron and nickel products, are being constantly sent from Canada to various aggressor nations, especially to Japan, but also to Germany and Italy as well. . . .
The prayer of the petition reads:
We the undersigned Canadian citizens urgently petition the government of Canada to use its powers under the Customs Act for the purpose of imposing forthwith an embargo upon the shipment of war material to these aggressor states; and we urge the Canadian government to seek the cooperation of other democratic countries in this matter.
I would ask the government to give this matter its careful consideration.


Hon. IAN MACKENZIE (Minister of National Defence):: I desire to lay on the
table certain contracts, in response to the request made by my hon. friends.


Mr. MANION:: Does this bring the tabling of these contracts pretty much up to date?


Ian Alistair Mackenzie: I do not think so. We have a special staff working on them and before the end of the session every contract will have been tabled. That is the objective.
Questions

ASSOCIATION OF CANADIAN CLUBS Leather



PROVISION FOR INCORPORATION OF NATIONAL ASSOCIATION

[Stage Direction]
Mr. THOMAS VIEN (Outremont) moved for leave to introduce Bill No. 101 (from the senate) to incorporate The Association of Canadian Clubs.
Some hon. MEMBERS:: Explain.


Mr.   ATEN@: Mr. Speaker, the purport of
the bill is to incorporate an association of all Canadian clubs in Canada. Canadian clubs have been now in existence for thirty years, and it is felt necessary that there should be a central corporation for all Canadian clubs, providing a corporate entity for the purpose of enabling them to receive bequests, and for other purposes. The bill has passed the senate. It will be explained in detail when we come to the committee stage.
Motion agreed to and bill read the first time.



QUESTIONS

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

Mr. TUCKER:: Is consideration being given by the government to setting in motion the machinery of the Combines Investigation Act to deal with the situation referred to in the final report of the special select committee on farm implement prices and distribution of the legislature of Saskatchewan ?


Mr. ROGERS:: If prosecution is contemplated as a result of the investigation of the Saskatchewan select committee, proceedings under the Combines Investigation Act or under section 498 of the criminal code would be instituted by the attorney general of the province. If further investigation is considered necessary, this could be made under the Combines Investigation Act, but no application for such investigation has been received.
Men's shoes	 3,625
Women's shoes	112,492
Children's shoes	 48
116,165
Miscellaneous
Boots, shoes and slippers with felt
uppers	 199
Boots, shoes and slippers of all kinds, except canvas, felt, rubber and leather, n.o.p	 60,013
60,212
Grand total	 188,447
2. No restrictions have been imposed.
*3rD TUNNELLING COMPANY, CJC.F.-CLAIM FOR SPECIAL PAY


Mr. MacLEAN (Cape Breton North-Victoria) :: AVhat action is the government taking in respect to the representations made by dominion command of the Canadian Legion in the matter of the claim for inclusive rates of pay on behalf of ex-members of the 3rd Tunnelling Company, Canadian Expeditionary Forces?


Ian Alistair Mackenzie: A similar question was asked a year ago by the hon. member for Vancouver North (Mr. MacNeil). The answer now is that the matter is receiving further consideration, but no definite decision has been arrived at.


NORTH WEST FIELD FORCE-CLAIM FOR PENSION
Mr. CHURCH:: What action is the government taking in respect to the representations made by officers and members of the North West Field Force (1885) in the matter of their claim for a pension?


Mr.   POAVER@: Any pension awarded under the Militia Act to an ex-member of the North West Field Force (1S85) for a disability incurred on service is increased where eligible to the rates set forth in the Pension Act.


TRADE WITH CZECHO-SLOVAKIA
Mr. MacINNIS:: 1.	How many pairs of shoes were imported from Czecho-Slovakia into Canada during the year 1938?
2.	Has there been any restriction imposed on the importation of goods from whdt was Czechoslovakia, since the taking over of that country by Germany ?


Mr. RINFRET:: 1. Rubber	pajr
Bathing shoes	 5,500
Canvas shoes with rubber soles.. 6,570
12,070


COST OF LIVING IN CANADA
Thomas Langton Church: Is it the intention of the government to set in motion an inquiry into (a) the high cost of living in Canada; (b) the high cost of telephone rates, mortgage interest rates, insurance rates of all kinds, and the cost of gasoline?


Mr. DUNNING:: I am afraid that this is entirely a matter of government policy; it is not a proper matter of inquiry under "questions."


HEAD OF SHIP HARBOUR, N.S., WHARF
Mr. BROOKS:: 
Mr. HOWE:: 1.	(a) Nil; (b) 81,931.23; (c) Nil.
2.	$185 (truckage only).


CHAKLO RIVER, N.B., SALMON HATCHERY
Mr. BROOKS:: 1.	Has the federal government constructed a fish hatchery (salmon) on the Charlo river, Restigouche county, New Brunswick?
2.	If so, from whom did the department purchase land, and what was the cost of each lot?
3.	Was the construction done by contract?
4.	If so, what are the names of the respective tenderers, and the amount of each tender?
5.	Who obtained the contract?
6.	What does it cost to supply ice to this hatchery, and is it obtained under contract?


Mr. MICHAUD:: 1.	Yes.
2.	Wm. Beaton and Maggie E. Beaton, $59; Joseph McIntyre and Elizabeth McIntyre, $237; Alexander McIntyre and Anna McIntyre, $345; John C. McLean and Winnifred McLean, Cluney Reid and Hilda Reid, Chalmers Reid, $4,000.
3.	Yes.
4.	J. & D. A. Harquail Co., $24,000; T. R. MacKenzie & Co., $55,000; Gerald S. Raill, $57,000.
5.	J. & D. A. Harquail Co.
6.	$94.50. Yes.



QUESTIONS PASSED AS ORDERS FOR RETURNS


Mr. MARSH:: How many civil servants, permanent and temporary, were employed in each of the federal government departments during each of the years from 1930 to 1938 inclusive?


Mr. EULER:: Return tabled.


LIFE INSURANCE IN CANADA, 1936-38
Mr. FAIR:: 1.	What amount of life insurance was written in Canada in the calendar years 1936, 1937, and 1938 by, (a) Canadian companies; (b) British companies; (c) other companies?
2.	What is the amount of premiums paid on the above policies during 1936, 1937, and 1938?
3.	How many policies have lapsed or been surrendered for cash surrender value during the above period?
4.	What is the value of such lapsed or surrendered policies?
5.	What amount has been paid in premiums on the policies referred to in question 3?



BUSINESS OF THE HOUSE


Robert James Manion: May I ask the Minister of Justice (Mr. Lapointe) a question arising out of the statement he made last night at the close of the sitting? Unfortunately I was not present, and I fancy that what appears in Hansard is a misprint, or perhaps I am misinterpreting the report. The Minister of Justice, in answer to the hon. member for Kootenay East (Mr. Stevens), the senior member on our side at the time, made the following statement with reference to the business of the house:
So fair 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.
I presume that is a misinterpretation of the minister's meaning, because it suggests that the Minister of National Defence is going to make a lengthy statement and that no one else will be permitted to discuss the matter. I do not think that is the intention.


Right Hon. ERNEST LAPOINTE (Minister of Justice):: I am sure that if my hon. friend wishes to speak immediately after the Minister of National Defence makes his statement he will be given the opportunity to do so, but the intention was in fact to proceed with the bills and the other legislation. The Minister of National Defence was anxious to make a general statement on defence and I thought that perhaps it would accommodate hon. members to have that statement before them before the estimates are considered separately.


Robert James Manion: I quite agree as to the desirability of having the statement before us; with that part of the minister's statement I entirely agree. I do not wish to speak myself but the hon. member for Yale (Mr. Stirling), who preceded the Minister of National Defence in office, wishes to make some remarks. There may be other hon. members who wish to speak, but I know the hon. member for Yale does, and it is only-fair that he should be permitted to make his statement. In fact, I believe that is the rule generally followed. I know that ministers have certain privileges with regard to making brief statements on any matter of importance, but in the years that I have been here I have always understood that if a minister made a lengthy statement the question was open for debate to some extent at any rate.
Single Unemployed, Men


Ernest Lapointe: I hope my hon. friend will not insist on spending the day on this matter.


Robert James Manion: No; I do not think that is intended.


Ernest Lapointe: We are anxious to proceed with the legislation.


Ian Alistair Mackenzie: Last
year we followed this course without limitation or reservations on addresses from the other side. The idea is that some information may be made available to hon. gentlemen opposite, in relation to what the minister may say, which can be referred to to-morrow or the next day, whenever the matter is taken up again. It will not be continued this afternoon.



UNEMPLOYMENT INSURANCE


[Stage Direction]
On the orders of the day:
Mr. J. S. WOODSWORTH (Winnipeg North Centre):: The unemployment insurance bill passed by the Quebec assembly would seem to leave the way open for the dominion to introduce an unemployment insurance scheme. May I ask what action the dominion government proposes to take?


Ernest Lapointe: I should like to see the act which was adopted by the provincial legislature before answ'ering my hon. friend.
WORLD WHEAT CONFERENCE Canada's representation at London meeting
-PROGRESS OF DELIBERATIONS
On the orders of the day:


Mr. M. J. COLDWELL (Rosetown-Biggar):: I have a question to ask either the Minister of Agriculture (Mr. Gardiner) or the Minister of Trade and Commerce (Mr. Euler). In view of the current interest in the world wheat situation, will either minister or both inform the house in the course of the next few days as to the progress of the world wheat conference and of Canada's part therein. I think the house should have information regarding this matter. -


William Daum Euler: Canada has three representatives at the world wheat conference in London now. There is really no information whatsoever available as yet. When that time comes, if it is thought in the public interest to disclose such information it will be given the house.


Mr. E. E. PERLEY (Qu'Appelle):: Pursuant to the reply of the minister to the hon.
[Mr. Manion.J
member for Rosetown-Biggar (Mr. Coldwell), may I ask whether the three representatives at the London conference have power to enter into any international agreement on behalf of this country?


Ernest Lapointe: That is a matter of law.


William Daum Euler: As a matter of fact, I may say frankly they have no such authority.



UNEMPLOYMENT


[Stage Direction]
On the orders of the day:
Mr. ANGUS MacINNIS (Vancouver East):: Has the attention of the Minister of Labour (Mr. Rogers) -been called to the fact that 110 homeless unemployed men were turned away from the Ottawa city mission last night and had to spend the night in a building without beds, and that at the present moment about a hundred men are sitting on the curb in front of the Ottawa city hall? If this situation has been called to his attention, does the government contemplate any helpful action?
Hon. NORMAN McL. ROGERS (Minister of Labour): I dealt with this question as it was put to me a short while ago in the course of debate. It is within the knowledge of all hon. members of this house that a group of single unemployed men have been in Ottawa for some weeks past, indeed, for some months. It has also been brought to the attention of the house that a considerable number of men have been placed in jobs through the employment office in Ottawa-one hundred, in fact, in the week during which this group have been conducting demonstrations in the city of Ottawa. I had not received all the information just given by the hon. member, but if any men are obstructing traffic I consider that entirely a matter for those vested with police authority in the city of Ottawa.


Mr. C. G. MacNEIL (Vancouver North):: As a supplementary question may I ask whether the minister has assured himself that these men have been advised where they may receive either work or relief?


Norman McLeod Rogers: I should hardly think it necessary to advise my hon. friend that there is one place where people can go if they are seeking work in the city of Ottawa-the employment service of Canada. In the week during which these men were conducting demonstrations in Ottawa, 100 men were placed through that employment service, some

Supply-National Defence
on farm work and some on the work being done by the Department of National Defence at Petawawa.

The house in committee of supply, Mr. Sanderson in the chair.
DEPARTMENT OF NATIONAL DEFENCE General.
208. Adjustment of war claims, $60,000.


Ian Alistair Mackenzie: This is the fourth occasion upon which I have had the honour to present to the house through the committee of supply the estimates of the Department of National Defence. It has been more or less a recognized custom for the last two or three sessions that, before the committee enters upon the discussion in detail of the various items, a presentation be made in a general way with reference to the defence policy and the general purpose of the estimates.
At the outset I must ask the indulgence of hon. members if I review in some detail the situation with reference to national defence. I can only hope that the presentation of essential facts and figures with reference to the past, an analysis of the situation with reference to the present, and a pronouncement of policy with reference to the future, may be of some assistance to hon. members in contributing to a fair and informed discussion of one of our greatest national problems, that of national defence. However, before I come to a discussion of the estimates themselves I should like to consider certain declarations of policy which have been made previously in the house during the present session. I do this not in any controversial sense but simply in order to set up a background for what I propose to say.
The government's policy in regard to national defence has been stated repeatedly in this house by the Prime Minister (Mr. Mackenzie King) and by other ministers. It is, I think, fair to characterize it as a rational policy of national defence. In connection with its estimates it is the duty of the Department of National Defence not so much to lay down a policy in regard to our relationship with other nations as to provide an effective instrument for upholding the policy of the government in the eventuality of the utilization of force becoming necessary. In other words, the function of the department over which I preside is not to lay down policy but to provide an instrument for carrying it out.
Authoritative statements of the government's policy have already been made to the house this session by the Prime Minister and the
Minister of Justice (Mr. Lapointe). It is not necessary at this time that I review the broad underlying philosophy on which the policies enunciated are based; but it may be valuable, in considering the concrete task of defence, to mention once again one or two passages from the remarks of two distinguished leaders of the government, the Prime Minister and the Minister of Justice. An excellent contribution also was made to the discussion by the leader of the opposition (Mr. Manion).
On March 30, 1939, the Prime Minister said, as reported on page 2423 of Hansard:
... it is for the government to recommend and for parliament to decide upon the course to follow.
Again:
. . . When for any reason there is cause to believe that one or more nations are determined upon aggression, and may have in mind domination of other countries by force, it may be that enemy, not the parliament of this country or even its people, who will decide whether it best serves its purpose to regard Canada as liable to attack in any conflict in which it may be engaged with any other part of the British Commonwealth of Nations.
Again at page 2426:
We would not go into a war merely because of legal uncertainty as to our power to stay out. We would not stay out of a war merely because we had provided unquestioned technical freedom to do so. Our country's decisions on such vital matters, now or later, will depend on deeper forces, they will depend on the thoughts and feelings of our people. . . .
. . . it is desirable nevertheless to consider some questions which would arise in the event of our participation in such a conflict. That participation could not be passive or formal, nor could it be unplanned or irresponsible. It will be necessary to consider in consultation with others involved and with regard to the objectives and operations of the enemy, what would be the most effective form our action and our cooperation could take.
Without quoting textually I would ask the house to recall the Prime Minister's observations as to the improbability of an expeditionary force, his pledge that conscription for such a purpose will not be adopted, his analysis of the great changes effected by a shifting of the balance of power and scientific invention. But there is one passage towards the conclusion of the Prime Minister's remarks on the subject of defence in relation to foreign policy which I wish to quote with emphasis. It is found on page 2426 of Hansard:
The heaping up of rival armaments, the clash of new doctrines, the concentration of power in a few hands, are factors which make it necessary to become prepared for whatever may happen. It is not possible to ignore that situation.
Again, having regard to the practical problem of defence which confronts my department, it is important to recall some observa-
Supply-National Defence

tions made by the Minister of Justice. My colleague from the province of Quebec effectively dissipated the myth of neutrality in any vital war where British and Canadian interests were concerned, with a reasoned analysis of the implications of such a theory. He quoted Oppenheim's definition of neutrality :
Neutrality may be defined as the attitude of impartiality adopted by a third state towards belligerents and recognized by belligerents, such attitude creating rights and duties between the impartial state and the belligerents.
And he said:
Can such an attitude of impartiality be possible in Canada during a war in our present international situation? A neutral state, as I said, would have to intern British troops or war vessels. I ask any one of my fellow countrymen whether they believe seriously that this could be done without a civil war in Canada. A neutral state would have to possess forces sufficient to deter any belligerent power from violating these neutrality rights which Canada would have to uphold even against Britain if it were neutral.
And later:
... if any dictator in the world has made up his mind that the British Commonwealth is going to be disrupted he is basing his future projects on utter fallacy.
With regard to Canada's direct defence responsibilities and the manner in which they should be honoured, let me quote again from the Minister of Justice as reported at page 2469 of Hansard:
There is no reason on earth why pious aspirations, unsupported by anything more substantial, should be more effective protection for us than they proved to be for Abyssinia or China; and we must remember that even the excellent Czech army proved inadequate when left without support. . . .
We cannot lull ourselves into a false security simply by making fine speeches, uttering great sentiments on the beauty of having no military expenditures, and being strong for peace.
Then, after pointing out that even if Canada were neutral or independent she would need security and would have to seek it by alliances with Great Britain and the United States, the Minister of Justice went on to point out the urgent necessity-
. . . in the interests of Canada that there should be a full understanding between Britain and the United States, and cooperation in coastal defence on the Pacific. But again I say, is not the British sea power an asset to be preserved in our own sacred Canadian interests?
These citations from these authoritative utterances of the Prime Minister and the Minister of Justice indicate very clearly the nature of the task which governmental policy has placed in the hands of the Department of National Defence, and it will be my duty this afternoon to describe to this committee the
[Mr. I. Mackenzie.!
manner in which the Department of National Defence in recent years has endeavoured to carry out that task. I desire to amplify the statements of policy submitted to the house during the present session by former declarations of policy, so as to indicate to my colleagues in this chamber the continuity of policy which has existed both in regard to our foreign relations and in regard to the necessity for making adequate provision for national security in the Dominion of Canada.
Almost immediately after taking office in October 1935 the present government decided to strengthen Canada's national defences. Three main reasons impelled this decision. The first one was the disturbed international situation in both Europe and Asia; the second, the technical advice that modern invention and change in technique of warfare had brought out new kinds and degrees of vulnerability for Canada; the third, an appreciation of the depleted condition of the country's defence equipment.
The decision to strengthen our defences, made in 1935 and actively pursued during the past three years, was set out in progressive declarations of government policy, through imperial conference resolutions and in formal pronouncements by the Prime Minister on various occasions. I refer first to the declaration made by the imperial conference of 1923:
The primary responsibility of each portion of the empire was for its own local defence.
And again:
Neither Great Britain nor the dominions could be committed to the extent of any active obligation except with the definite assent of their own governments.
Speaking in this house on March 10, 1936, as reported at pages 922 and 923 of Hansard, the Prime Minister said:
-we have made clear at various conferences that any action in -the nature of military obligations of any sort would be entered into by the government of the day only after such bad been recommended to parliament by the government and approved by parliament itself.
Then on February 13, 1937, as appears at page 1050 of Hansard, the Prime Minister stated:
By all means, let us make the most of our friendship with the United States. By all means, let us make the most of our friendship and kinship with Great Britain and with every other part of the British empire. By all means let us continue to be friends with every other nation, because in that direction, more perhaps than in any other, security lies. But let us realize that unless we do something to help ourselves these countries cannot .be expected to help at a time of world crisis, or great peril. ... So far as the Monroe doctrine is concerned, may I ask this house whether.

Supply-National Defence
having regard to our relations with the United States and our desire to maintain the friendliest possible relations with that country, we are prepared to surrender to that country the whole of our obligation in the matter of protection against foreign aggression? Is it likely that we shall be able to maintain friendly relations with the United States if we do nothing to defend our own coasts but simply take the attitude that we shall look to them for our defence? Similarly with regard to England. Are members of this government who are to represent Canada at the imperial conference to be asked to assert Canada's equality of status with all the nations of the British commonwealth and at the same time to tell the British government -that we are relying upon Great Britain to protect our coasts and will do nothing to help ourselves because we have their protection?
Then the Prime Minister continued:
I submit that sponging by a nation is, in the eyes of other nations, exactly the same as it is in the case of individuals .	.	. anynation that does not wish to become a belligerent in a war must at least be able to see that the waters -adjacent to its own co-asts are so patrolled by its own vessels that no belligerent can come and operate from that base against some other country with which it may be at war. .	.	.
There will be no participation by Canada in a war overseas except by the consent of our own parliament. ... I say that while we are doing what we are doing for Canada we believe that in this way we can make the most effective contribution towards -the security of all countries that may have like institutions, like ideals, -and principles of freedom similar to our own.
Next I come to the finding of the imperial conference of 1937, which has a definite bearing on the situation:
.	.	. the conference found general agreement among its members that the security of each of their countries can be increased by cooperation in such matters -as the free interchange of information concerning the state of their naval, military and air forces, the continuance of the arrangements already initiated by some of them for concerting the scale of the defences of ports, and measures for cooperation in the defence of communications and other common interests. At the same time the conference recognized that it is the sole responsibility of the several parliaments of the British commonwealth to decide the nature and scope of their own defence policy.
Next, Mr. Chairman, comes that famous declaration, already quoted in this house, by the president of the United States on August 18, 1938:
The Dominion of Canada is part of the sisterhood of the British empire. I give to you assurance that the people of the United States will not stand idly by if domination of Canadian soil is -threatened by any other empire.
On August 21, 1938, the Prime Minister of Canada commented upon that statement as follows:
The people of Canada deeply appreciate all that is implied by the president's visit. At the same time they know they have their own
responsibilities for maintaining Canadian soil as -a homeland for free men in -the western hemisphere .	.	. they will be quick to see
that the assurance given by the president has, if anything, increased rather than lessened our responsibilities.
We, too, have our obligations as a good friendly neighbour, and one of them is to see that, at our own instance, our country is made as immune from attack or possible invasion as we oan reasonably be expected to make it, and that, should the occasion ever arise, enemy forces should not be able to pursue their way, either by land, sea or air to the United States, across Canadian territory.
That brings me, sir, to a consideration, of the functions of national defence in the Dominion of Canada, and I suggest to hon. gentlemen that in determining from year to year what shall be the program of the department it is necessary to appraise, in the first place, the relevant aspects of the dominion's policy with regard to external affairs; in the second place, the nature and extent of the risks to lie apprehended, and, in the third place the types of weapons and equipment and the amount of force required for the purpose of coping with such risks.
It is submitted now that the program adopted and pursued during the past three years, and still under active development, is strictly in accordance with the country's external affairs policy. The department has proceeded on two major assumptions, the first being that Canada will not be engaged in any war against the United States of America, and the second that Canada will not be engaged single-handed in any war against an overseas power, and that any war in -which Canada may become engaged will be in association with other great powers whom she will be supporting and by whom she will be supported, for the protection of vital and essential principles. These two major assumptions, Mr. Chairman, limit the scale of the preparations necessary. In the first place, we do not have to fortify our southern border. In the second place, the extent of defence on the Atlantic and Pacific coasts need not be on such a scale as to cope with a major attack or attempted invasion.
A third important consideration which vitally affects the character and extent of the program imposed upon the Department of National Defence is the nature of this country's economy. I desire to say a word about our national trade. I believe Canada is now the fourth trading nation in the -world. With respect to other vital aspects of our economy she is dependent upon external trade. Our trade with the United States, being mostly overland, is relatively immune from hostile interference. This represents only half our
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external trade. The other half is carried entirely by sea, forty per cent to the sister nations of the commonwealth and about ten per cent to foreign countries.
Without discussing at the moment considerations of policy, and viewing the matter only from a technical military standpoint, it is to be assumed that an enemy at war with Great Britain would endeavour to cut off trade between the British Isles and our own dominion. It is a very large question, not to be omitted from military consideration, whether Canada's economic life could be maintained without that 1750,000,000 of export and import trade. The department must therefore be prepared to defend our seaports, our terminals, our coastal shipping and the focal areas of our offshore trade in the vicinity of our seaports from probable interference or attack.
Possibly this might be the appropriate moment- to review briefly the historic evolution of Canada's defence problem. Our early settlements along the St. Lawrence lived for almost two centuries under the constant menace of attack, in the early days from the Indians and later from the colonies to the south. It was in those days that Canada's unique militia system had its birth. Every ablebodied man was subject to the call to arms for the defence of his home and his community. The basis of organization was the town company, for the direction of which the local seigneur or the chief citizen was responsible to the governor. In the days of the American revolution, and for years afterwards, there was constant fear of attack from *the south. The English settlers, including the United Empire Loyalists, banded themselves together in New Brunswick and Upper Canada in county regiments; every ablebodied man was required to attend at least one annual muster.
Gradually, Mr. Chairman, the militia became formalized into definite units, but the history of many of the outstanding militia regiments of to-day can be traced back without a break to the very beginning of our Canadian history. And the much discussed universal service clause in our present Militia Act is the oldest law in Canada, dating back to the earliest French settlements in Quebec.
For two centuries of Canada's history she lived in constant peril of attack and a strong militia was vital and essential for her safety. Then, in that century between 1814 and 1914 there was the celebrated hundred years of peace. Steady development of friendly relationships with our kin across the border resulted in such a close affinity that the very

thought of possibility of war was dismissed from our minds. A friendly United States on the south, wide seas upon our eastern and western flanks, and frozen fastnesses to the north developed in Canada a sense of security which amounted almost to an obsession of immunity from attack.
There was for a time justification for that feeling of immunity. It rested, however, upon one factor which has not yet been mentioned, namely, the British navy. In the days when British fleets patrolled and dominated the seven seas, we, in Canada, were indeed immune from attack.
There was no lack in Canada of recognition of the great service performed by the British navy. Until very recent years Canada did not feel herself impelled to make any contribution to naval defence, but we did maintain our militia institutions. We drew on our militia to support Great Britain in the South African war, and we threw the whole weight of Canada's man power and the whole of our national effort into the great and tragic European war of twenty years ago.
The significance of this brief historical review is that since the dawn of our history in Canada the essential defence problem of successive Canadian governments has been the maintenance of our militia institutions. Both in the days of the Indian wars and in the days of immunity which came after, the militia was the effective instrument for coping with our military responsibility. According to some of our best thinkers, those days have gone forever. We face a new problem at the present time. A fleet on the surface of the seas is no longer a sure defence against hostile attack. The submarine can go under and the aircraft over those walls of steel. Not long ago-in fact only a few months ago- intrepid air men took off in Russia, flew across the Arctic wastes and all across Canada without a single stop, landing in California. Only a few months ago a squadron of the British Royal Air Force flew from Egypt to Australia, a distance greater than from the heart of Europe to Montreal, and back again.
In other words, it is to-day possible for hostile aircraft to take off in mid Europe, fly to Canada, drop their bombs and fly back again without landing. Even in the last war, as we all know, submarines operated off the Atlantic coast of North America with devastating effect. So that after a century of immunity from attack Canada is to-day again vulnerable to enemy hostilities and has to cope with a real problem of national defence, just as she did in the early centuries of her history.

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This brings me to a consideration of Canada's defence program, upon which we have embarked, after very carefully weighing the foregoing factors. It is now considered by those who are qualified and competent to advise that in the event of great international conflict Canada must be prepared in the first place to maintain a ceaseless patrol of all possible lines of approach from which attack may come, and have in readiness at the right place forces and weapons adequate to cope with attacks of the type and scale to be apprehended.
In the second place she must defend her territory from raiding attack from submarine, aircraft or other craft which may successfully escape blockade and seek to inflict damage upon Canadian property, especially that utilized for transportation and industrial production.
In the third place, she must defend her seaports, terminals, and shipping and overseas trade from attack or interceptions by belligerents.
In the fourth place she must prevent the utilization by belligerents of her territory or territorial waters, of the myriad bays and coves on her deeply indented coast line, and of the air over her territory, for the purpose of or in the course of attacks upon any other friendly or allied nation.
For these purposes which I have specified, the conclusion has been reached-although in regard to that conclusion there are differences of opinion-that the first line of defence for the Dominion of Canada must be the air force. The navy must be strengthened, and the militia must be properly safeguarded.
In 1935 and 1936, in anticipation of possible repercussions from the impending conflict in the far east it was considered the greatest risk in Canada was on the Pacific coast. Accordingly in preparing our defences the department laid down the following priorities as a guide:
1.	Fortification of Pacific coast prior to Atlantic coast.
2.	Development of the air force in priority to navy and, so far as possible, the navy in priority to the militia.
3.	Reorganizing and re-equiping the militia as soon as our resources permit us to do so.
That plan has been followed to the utmost extent practicable.
The task confronting this government in 1936 was a very formidable task indeed.
It is my intention this afternoon not to condemn and certainly not to criticize, but to explain what had to be done in the last three years, and to submit to members of the
committee an exact picture of the situation of our national defence in Canada when I assumed the responsibility of my office in 1935.
On taking office in October I immediately called for reports from the heads of the three services in the Department of National Defence as to the state of departmental organization in relation to the tasks confronting it. A most serious state of deficiency in equipment was revealed.| The government immediately decided upon a policy of strengthening the national defences. As hon. members may recall, the Prime Minister stated in the house in 1937 that for very grave reasons of national policy which, in retrospect, hon. members will appreciate, it was decided to make no major effort in 1936, although in fact there was a substantial increase in the defence appropriation for that year. And a beginning at least was made in repairing certain deficiencies. This afforded time for a very careful study of the whole problem, and in 1937 the government laid its policy fully before the house in connection with major increases in appropriations. At that time and more briefly last year I laid before hon. members some of the information as to the state of the various services brought to my notice in the reports of the heads of the three services received shortly after taking office in 1935.
In regard to our naval service the report I received was as follows, that even assuming effective air force and militia cooperation Canada did not possess adequate naval forces to guarantee neutrality of Canada in a war in which she did not wish to be a belligerent. Assuming that at a particular time the danger would exist on only one coast the minimum force adequate to maintain an effective naval patrol would be, on one coast, six torpedo boat destroyers, four mine sweepers and twelve auxiliary vessels. In October, 1935, Canada possessed two effective torpedo boat destroyers, two torpedo boat destroyers due for retirement, and one inefficient mine sweeper.
Then, it was reported that the barracks, dockyards and other shore facilities of the naval forces were generally antiquated and inadequate. The naval magazine at Esquimalt harbour was condemned as far back as 1905, and the wireless equipment at both Halifax and Esquimalt was inadequate.
In regard to our military services the report was that there was not a single modern antiaircraft gun in Canada. The stock of field gun ammunition on hand represented ninety minutes fired at normal rates for the field guns inherited from the great war. The stock
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in Canada was less than one-half of the equipment ammunition which travels with the guns, and there were no reserves. Existing field artillery was unsuitable for mechanical traction and outranged by modern guns to the extent of 3,000 to 6,000 yards. Coast defence armaments were obsolescent and in many cases defective. Firing practice had been restricted in order to prolong life of guns.
Beyond a few tractors for guns of the permanent force batteries, no provision had been made for mechanical transport for defence purposes. Canada possessed no tanks or service armoured cars and no tractors for heavy and field equipment. In regard to anti-gas defence, it was reported that there was an insufficient supply of respirators for even the permanent force suitable for training only, and none available for mobilization. No steps had been taken to organize other forms of anti-gas defence.


Mr. HARRIS:: Whose statement is that?


Ian Alistair Mackenzie: These
were called for by the minister from the heads of the three services immediately after he took office in 1935. I shall be glad to let my hon. friend have the actual reports. It was reported also in regard to existing manufacturing facilities that no facilities existed for the production of rifles, machine guns and artillery weapons in Canada. It was reported also that the dominion arsenal was equipped only for the production of rifle ammunition and a limited number for field guns.
With regard to the militia, it was further reported to the minister that the reorganization of the militia had been recommended in 1932, approved in principle by the government of that day, but no action taken. In regard to the militia again, it was reported to the minister that the training of militia had been so much restricted that many officers had had no opportunity to exercise command of troops on manoeuvres, or to develop the power of leadership by actual practice. The training in the various administrative duties with which officers and non-commissioned officers may be faced had been neglected. The majority of men in the ranks had had very little experience in the handling of their weapons, and only the very elementary forms of collective training had been possible. The Royal Canadian Army Service Corps units had had no practical experience in the problems of the supply and maintenance of troops in tihe field.
With regard to the air service, it was reported to the minister that there were only twenty-three aircraft of service type in Canada. All were obsolescent except for training, and none were suitable for active service under

present day conditions. There were no air bombs in Canada available for immediate use. There were no aero engines manufactured in Canada, and the development of an aero engine industry to the point of production would take two years. In order to ascertain how this situation had risen, inquiry was made with regard to the appropriations for defence during the previous years. This is the actual record from the documents of this parliament of what has taken place in regard to our national security and national defence.


Mr. BROOKS:: How many anti-aircraft
guns, how many gas masks and how many aerial bombs are there in Canada to-day?


Ian Alistair Mackenzie: I shall come to that in a moment. I told my hon. friends at the beginning that I was simply trying to paint the actual picture from the facts which had been presented to me. I shall be glad to let my hon. friend see the document from which these facts are taken.


Robert James Manion: I am sorry to interrupt the minister, but apparently he is quoting from some official document which was given to him as minister. I think he should make it perfectly clear who are the authors of the document. I assume they are his officers, but I should like to have it on the record. I think it is a rule of the house that when an official document is quoted, the name of the writer of the document should be given.


Ian Alistair Mackenzie: My recollection is that these documents have been referred to already in the debates reported in Hansard. They were made by the heads of the three services. I shall be glad to let my hon. friend have copies in order that he may satisfy himself.


Mr. SLAGHT:: What is the date of the last report referred to?


Ian Alistair Mackenzie: Speaking from memory, my recollection is that these reports were called for immediately after I took office in 1935, and I believe they were dated November, 1935. However, I am subject to correction on that point.
The appropriations for the three defence services, naval, militia and air showed a steady rise from 1926-27 to 1930-31. In the year 1931-32 the preceding administration made a substantial reduction. Further reductions were made the following year and the services were compelled to carry on at the reduced rates until 1935-36, when there was a partial restoration of funds for these services. Total appropriations for the Department of National Defence do not illustrate the story accurately, since in recent years these have

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been swelled by appropriations for the operation of relief camps. Prior to the introduction of this item, however, the grand total of appropriations for the Department of National Defence was reduced in the first two years of the preceding administration by nearly $10,000,000, or 45 per cent.
With the permission of the House, I should like to place upon Hansard a table showing the total appropriations for the Department of National Defence for the fiscal years 1926 to 1933, as well as another table showing the total appropriations and expenditures for national defence services, excluding relief camps, battlefields memorials, war claims, and similar matters not directly contributory to national defence. The tables are as follows:
Grand total appropriations for the Department of National Defence-for the fiscal years 1926 to 1933
Total appropriation
Fiscal year	(in millions of dollars)
1926-	27	
15-21927-	28	
17-81928-	29	
20-71929-	30	
22-61930-	31	
24-21931-	32	
20-61932-	33	
14-7
Total appropriations and expenditures for National Defence Services
(Excluding relief camps, battlefields memorials, war claims, and similar matters not directly tributory to National Defence.)
Appropria- Expendi-I' iscal year	tion	ture
(in millions of dollars)
1926-27.. ..	.. .. 12-9	12-91927-28.. ..	.. .. 15-8	15-71928-29.. ..	.. .. 18-8	17-91929-30.. ..	.. .. 20-6	20-01930-31.. ..	.. .. 22-1	21-71931-32.. ..	.. .. 18-9	16-81932-33.. ..	.. .. 15-0	12-61933-34.. ..	.. .. 13-0	12-61934-35.. ..	.. .. 13-3	13-31935-36.. ..	.. .. 17-3	16-21936-37.. ..	.. .. 25-5	24-41937-38.. ..	.. .. 35-5	32-81938-39.. ..	.. .. 35-5	N.B.-1930-31	was the former peak	year ofexpenditure, 21-	7. In two years this was reduced	
to 12-6, a reduction of 9-1 or 42 per cent.
I come now to a consideration of the effect of these reductions upon the Department of National Defence in Canada. In regard to the navy, I can say immediately that the reduction in appropriations for the naval service was not as important as it was in regard to the other services. There was an apparent reduction of approximately $1,300,000, but the real reduction was only about $250,000.


Mr. STIRLING:: To what year is the minister referring?


Ian Alistair Mackenzie: This is
when I came into office in 1935.


Grote Stirling: The minister is comparing 1936 with what year?


Ian Alistair Mackenzie: With 1931. The explanation is that the construction of the destroyers Saguenay and Skeena was financed by a series of three annual appropriations. The last of these was in 1931-32. Hence the next year's appropriation showed a sharp reduction. The only real cut affecting the efficiency of the service was approximately $250,000, which was applied to the diminution of the number of hours' steaming time and the non-replenishment of the supply of ammunition.
Coming now to the militia service, I find that in the fiscal year 1930-31 the expenditures were $10,976,008; in 1931-32 they were $9,700,464 and in 1932-33, $8,718,881. There was a total reduction in the appropriations in the two years of $2,237,212, or approximately 25 per cent. Most of these reductions were in connection with the following:
Grant towards cadet uniforms abolished.

Maintenance of military properties, including rifle ranges, lowered by $103,000.
Artillery stores not replenished to the extent of $232,000.
Other military stores not replenished to the extent of $138,000.
Training of non-permanent active militia reduced by $347,350.
Artillery practice reduced by $72,000.
Maintenance of properties diminished by $408,000.
Replacement of ammunition diminished bv $179,500.
Quebec arsenal closed for ten months at a saving of $199,000.
Another S200.000 was saved by not replacing other military stores. The training of nonpermanent active militia, including artillery practice, was reduced by a further $123,000, making roughly $500,000 in the two years. The permanent force was reduced by 3 officers and 139 other ranks at a saving of $145,096.
I desire to refer to page 2930 of Hansard of May 16, 1932, where Mr. Sutherland, the then Minister of National Defence, questioned about reductions of defence appropriations, gave the following information:
The reduction is due to the re-allotment of the days of training. There will probably not be as many days' training this year, perhaps only ten days where there were twelve before. The artillery did not get a chance last year to go to camp at all, and use the mechanized equipment.
Mr. Ralston: How many days in camp, and for how many men does the minister propose this year?

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Mr. Sutherland: For the artillery, 12 men to a battery. There will be no camp whatever for the infantry.
Mr. Ralston: Will there be less ammunition manufactured this year?
Mr. Sutherland:	Yes, there will be less
ammunition manufactured.
Then in connection with the air services, the expenditures in 1930-31 were $7,147,018; in 1931-32, $4,119,790 and in 1932-33, $1,731,219. The total reduction in the air force in two years was $5,415,799, a reduction of approximately 75 per cent in the air service of the Dominion of Canada. This reduction was applied as follows:
Royal Canadian Air Force
1930-	31	
$2,510,0001931-	32	
2,266,0001932-	33	
1,555,000
A total reduction of $935,000, or 36 per cent. Construction of the new training centre at Trenton was practically stopped.
The replacement of aircraft was not carried out. The proper rate of replacement is indicated by the fact that in the preceding year there were acquired twelve aircraft and four spare engines, at a cost of $153,405.
In 1931-32 flying hours were increased by
5.000	hours, but in 1932-33 flying hours were reduced from 32,095 hours by 27,095 hours to
5.000	hours.
In the following year a further reduction of 3,800 hours was made, and the total hours of flying was reduced in three years from 32,095 hours to 1,200 hours.
The training of airmen suffered in proportion.
In 1932-33, 78 officers, 100 airmen and 125 technical civilian employees were dismissed. Wireless service was discontinued. Engineer services for the maintenance and upkeep of buildings and equipment were curtailed.
With regard to civil government air operations, in 1930-31 the appropriation was $3,246,700. By 1932-33 this appropriation had been completely abolished. Forestry patrol on the three prairie provinces was abolished, and many other valuable activities were eliminated. This work was formerly done by the Royal Canadian Air Force and constituted valuable training, not only in actual flying, but in reconnaissance, map making, photography, maintenance, et cetera. Abandonment of these activities is directly related to "Reduction in flying hours'' noted under Royal Canadian Air Force referred to previously.
As regards civil aviation, there was a reduction in two years from $711,700 to $195,000. The method of presenting the estimates was changed, but the $195,000 voted for civil

aviation in 1932-33, included in addition to appropriations for inspectional services, et cetera, all that remained of what had been a separate vote for air mail routes.
In 1930-31 the item for air mail routes was $900,700; in 1931-32, $280,000; and in 1932-33 it was included in the civil aviation vote of $195,000. The vote of $195,000 for civil aviation in 1932-33 has to be compared with appropriations of $1,800,000 included under several headings in the estimates of 1930-31. This reduction entailed abandonment of air mail contracts and services, wireless service already installed, preparation of aerodromes and sites, assistance to aeroplane clubs, and installation of lighting equipment.
Just to bring this sharply to the minds of hon. members present, may I refer to Hansard, February 9, 1932, page 360. Mr. Ralston moved the adjournment-
-to discuss a definite matter of urgent public importance in connection with the dismissal of between two and three hundred officers and men of the Royal Canadian Air Force without regard to their families, their overseas service or period of enlistment, and the embarrassing situation which may arise if they are forced by the necessity of employment to accept service with another nation.
The speaker ruled the motion out of order, and refused leave to appeal to the house. Mr. Ralston raised the question again, when the Hon. D. M. Sutherland, then Minister of National Defence, said:
About sixty-nine officers and one hundred men have been notified that their services will be dispensed with on the first of April.
I quote from Hansard, February 26, page 559. Mr. Ralston spoke of the valuable service rendered by the air service in the development of northern Canada in surveying, map making, development of air mail routes, selecting sites for emergency landing fields, et cetera. He said:
In the face of this great service which is being rendered, 69 officers and 100 men are told that they must go. I submit that such action is poor business and is very short-sighted.
Mr. Ralston continued:
With regard to the air force, in the interests of humanity, in the national interest, and furthermore in the international interest, the government should reconsider this whole matter. . . . There is talk abroad that these airmen who have been thrown out in the world are about to enlist in the forces of another country. No one can blame them. . . . They say "If our own country does not want us, if our country leaves us in the lurch, we will have to take the best employment we can get." I submit that that will not be a good thing for Canada, regardless of whether or not it is legally possible. ...
Mr. McIntosh: It is not a "Canada First" policy.

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From Hansard of May 20, 1932, at page 3197:
Mr. Sutherland:	Civil air operations are
washed out altogether. . .	. An amount of
$1,555,000 will go to aviation proper, and $195,000 to civil aviation. . . . This year we have $77,000 under the air mail heading, which is largely used for maintenance. . . .
Mr. Ralston: And there is nothing for civil air operations?
Mr. Sutherland: Nothing whatever. . . .
Mr. Ralston:	I submit . . . that the idea
of slashing the vote in this manner, without any regard to the work to be done, was wrong. Although the force may not have been kept at full strength, at the same time the trained men could have been used for useful work, not only in the Department of National Defence but in the other departments. . . .
Mr. Ralston continues:
The minister now finds himself in the position where he cannot carry on civil aviation work at all. He is training a few men at Borden, a few .at Trenton, and 100 men in Winnipeg are apparently doing nothing. As I understand him they are simply waiting to give service to the department if any opportunity presents itself .	.	.I think at this time a word should be said about the routes that were developed whereby through the use of the air force ... it was made possible to provide communication with the outlying districts. The air force were the pioneers in that work. Again in the more settled areas they surveyed the routes, establishing landing fields and perfected a system of which Canada was proud. I think the Canadian people believe a great mistake is now being made when they see .	.	. this
fine service ,is being completely demoralized. On what routes does the minister intend to spend the $77,000?
Mr. Sutherland: That amount is very largely for maintenance. .	.	. The machinery has
to be put into grease.
Mr. Ralston: Is there any air mail route which will be used this year?
Mr. Sutherland: No lighted mail route.
I have given from the records the actual situation which confronted the minister and the government in October, 1935. My next attempt will be to indicate to this committee the steps which have been taken during the last three years to repair the deficiencies which I have mentioned and to make good the gaps to which I have made reference.
The department, Mr. Chairman, has expended in all more than $90,000,000 on defence purposes during the last three years:
1936-	37	$26,684,8901937-	38	
32,749,0491938-	39	
35,954,253
That is, assuming that the appropriations will be entirely expended for 1938-39, a total of $95,388,192. Included, however, in this grand total is approximately $5,000,000 expended on relief camps and civil aviation in
1936-37. Of this total expenditure $6,791,666
7H92-2041
was on general services, including general administration, including also nearly $4,000,000 for relief camps. The remainder was divided among the three services as follows:
Militia	$45,295,305
Naval	 15,774,777
Air	 27,526,444
This air appropriation includes, however, $1,244,000 for civil aviation in 1936-37. An account of the use made of this money by the three services follows.
First of all I deal with the government naval service. There was expended, in 1936-37, $4,252,047, in 1937-38, $4,371,980; and in 1938-39, $6,639,232 was voted. I should like to be allowed to place upon Hansard-it is not controversial in the slightest degree-a record of the actual figures of the naval service from
1936-37 to 1938-39 inclusive, as follows:
Naval Service-Personnel
During the three years, 1936-37 to 1938-39, the personnel strength of the naval service and its various reserves has been increased by approximately 75 per cent.
Royal Canadian Navy
April 1,	November,
1936 Additions 1938
Officers	
101	23	124Ratings	827	640	1,467Total	
928	663	1,591
Royal Canadian Naval Reserve
Officers	
41	18	59Ratings	
147	45	192Total	
188	63	251
Fishermen's Reserve, R.C.N.R.
Skippers	
40	40Seamen	
160	160Total	
200	200
Royal Canadian Naval Volunteer Reserve
Officers	
71	53	124Ratings	
897	354	1,251Total	
968	407	1,375
Summary
All ranks.. .. 2,084	1,333	3,417
The Fishermen's Reserve, to which reference is made there, was a new branch of the Royal Canadian Naval Reserve, created during the present year on the Pacific Coast. The object was to train fishermen in naval patrol work for service in their own boats, in waters with which they are intimately familiar.
The first thirty-day training period began in February, with the unit at full strength. I may say it is the intention during the present year to extend the Fishermen's Reserve to the Atlantic coast as well as the Pacific.
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in Great Britain at a cost of $51,000. Substantial quantities of ammunition for the various types of coast defence guns were acquired from the war office at a cost of $123,098.
With regard to mobile artillery, five 3-inch mortars were procured in England. Substantial quantities of ammunition, fuses, et cetera, of types not available in Canada for mobile artillery, were procured from the war office at a cost of $371,000.
Of great importance is the fact that with an expenditure of $820,000 there was developed in Canada for the first time since the great war, production of the following commodities, through private industrial sources: shell steel in the form of billets and forgings; steel base plates; driving band rings; fuse plugs; propellant in the form of Cordite W; shell filling in the form of T.N.T.; steel exploder containers; ammunition boxes.
In connection with the production of T.N.T,. this industrial operation was brought about through the enterprise of the Department of National Defence, and when successful production was attained), the firm received an order from the British government which will take care of one year's entire output. In addition, in order to keep pace with the development of other components, production in the dominion arsenal was substantially increased in the matter of cartridge cases and percussion primers. A shell machine shop was equipped at Montreal at a cost of $200,000 and some $67,000 was expended on machine shell in Canada. Altogether, the outlay on mobile artillery ammunition, as just described, was $1,462,305.
In connection with increased equipment and increased production at the dominion arsenal, there has been expended in the three years $1,786,770. Production of small arms ammunition has been increased four-fold. This means that the production during the past three years has been 21 million rounds greater than it would have been had the rate of production prevailing in 1935 not 'been increased. The production of 18-pounder cartridge cases has been increased six-fold, and the production of percussion primers has been increased at least six-fold. The gauge plant has been equipped at Quebec so that the department is now able to produce its own gauges in a thoroughly satisfactory manner. There has been expended on the purchase of equipment and rebuilding the rolling mill at Lindsay arsenal more than $100,000 for the purpose of initiating production of cartridge cases. Production at Lindsay will begin very shortly.

With regard to small arms, the department obtained 82 Vickers machine guns at a cost of $116,000. In addition there were obtained 10 Bren guns and 7 half-inch anti-tank rifles from the war office, chiefly for training purposes.
Then under the head of wireless, equipment to the value of $128,000 was obtained, including 133 light portable wireless sets and a number of radio transmitters and receivers for the permanent force radio stations.
On mechanical equipment and mechanization of existing equipment there has been expended $539,560, for which we have obtained:
2 light tanks from the war office
Conversion of 200 quick-firing 18-pounder equipment to pneumatic tires _
Production in Canada of 51 special trucks in accordance with war office standards
Production in Canada of 20 special mechanically propelled vehicles for experimental purposes
1 dragon from the war office (a tractor for hauling heavy artillery)
50 miscellaneous motor vehicles
On anti-gas respiratory equipment, completely delivered, there has been expended $153,000. Four thousand complete respirators were purchased from the war office and afterwards 20,000 (less containers) were produced in Canada.
Some small items have been omitted, but this accounts in a general way for the equipment ordered and actually delivered under the general stores vote, during the past three years.
As already indicated, approximately $2,000.000 has been expended as initial or progress payments on items ordered, but not yet delivered, and with respect to which the total commitment -will be approximately $12,000,000. Chief among these items are the following: For coast defence armament: high angle mountings for heavy coast guns; a number of medium coast defence guns and mountings; a number of guns for anti-motor torpedo boat action, to be situated at certain harbours for close-in defence against small craft which may elude outer defences; relining of additional heavy guns in England; fire control equipment for coast defence batteries, ordered from the war office; communication equipment for coast defence batteries, ordered in Canada; 130 search light equipments for anti-aircraft defence. The arrangement for the production of this equipment in Canada involved extended negotiations with the industry, since this is a product which had never before been produced in Canada. It was finally found possible to obtain competitive bids.

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In regard to coast defence ammunition, while it is not considered to be in the public interest to give too much detail regarding armament and ammunition orders, there has been ordered from the old country additional coast defence ammunition to the amount of $842,266. This includes the various types of ammunition for the coast defence guns, some of which are purchased in the complete rounds; in other cases the components are purchased separately and assembled in our own arsenals. Also in some cases we buy certain components from the old country and produce certain components ourselves.
As to anti-aircraft equipment, answering the question of my hon. friend a few moments ago, they were ordered by the previous administration and since then there have been ordered fourteen anti-aircraft guns of the 4-5 inch calibre and four of 3-inch calibre for future delivery, at an estimated total cost of $1,289,240.


Alfred Johnson Brooks: When does the minister expect delivery?


Ian Alistair Mackenzie: I think fairly soon, but I cannot be specific in regard to that.
Ammunition for these has been ordered to the extent of $553,140.
In regard to mobile artillery, items on order and not delivered include: 130 mortars of
Item
Coast defence, $4,665,173.. Anti-aircraft, $1,842,380.. . Mobile artillery, $1,092,100 Small arms, $6,241,325.. .. Respirators (containers) .. Mechanization, $502,582..
Totals	
3-inch calibre; technical instruments and equipment for mobile artillery and machine gun units; 36 anti-tank guns of 2-pounder type; certain special types of ammunition; miscellaneous small arms; an additional 21 Bren light guns from the war office for training purposes pending first delivery from the Canadian factory; 7,000 Bren guns ordered in Canada; and a quantity of anti-tank rifle ammunition from the war office.
Regarding anti-gas respirators, it has now been found possible to procure production of these containers from Canadian industry, and tenders were invited recently to this end.
In regard to mechanization, the following steps, which have not resulted in deliveries being completed, have been taken:
Fourteen light tanks were ordered from the war office at an estimated total cost of $415,500.
Purchase of war office pattern adapters for the conversion of artillery equipment to rubber tires, at an estimated total cost of $77,282.
One armoured machine gun carrier was ordered from the war office at a cost of $9,800.
I should like to place upon Hansard a summary in regard to all this equipment ordered but not delivered, so that hon. members will have information in regard thereto as soon as possible:
Great	Sum Balance to
Britain Canada voted be provided 2,007,173 $ 2,658,000 $ 1,253,231 $ 3,411,942
1,842.380	
400	1,841,980976.400	115,700	192,835	899,265100,325	6,141,000	496,925	5,744,40043,250	
43,250502,582	
11,561	491,021
5,472,110 $ 8,914,700 $ 1,954,952 $12,431,858
I now come to engineer services and works. For these the militia service has expended during the past three years $8,614,710, made up as follows:
1936-	37	$2,420,5151937-	38	
3,394,3111938-	39	
2,799,885

Of this sum there was utilized for the maintenance of military buildings, fortifications and properties:
1936- 37	$ 770,276
1937-	38	
808,2771938-	39	
852,793

The remaining sum out of the total expenditures under the vote for engineer services and
works went for new military construction including fortifications, as follows:
1936-	37	$1,650,2381937-	38	
2,544,0551938-	39	
1,897,092

In militia service there was expended on works for the Royal Canadian Air Force:
1936- 37	$ 488.886
1937-	38	 303,945
On funds expended on works directly for the militia services the distribution was:
Fortifications	$1,986,851
Barracks, et cetera	 1,648,317
Magazines and stares	 859,388
Armouries	 132,000
Rifle ranges, camps, et cetera. ..	541,996
Quebec walls	 129,998
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Fortifications: These funds were utilized during 1937-38 and 1938-39 upon the construction of coast defence batteries at Albert Head, near Victoria, and York island in Johnston strait, covering the waters by which approach to Vancouver and Victoria could be made. The existing batteries at Fort Macaulay, Esquimalt, were reconstructed, and a new battery was installed in Stanley park, Vancouver. Property was acquired on Kaien and Digby islands for the construction of defence works for the Prince Rupert rail head. This property was cleared and construction of one battery is now under way. Signal equipment, submarine cable for the communication systems and incidental services have been provided for these fortifications as required.
In regard to other construction, barrack accommodation and relative buildings, at Barriefield, Ontario, a considerable amount of development has been undertaken in connection with the establishment of the Royal Canadian Corps of Signals at Vimy barracks during the period under review, and the following buildings have been constructed: Administration building, training building, single officers' building and mess, sergeants' mess, one married officers' quarters, one block of four married other rank quarters, one men's barrack block, and heating plant and garage. In addition, services in connection with the barracks, such as water supply, sewers, lighting, construction of roads and parade grounds, and development of the area generally have been taken care of.
At Calgary work was continued on the development of Currie Barracks, and the following additional buildings have been constructed: single officers' quarters and mess, one married officers' quarters, veterinary sick lines. The barrack area generally has also been improved and roads and services extended.
At St. Johns, Quebec, an administration building and mechanical transport garage were constructed at the barracks.
_ At Winnipeg, Port Osborne barracks, an instructional building and an addition to the mechanical transport garage were constructed.
At Halifax, Nova Scotia, a training building for the Royal Canadian Engineers and mechanical transport was constructed at Wellington Barracks, and garages for the Royal Canadian Engineers and Royal Canadian Regiment respectively were constructed.
At London, Ontario, mechanical transport garage for the Royal Canadian Army Service Corps was constructed at Wolsley barracks.

At Kingston, Ontario, at Artillery park the first unit of an anti-aircraft training building is under construction. At the Royal Military College a dormitory wing was constructed, and equipment and fittings for mess and recreation building were provided.
At Esquimalt, British Columbia, the construction of a new hospital at Work Point barracks was completed.
In addition to the foregoing accommodation at the various military barracks, one block of four married quarters and a boiler house were constructed at the Dominion arsenal, Valcartier, out of funds provided in the vote for engineer services and works.
Regarding magazines and stores, at Esquimalt seventeen magazine buildings were constructed in connection with the land service end of the joint service magazine. A pier was also constructed, and work carried out on the development of the area generally.
At Dundurn camp, Saskatchewan, six magazine buildings and a heating plant were constructed.
At London, Ontario, a small arms munition magazine was constructed.
At Kamloops, British Columbia, property was purchased and its development commenced in connection with the establishment of a joint service magazine there.
At Valcartier, six magazines were constructed out of funds provided in the vote for engineer services and works, for use in connection with the Dominion arsenal.
At Esquimalt, three ordnance stores buildings were constructed and also an ordnance workshop.
At London, Ontario, a clothing store was constructed at the ordnance stores.
Regarding armouries, no new armouries were constructed out of funds provided in the vote for engineer services and works during the period under review. The central portion of the armoury at Fredericton, New Brunswick, however, was reconstructed.
Additions were made to armouries at Rimouski, Sarnia, Walkerton, Lindsay, Ken-ora, Napanee, Pincher Creek and Indian Head. These additions consisted mainly of the provision of gun sheds to accommodate artillery units that were formed in connection with the reorganization of the non-permanent active militia.
As to rifle ranges, camps and training areas, a new rifle range has been provided at Winona, Ontario, and also at St. Bruno, Quebec. A new range was constructed at Niagara-on-the-Lake, and at Valcartier the rifle range has been extended.

Supply-National Defence
General development has been continued at the camps at Niagara-on-the-Lake; Petawawa; Sussex, New Brunswick; Aldershot, Nova Scotia; Shilo, Manitoba; Sarcee, Alberta; and Dundurn, Saskatchewan.
Some further restoration work has been carried out in connection with the Quebec walls.
With reference to training, the appropriation for permanent force training in 1935-36 was 8113,850. By a series of small annual increases this was brought up to 8168,850 for the current year. Considering the 1935 appropriation as an irreducible minimum, the department has had in the three years, over and above the irreducible minimum, 8101,000 for additional training over and above that for 1935-36. These additional funds were used in 1936-37 for the provision of courses of training abroad, and in 1937-38 for additional courses abroad in coast defence, anti-aircraft defence and tank training, and for the mobilization of the Royal Canadian Horse Artillery Brigade at Petawawa, and training of the Royal Canadian Dragoons, as a regiment for one month at Petawawa.
In 1938-39, for the first time in many years all permanent force units were concentrated at Camp Borden for manoeuvres, affording commanders an opportunity to practise leadership in the field. The newly formed antiaircraft battery, Royal Canadian Artillery, was also given training in a practice camp near Trenton.
Por the non-permanent force, the appropriation for training of the militia in 1935-36 was $1,588,800. There was no increase in 1936-37, but fairly substantial increases were made in the following two years, so that the appropriation in 1938-39 was $2,035,800. Treating the appropriations of 1935 and 1936 as an irreducible minimum, the increases of the past two years have given the non-permanent militia $447,000 for training over and above that which was possible on the 1935 appropriation. In 1936-37, although there was no increase in funds, certain technical arms were given slightly longer training periods. In
1937-38 an additional 5,000 men were trained in camps and fortifications. The number of officers and men attending schools of instruction was increased over the previous year by 1,468. Additional expense was incurred in the technical training of units reorganized along mechanical lines.
In 1938-39 there were further increases in the periods of annual training and in the number permitted to train, an increase in the number training in camp, by 12,700.
Coast defence units, especially the newly formed units at Vancouver, Sydney and Saint John, were given additional training.
I now come to the question of the industrial survey. In 1936-37 a master-general of the
ordnance was reappointed and under his chairmanship there was formed the navy, army and air supply committee. During the past two years this committee has made a thorough survey of industrial firms and plants, with a view to ascertaining, tabulating and indexing the available industrial resources of the country for the production of military requirements at a time of emergency. More than 1,500 firms have been surveyed and the information obtained has been tabulated and indexed in convenient form for reference.
This is the first time in Canadian history that peace time provision has been made, on a scientific basis, for the mobilization of industry, should the necessity arise. Largely as a result of the work of the master-general of the ordnance and the supply committee many of our requirements, not hitherto obtainable in Canada, are now being produced for the department in this country. The development of domestic sources of supply for the greatest possible variety of our requirements, is one of the most valuable contributions to our national defence potential that could be made.
I come now, sir, to one of the most important services, the air service, and the steps taken to repair the deficiencies in this service during the last three years. In 1936-37 the vote for this purpose was $4,685,028; in 1937-38 it was $11,409,617, and in 1938-39, $11,330,517. I should like to place upon Hansard the following table showing the various forms of the air force as it existed some three years ago and as it is now, as follows:
Personnel
Strength of the Permanent Active Air Force has been more than doubled in that period, thus:
*April 1, Dec. 31, Mar. 31,
1936	1938	1939	IncreaseOfficers.. ..	143	248	257	114Airmen.. ..	884	1,829	1,927	1,043
Total, all
ranks.. 1,027	2,077	2,184
1,157
Note: The above figures include permanent force personnel (12 officers and 132 other ranks in 1938-39) attached to non-permanent squadrons and provided for in the estimates for the non-permanent force.
Strength of the non-permanent R.CA.F. has also been doubled, thus:
April 1, 1936	Dec. 31, 1938	Mar. 31, 1939	IncreaseOfficers.. ..	52	87	96	44Airmen....	289	820	868	579Total, all	ranks..	341	907	964	623
Note: The above figures do not include permanent force personnel attached to nonpermanent squadrons and shown in the estimates as provided for in the nonpermanent vote.

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Annual cost of personnel (including pay and allowances, rations, clothing, laundry, transportation, medical care, etc.) has increased by 85 per cent in the same period, thus:
1936-	37	$2,033,2441937-	38	
2,722,7421938-	39	
3,787,785
With regard to training and organization, training activities have been expanded in proportion to the increased personnel, and an important change in organization has been effected. Three new commands, decentralizing administration in the interests of efficiency, have been set up: an eastern command with headquarters at Halifax, a western command with headquarters at Vancouver, and a training command with headquarters at Toronto. The principle involved is the same as that by which the militia functions under a series of district headquarters and the naval service functions under its two station commands at Halifax and Esquimalt.
On April 1, 1936, we had in service 164 aircraft, as follows: service craft, 23; training and civil types, 141. All the service craft were obsolete types of little or no military value and many of the others were also obsolete. These civil aircraft were acquired during the period when the R.C.A.F. was largely employed in civil government air operations. On April 1, 1936, there were also on order 18 aircraft, as follows: modem service types, 10; training and civil types, 8. In the ensuing three years there were ordered 201 planes, as follows: service types, 106; training and survey types, 95. Together with the 18 aircraft referred to previously, these make a total of 219 aircraft for delivery subsequent to April 1,	1936. This was before the
preparation, of this year's estimates. Of these 219 aircraft up to March 31, 1939, planes to the number of 110 had been delivered. Of the planes on order there remained to be delivered subsequent to April 1, 1939, the following: service types, 76; training types, 33, making a total of 109.


Grote Stirling: Ordered when?


Ian Alistair Mackenzie: The
planes on order.


Grote Stirling: The minister is not able to say when these were ordered?


Ian Alistair Mackenzie: Sup-ply-National Defence
Summary Aircraft Situation (Tabulation A)
Fiscal Year	Delivery	Write-off	Strength	Orders Placed	1st Line	Training	Total	1st Line	Training	Total	1st Line	Training	Total	1st Line	Training	Total1936/37	4	5	9	1	21	22	26	125	151	8	16	241937/38	9	41	50	2	23	25	33	143	176	63	54	1171938/39	27	24	51	8	9	17	52	158	210	35	25	60Total	40	70	110	11	53	64	106	95	201
With regard to aircraft engines, on April 1, 1936, the department had 282. In the three ensuing years 263 were ordered. On March 31, 1939, the department had 475, while engines ordered and undelivered on March 31, 1939, numbered 30. The balance is accounted for by wastage, loss, obsolescence, and so on. Expenditures on new aircraft and engines in the three years aggregated 86,473,287.
In regard to maintenance, logically in consequence of increases in personnel and equipment, maintenance costs have shown a marked increase, as follows:
1936-	37	
$1,015,7601937-	38	
2,261,8531938-	39	
2,442,417
Included in the foregoing are the following: bombs, motor transport, marine craft, ammunition, fuel, aircraft, spares, barrack stores, wireless, photo stores, gasoline and oil, freight, parachutes, overhaul, light, power, rentals, telegrams, miscellaneous stores and repair and upkeep of buildings. Armament, cameras and so on have been acquired each year along with aircraft. Mobilization stores equivalent to one-third of requirements were acquired in 1937-38. In regard to parachutes, on April 1, 1936, we had 314. During the past three years we have purchased 590, and as of April 1, 1939, the number of serviceable parachutes was 598. Other equipment acquired includes 75 motor transport vehicles and 26 marine craft.
Now I come to construction. Coincident with this increase in personnel and equipment, and as part of the defence policy of distributing these to the best advantage, there has been a necessarily heavy construction program. Expenditures have been as follows:
1936- 37	 $ 604,976
1937-	38	
1,964,6451938-	39	
1,896,900Total	
$4,466,521
These expenditures have been on the development of new aerodromes and seaplane bases, construction of hangars, workshops, barracks, stores buildings, and so on. Six new sites have been developed and nine 71492-2054
hangars built, as well as the necessary barracks, magazines and other accommodations that go with these. On the Pacific coast construction was begun in 1936-37 on a bulkhead, apron and two hangars at the Jericho seaplane station. These were completed in 1937-38. Two additional hangars and an airmen's barracks were being built during 1938-39, and quarters for single officers have been acquired. The new apron and slipway were completed in 1938. At Aliford bay, in the Queen Charlotte islands, the site for a seaplane base was purchased in 1937-38, and a new apron and slipway are being built this year. Construction was commenced during 1938-39 on quarters for officers and airmen and also a small workshop and stores building. At Patricia bay, on Vancouver island, a new aerodrome site was purchased and partly developed during 1937-38. Grading of this will be completed shortly. At Kamloops four magazine units were built, and at Esquimalt one magazine unit was built. At Calgary construction of a new landplane hangar is related directly to Pacific coast defence.
On the Atlantic coast a new aerodrome site at Yarmouth was acquired and development begun in 1937-38. Further development was continued during 1938-39. At Dartmouth a new site was acquired, and the grading of four runways was half completed during 193S-39. At Truro a new site was acquired in 1938-39 and four magazines, a heating plant and a caretaker's cottage are now under construction. Clearing and grubbing of the new runways was eighty per cent completed during 1938-39. At Sydney a site has been arranged for, the majority of the property being provided free by the provincial government. Work on clearing and draining these sites was commenced in 1938-39.
Other construction carried on has been as follows:	At Trenton, the chief R.C.A.F.
training centre, development work has been extended each year. In 1936-37 a new hangar, an airmen's barrack block, an administration building, a 25-yard range, and two magazines were built. In 1937-38 the work included an
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airmen's barrack block, single officers' quarters, non-commissioned officers' and airmen's mess building, on which work was begun, 25-yard range, station garage, workshop and stores building. In 1938-39 the work included a new station hospital and large central heating plant. At Rockcliife station, Ottawa, a new slipway and landplane hangar were built in 1936-37, and in 1937-38 the work included a new airmen's barrack block, three buildings for married airmen's quarters and an addition to the single officers' quarters.
Now I should like to place on record, in order that the very last possible detail of information may be available, a summary of the aircraft situation so that it may be available to hon. gentlemen who may desire to discuss it:
Summary of the Aircraft Situation
(a) The aircraft strength on April 1, 1936, was 164, made up as follows:
Service type	 23
Training and	survey	141
Total	 164
(b)	On April 1, 1936, there were 18 aircraft on order, made up as follows:
Modern service type, 10 (4 Sharks, 6 Wapiti). Civil and training types, 8 (3 Deltas, 3 Avro 626's, 2 Super 71's).
(c)	In the period April 1, 1936, to April 1, 1939, 201 aircraft have been ordered, made
up as follows:
Service type	 106
Training and survey types	 95
Total	 201
Details of the types ordered are as follows:
Hurricane	 10
Lysander	 28
Shark	  22
Stranraer	 10
Bolingbroke	 18
Wapiti		18
Avro 621	 1
Avro 626	 9
Delta	 17
Fleet	 21
Grumman	 1
Norsemen	 4
N.A. 16	 16
Tiger Moth	 26
Total	 201
(d) Together with the 18 on order April 1, 1936, (shown in b above) this makes a total of 201 plus 18, that is 219 aircraft on order and to he delivered subsequent to April 1, 1936.
CMr. I. Mackenzie.)
(e) Of these 219 aircraft, 110 were completed and delivered by April 1, 1939, made
us as follows:
First line	 40
Training and survey types	 70
Total	 110
Details of these types follow:
Avro 621	 1
Avro 626	 3
Deltas	 12
Fairchild Super 71	 2
Fleet	 21
Grumman	 1
Tiger Moth	 26
Norsemen	  4
Shark	 9
Stranraer	 2
Wapiti	 24
Hurricane	 5
Total	 110
(f) Of those aircraft on order subsequent to April 1, 1936, there were still to be delivered on April 1, 1939, 109 machines, made up as
follows:
Service type	 76
Training and survey types	 33
Total	 109
Details of these types follow:
Bolingbroke	 18
Hurricane	 5
Lysander	 28
Shark	 17
Stranraer	 8
Avro 626	 9
Delta	 8
N.A. 16	 16
Total	 109
Note: Anticipated delivery dates are shown in tabulation B.
(g) If no aircraft had been written off, the strength on April 1, 1939, would have been 274, made up as follows:
1st line Training Total 1st April, 1936 ..	23	141	164
Ordered and delivered in the period April 1, 1936 to April 1,
1939. (see "e" above)	40	70	110

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However, during the three years there were 64 aircraft written off as follows:
Atlas	 4
Shark	 1
Wapiti	 2
Hurricane	 1
Siskin	 3
Bellanca	 4
Courier	 1
Fairchild	F.C.2W	
2Fairchild	51	
2Fairchild	71	
3B'airehild	Super	71	
1Fleet	
8Ford tri-motor	
1Moth 60M	
16Puss Moth	
9Tiger Moth	
3Vedette	
3Total	
64
Therefore the actual strength at April 1, 1939, was 210 aircraft made up as follows:
Modern service	type	 36
Obsolete service type	 16
Training and civil	type	 158
Total	 210
Details of the types in hand follow:
Hurricane	 4
Shark	 8
Stranraer	 2
Wapiti	 22
Siskin	 5
Atlas	 11
Delta	 12
Fairchild 71	 15
Fairchild 51	 7
Fleet	 40
Tiger Moth	 23
Moth 60	 22
Tomtit	 2
Avro 621	 7
Avro 626	 3
Bellanca	 8
Super 71	 1
Grumman	 1
Norseman	 4
Vancouver	 4
Vedette	 9
Total
210
(h) When the 109 aircraft now on order (shown in "l" above) have been delivered, the Department will have a total apparent strength of 319 aircraft, made up as follows:
First line	 112
Obsolete service types	 16*
Training and	survey type	 191
Total	 319
* Siskin and Atlas.
Details of types are as follows:
Bolingbroke	 18
Hurricane	 9
Lysander	 28
Shark	 25
Stranraer	 10
Wapiti	 22
Atlas	 11
Siskin	 5
Avro 621	 7
Avro 626	 12
Bellanca	 8
Delta	 20
Fairchild 51	 7
Fairchild 71	 15
Fairchild Super 71	 1
Fleet	 40
Grumman	 1
Moth 60M	 22
N.A. 16	 16
Norseman	 4
Tiger Moth	 23
Tomtit	 2
Vancouver	 4
Vedette	 9
Total	 319
(i) However, before delivery of the 109 aircraft has been completed, it is considered that another 69 aircraft will have been written off as follows:
Bellanca	 8*
Atlas	 ll*
Fairchild	51	
2*Fairchild	71	
7*Fleet	
4**Moth 60M	
22*Siskin	
5*Tiger Moth	
4**Tomtit	
2*Vedette	
4*Total	
69
* obsolete. ** estimated wastage.
Note: No wastage is included in these figures for other than primary training aircraft. On this basis the department has, therefore, now provided for a total of 319 minus 69, that
is 250, made up as follows;
First line	 112
Training and survey type	 138
Explanatory Note:
The orders placed have been shown in the fiscal years during which the estimates provided for the purchases, that is. an order placed in December, 1937, chargeable against 1938-39 funds, has been shown as having been placed in the fiscal year 1938-39.
Now, Mr. Speaker, I come to a consideration of the estimates for 1939-40, and I should like to be allowed this year, as I was last year, to place upon Hansard, tables showing comparative expenditures in Canada and other countries, in order that this may be readily available to hon. members:

Department of National Defence Expenditure on National Defence-Various Countries (Latest available figures)
Country
Australia	
Canada	
Great Britain and Northern
Ireland	
New Zealand	
South Africa	
Belgium	
Denmark	
Finland	
France	
Germany	
Italy	
Japan	
Norway	
Russia	
Sweden	
Switzerland... United States.
Population
6.867.000
11,120,000
47,288,000
1.587.000
2.034.000 (Europeans)
8.331.000
3.749.000
3.603.000
41.950.000
(a)	78,500,000
43.142.000 72,242,800
2.908.000 168,000,000
6.285.000
4.183.000
(b)	130,215,000
N ational Defence Appropriations
Total 000's omitted
44,753 (c) 31,259
1,673,840
6,419
10,041
54,033
9,768
18,482
863,820
312,527
1,131,350
12,950
4,370,250
47,302
25,825
1,009,700
Fer
capita
6 51
2 81
35 39 4 04 4 93
6	48 2 60
5	13 20 59
7	24 15 66
4 45 26 01 7 52
6	17
7	75
Per cent of total budget
7-4
4-	67
5-	11
9-59
44-83
National Defence Appropriations
Total 000's omitted

59,950
(c)	37,166
2,083,000
8,466
(d)	9,600
62,990
13,464
24,788
932,739
Per
capita
8 73
3	34
44 05 5 33
4	71
7 56 3 59 6 87 22 23
Per cent of total budget
8-17
(h) 41-66 5-85
(Since 1934-35 no figures have been published)
12-86
54-16
66-03
18-0
21-35
318,270 1,768,072 13,075 6,761,100 71,916 27,853 (e) 1,389,718
7 37	23-98
14 47	78-99
4 49	9-88
40 24	
11 44	23-34
6 65	22-36
10 07	(e) 14-48
National Defence Estimates
Total 000's omitted	Per capita	Per cent of total budget
$ (f) 83,333 (c) 62,624 (i) 2,712,988	$ 12 13 5 63 57 37	
		11-38
		
(j) 8,695	4 27	
		
		
		
		
(1) 988,000 (g) 413,700 (k) 2,430,000	23 55 9 58 33 63	
		(g) 28-22
		
		
		
(e) 1,319,558	io i3	(e) ii-5


on

General: Computation based on League of Nations' Armament Year Book (1938) and Statesman's Year Book (1938), except where otherwise stated in notes. Australia, Canada and New Zealand figures from official reports.
(a)	New York Herald Tribune, 30-9-38 (includes Austria and Sudetenland).
(b)	Washington Post, 17-11-38.
(c)	Not including Civil Air Operations, N.W.T. Radio Service and other General Votes (not for Defence purposes) 1937-38 figure is actual expenditure.
(d)	New York Times, 1-10-38.
(e)	New York Times, 6-1-39.
(f)	Montreal Star, 20-1-39.
(g)	Montreal Gazette, 30-12-38.
(h)	Ottawa Citizen, 16-7-38.
(i)	Montreal Star, 15-2-39.
(j)	Ottawa Citizen, 28-3-39.
(k)	Buffalo Evening News, 2-12-38.
(l)	London Times, 3-3-39.
Militia and Air Force Intelligence Section, Ottawa, Ontario.
18th April, 1939.
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Department of National Defence Expenditure on National Defence

Various Countries In Order of Per Capita Cost (latest available figures)
Country	1937-38
Canada	 $ 2 81
Denmark	
2	60Norway	
4	45South Africa	
4	93New Zealand	
4	04Switzerland	
6	17Finland	
5	13Italy	
7	24Belgium	
6	48Australia	
6	51United States	
7	75Sweden	
7	52France	
20	59Japan	
15	66Russia	
26	01Gt. Britain and N. Ireland.. ..	35	39Germany	er capita	Percentage of budget	1938-39	1939-40	1937-38	1938-39	1939-40$ 3 34	$ 5 63	7-4	8-17	11-383 59	9-59	12-86	4 49	10-32	9-88	4 71	4 27	5-11	5 33	4-67	5-85	6 65	21-35	22-36	6 87	15-79	25-4	7 37	9 58	25-04	23-98	28-227 56	11-81	16-36	8 73	12 13	13-01	16-09	10 67	10 13	13-25	14-48	14-511 44	14-23	23-34	22 23	23 55	44-83	54-16	24 47	33 63	66-03	78-99	40 24	18-	44 05	57 37	35-89	41-66	
In regard to the year 1939-40, in the estimates now before us the government is asking the house to vote for national defence $54,000,-
000.	In addition, under separate legislation, for the training of pilots in order to meet the requirements of our own force and the desire of the Royal Air Force to have pilots trained in Canada, there will be appropriated $6,000,-
000.	The grand total of appropriations is therefore $60,000,000-that is, outside of the $3,000,000 for capital expenditures.
The departmental vote is divided among the several services as follows:
General administration..	.. $	450,900	00Militia services	
20,775,600	00Naval services	
8,500,000	00A.ir services	
23,775,565	00Miscellaneous	
495,950	00Pensions	
1,985	42

Training of pilots	 6,000,000	00

Now follows an account of the manner in which these funds are to be used by the three services. We shall deal first of all with naval services. In 1939-40 the vote is $8,500,000, whereas in 1938-39 the amount voted, including the supplementary estimates, was $6,639,232, showing an increase of $1,860,768.
As hon. members will have observed, the estimates this year are presented under different headings from those used last year, because the new arrangement adopted last year created difficulties both in administration and accounting. Appropriations for the naval service this year have been presented, it will be observed, in the estimate book, under four subheadings, as follows:
1939-40	1938-39
Increase or decrease
Royal Canadian Navy	
Naval stores	
Engineering services	
Royal Canadian Naval Reserves
$2,675,961	$2,178,282
2,382,672	1,164,892
3,012,268	3,043,265
429,099	252,792
75	Inc. $	497,678	2500	Inc.	1,217,780	0025	Dec.	30,997	2500	Inc.	176,307	00
Totals
$8,500,000	$6,639,232 00
Inc. $1,860,768 00
Then, in regard to personnel, it is proposed during the coming year to increase the personnel establishment of the Royal Canadian Navy, the Royal Canadian Naval Reserve, and of the Fishermen's Reserve.
The Royal Canadian Navy will be increased by 21 officers, and 363 ratings, as follows:
	Present	To be	
establishment	authorized	IncreaseOfficers..	. . 119	140	21Ratings..	.. 1,462	1,825	363Totals.	.. 1,581	1,965	384
It is hoped by this increase to provide trained personnel in anticipation of new vessels to be acquired in the future. In an
emergency, it is possible to acquire vessels for various purposes very quickly, but if these are to be manned by trained naval personnel, it is necessary that a nucleus, in excess of the complement of the existing ships, shall be trained in advance.
In regard to the Royal Canadian Volunteer Reserve, it is proposed to add two new divisions to that force during the coming year. The sixteen present divisions are located at the following points: Halifax, Charlottetown, Saint John, Quebec, Montreal, Ottawa, Toronto, Hamilton, Winnipeg, Regina, Saskatoon, Edmonton, Calgary, Vancouver, Prince Rupert, Port Arthur.
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It is expected that one of the two new divisions will be situated in Montreal, for French-speaking boys. The existing Montreal unit is for those who speak English. There is keen competition among several cities for the other proposed new division, and its location will be determined by the prospects for the quickest and most efficient recruitment up to strength.
Then, the Royal Canadian Naval Reserve exists for the purpose of adding to the resources of the naval forces, officers and men of the mercantile marine. The Royal Canadian Naval Reserve has an authorized complement of 500, and its actual strength is only a little more than half the authorization. No increase in establishment is contemplated, therefore, but every effort will be made to add to the strength of the reserve during the coming year.
In regard to the Fishermen's Reserve I would say that great success was experienced in organizing that reserve on the Pacific coast, with a strength of 40 skippers and 160 seamen. It is now proposed to establish a similar reserve on the Atlantic coast, of equal strength with that on the Pacific. All 400 of the personnel of the Fishermen's Reserve will be given thirty days' training.
A new unit is being added to the naval reserve this year, to be known as the Royal Canadian Fleet Reserve. This corps will be recruited from men discharged from the Royal Canadian Navy. Upon discharge from the Royal Canadian Navy, pensioners and those who have served less than the full time to qualify for pension will be given the opportunity to enlist in the Royal Canadian Fleet Reserve for a period of five years. Ratings will be trained in the second and fourth years of each period of enrolment. The object of the fleet reserve is to retain as available naval ratings who have already received training in the Royal Canadian Navy.
In regard to ships, it is proposed during the coming year to add one major unit to the floating establishment of the Royal Canadian Navy. One flotilla leader is to be purchased at an estimated price of $820,000. This vessel will be purchased from the admiralty. A ship, built at the same time as the four destroyers recently purchased, is understood to be available. Acquisition of a leader, whose interior arrangements are adapted for the accommodation of staff, will make it possible for the destroyer flotillas to be trained in flotilla manoeuvres, and will give to Canadian staff officers experience in the direction of such activities.
In addition, it is proposed, during the coming year, to draw up complete working plans for the building in Canada of anti-submarine

vessels, motor torpedo boats, and a training schooner for the west coast.
It is believed, from the success of Canadian shipyards in building the four mine sweepers now in commission, that Canada has the capacity to produce both these additional types of naval craft. The requirements of Canadian defence contemplate the use of such vessels. Motor torpedo boats, it is believed, will be especially useful on the river St. Lawrence. Construction of another training schooner for use on the Pacific will give the same facilities for training on that coast as have been successfully established on the Atlantic in H.M.C.S. Venture. Some minor yard craft such as ammunition lighters, motorboats, et cetera, will be built for use in naval harbours during 1939-40.
New construction works during the coming year will involve the expenditure of $358,500 at Halifax and $545,800 at Esquimalt. A new barrack wing, a new torpedo depot and numerous additions to the Bedford magazine will be provided on the east coast. On the west coast there will be an extension to the dockyard wharves, various storehouses, some small additions to the barrack blocks, and a number of additional units for the Esquimalt magazine.
Then, in regard to naval stores, may I say that the vote for naval stores has been doubled. The greatest increase is for the acquisition of armament stores, such as guns, ammunition, torpedoes, depth charges, and so on. The expenditure on armament stores during 1939-40 will be $729,000 as against $117,767 last year. Miscellaneous stores for ships and harbour defence purposes, to be acquired during the coming year, will include additional antisubmarine and anti-torpedo nets for both east and west coasts.
I now come to the militia services. For the militia services in the year 1939-40 the department asks $20,775,600, whereas in 1938-39 it asked $16,727,020, representing an increase of $4,048,580. This entire increase is being utilized in the acquisition of stores and equipment-chiefly armament stores. Training of the permanent and non-permanent militia is being maintained at the increased level arrived at by steady progress during the past three years. In the non-permanent militia, fortress troops will receive twenty-one days' training, other technical arms twelve, thirteen and fourteen days' training; and the minimum number of days for any branch of the service will be eleven days.
The total estimates for general stores in the present year amount to $8,836,793 as compared with $4,384,437 in the year 1938-39, or an increase of $4,452,356. Salaries, pay and allowances, operating expenses generally, will consume approximately $1,400,000 of this, and

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the sum available for the actual purchase of military stores and equipment will be $7,486,190.
As already explained, there have been placed during the past two years orders for various supplies which have not yet been delivered. Deliveries during 1939-40 are expected to use up, of this year's appropriation, the sum of $3,773,000. This is not the full cost of pending future deliveries, but covers progress results expected to be achieved during the current fiscal year, and for which it is necessary that funds be provided in this year's appropriations.
One of the most important steps to be taken this year is a commencement of the provision of new clothing for the non-permanent militia. For twenty years the nonpermanent militia has been struggling along with clothing left over from the war. Militia officers report that not only has recruiting been adversely affected by the unattractive, old. worn-out uniforms used by the non-permanent militia on parade, but that the turnover, even in some of the most popular units, has been most discouraging. In some units the annual turnover has been in excess of fifty per cent.
On this basis, effective training and the development of experienced personnel for defence has been made almost impossible. During the coming year we intend to buy
20,000	new jackets and 10,000 pairs of trousers, as a first measure towards the reclothing of the non-permanent militia in better fitting garments of smarter appearance. Khaki will be adhered to. In addition to the normal replacement and other incidental clothing expenses, this provision of new jackets and trousers is expected to cost $174,250. The full increase in the appropriation for clothing and miscellaneous stores is more than $500,000, largely due to the necessity of furnishing the non-permanent militia with more complete and better equipment. For instance, the assembling of larger formations in central training camps requires increased quantities of camp equipment. In addition to the above it is expected by supplementary estimate that provision will be made for boots for the non-permanent militia during the present year.
In connection with the question of armaments and ammunition, the amount asked for armament stores in 1939-40 is $4,299,371. Of this, the sum required to meet payments on past orders expected to mature during the year is $3,323,076. This leaves for initiating new purchases of armaments only $976,295.
The amount asked for 1939-40 for ammunition procurement is $2,499,158. Of this, the sum required to meet payments on past orders ready for delivery during the year is $408,303.
This leaves for new spending in 1939^40 on ammunition $2,090,855. The figures with regard to ammunition include operation of the dominion arsenals at Quebec and Val-cartier, as well as the development of production in private industrial channels in Canada and the procurement from England of such items as cannot be obtained within the dominion.
The provision for signal equipment is $388,400. This is a substantial increase over last year, and allows for the procurement of mechanically propelled vehicles, wireless and radio equipment and general training equipment. Out of the $128,000 provided for mechanical and water transport there will be acquired two war office pattern ambulances, six motorcycles, one motorboat for Halifax, and the replacement of old cars and trucks.
There has been provided approximately $103,600 for the continuous operation of an important unit of the Lindsay arsenal throughout the year. This plant will be used in connection with the production of cartridge cases. Operations are now ready to begin, if they have not begun within the past few days.
Then in connection with future delivery, the major items for which orders will be placed in 1939-40. but with respect to which only partial payments will be required, are as follows:
Provision and development of mechanically propelled vehicles, $426,800.
Bren gun accessories such as chests, tripods, ammunition fillers, etc., $1,192,400.
Searchlight and sound locators, $400,000.
Communication equipment for eastern fortresses, $477,000.
It has already been explained that with regard to most of the important items in the way of armament stores, the time required for production is such that delivery seldom takes place in the year in which the order is placed. In some instances five years will be required to complete contracts already let. This makes it necessary to obtain from parliament authority to enter into contracts for which in that year little or no funds will be required. Sometimes only a small partial vote is asked for in order that authority may be obtained to proceed with negotiations.
There are other requirements urgently needed in connection with which the problem has not been solved as to how they are to be procured. They are not manufactured in Canada. The requirement is so small that the overhead cost of setting up a special plant seems prohibitive. They are made in Great Britain, but the British rearmament program demands the entire output. It has just been mentioned that the department will have approximately $3,000,000 this year for initiating new purchases of arms and ammunition.
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A great deal of this will be utilized in the operation of our own arsenals and in purchasing relatively simple items that can be produced by Canadian industry. But where new items are to be ordered, the actual disbursement during 1939-40 will be relatively small.
The department is working steadily on the problem of finding the means of production for certain types of equipment for which there is no obvious source available. Energetic efforts are being put forth with respect to half a dozen specific requirements at the present time. It is not possible now to forecast whether we shall succeed in arranging for Canadian production, or whether we shall have to rely upon old country sources. Perhaps in one or two cases we shall develop Canadian sources, but in others, this may not be found economical. One cannot foretell with respect to which requirements the first solution may be found. Accordingly the department is asking for small votes for a variety of requirements under this heading in order that pressure may be kept up on all fronts until solutions have been found that utilize the authority granted by parliament for the expenditure of approximately S3,000,000 on new items.


Mr. GREEN:: Would the minister have any objection to telling the committee just what items the department finds itself unable to procure?


Ian Alistair Mackenzie: I will place on Hansard a record which will give that information.


Howard Charles Green: That will be a list of the items of equipment which cannot be procured ?


Ian Alistair Mackenzie: In order that the committee may have some appreciation of where we are going in this matter of supplying the military services with a proper supply of modem arms and equipment, the general staff was asked to outline a broad objective of requirements. The meaning of the objective may be better understood if it were stated that upon acquiring the items included in it the service could, from that point, proceed on a maintenance basis. This objective includes the proper weapons and stores of ammunition to put the militia service in a position to discharge with reasonable efficiency its share of the duty of national defence for Canada. I should like to place upon Hansard the recommendations of the officials of the militia service with regard to their requirements:
In terms of the commodities themselves, the chief items that go to make up this objective in armaments and ammunition are the following:

Coast Defence Armament for both East and West Coasts-
12 heavy coast defence guns 9 mountings for heavy guns 4 medium guns 3 mountings for medium guns 6 light quick firing guns Anti-Aircraft Armament-
123 anti-aircraft guns with equipment of four different types
Mobile Army Requirements-
544 infantry mortars 60 medium howitzer equipments 20 medium gun equipments 500 field gun equipments 348 anti-tank equipments
The ammunition requirements are those considered essential for the proper supply of the above-mentioned weapons.
In terms of cost, the actual armament and ammunition items included in this broad objective, are estimated, at present-day prices, to involve approximately $60,000,000.
The distribution, by items, is as follows:
Coast defence armament	$ 3,267,300
Anti-aircraft armament	 11,522,800
Mobile army armament	 17,864,160
Coast defence ammunition.. ..	1,720,000
Anti-aircraft ammunition.. ..	7,270,000
Mobile army ammunition		17,823,280

With regard to the mobile army equipment and ammunition for the new types envisioned in the requirements laid down by the general staff, which appear in the table to which I have just referred, no partial or preliminary votes have been included in the present estimates, but small sums have been included towards the coast defence and anti-aircraft artillery because provision of these is regarded as a necessity to be dealt with as speedily as the very difficult procurement problem will allow.


Grote Stirling: The minister is putting on Hansard a list of what the officers have asked for, all of which has not been granted at the present time?


Ian Alistair Mackenzie: Yes.
With regard to engineer services and works, the amount allotted for construction of new buildings for the militia services for
1939-40 is slightly less than that approved for 1938-39. The estimates of 1939-40 provide for $2,367,165, whereas the vote for 1938-39 was $2,799,855, there being a decrease of $432,720. It is not anticipated that the repair and upkeep of buildings and works will require any greater sum during the current year. The items of new work to be undertaken are very widely distributed in comparatively small amounts. I shall give some of the larger items.
There will be a new building at Camp Borden for the accommodation of the Canadian armoured fighting vehicle school and the army service corps training centre, costing

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$100,000. At Kingston there will be further construction of the anti-aircraft training building and artillery park to the extent of $30,000. At Kingston Vimy barracks, there will be additional work on the parade ground, roads and grading, electrical system, water supply, sewer construction, et cetera, to an amount of $50,000.
There will be an expenditure of $45,000 on the Montreal St. Bruno rifle range. There will be new construction to the extent of $40,000 on the Bedford magazine at Halifax, and repairs and renewals to the extent of $26,500 at Fort McNab. There is $25,000 for continued development at Shilo camp, Manitoba. The completion of the building program at the joint service magazine at Esqui-malt will cost $73,000. The third stage of the construction of Pacific coast defences will total $900,000. The total cost of the entire program is estimated at $3,975,000, of which $1,995,000 has already been provided in the past two years, leaving a further requirement for next year of $1,080,000. At Dundurn camp, Saskatchewan, there will be further improvements to the extent of $22,000. Additional work will be done in all military districts, with reference to the following projects:
Niagara rifle range Winona, Ontario, rifle range Fort Frontenac barracks St. Johns, Quebec, barracks Valcartier camp Sussex camp
Kamloops joint service magazine Prince Albert and Victoria armouries Royal Military college
I come now to the program for the air services. For the air services there is being appropriated for the year 1939-40 the sum of $29,775,565, which is an increase of $18,089,048 over last year's vote. The appropriation for the Royal Canadian Air Force, permanent, is $20,085,238; for the Royal Canadian Air Force, non-permanent, the appropriation is $3,365,277; for civil government air operations, $325,050, and for training of pilots, $6,000,000. As already mentioned, the immediate objective of the department is to build up for the defence of Canada an air force consisting, on a peace time basis, of eleven permanent and twelve non-permanet squadrons, which is considered the minimum for any effective defence plan. The policy is to provide permanent force squadrons with a full complement of first line service aircraft in squadrons, with a reserve, and to provide non-permanent squadrons with one-third of their complement, consisting of elementary and advanced training aircraft, and a reserve. Further, it is intended to provide schools with the number of aircraft required to train new entries and replace wastage.
This objective involves the provision of 527 aircraft. Of this number approximately
59 per cent, or 312, represents the number of aircraft required to be available for active operations in squadrons. The remaining 215, including reserves, are required for training. To man a force of this size requires a permanent force of 525 officers and 4,500 airmen, a non-permanent force of 220 officers and 2,014 airmen, making a total of 745 officers and 6,514 airmen. Of the total number of officers, 599 would be pilots, the remaining 146 officers being employed on ground duties. A small proportion of airmen are also employed as pilots.
There has already been described the progress made towards attainment of this objective. Further progress is to be made out of current year's estimates as follows. Personnel: Aside from increases to be provided for in the vote for training of pilots, personnel of the Royal Canadian Air Force permanent force is to be increased by fourteen officers and 217 airmen, making a total of 231, making the establishment for the coming year 273 officers and 2,172 airmen, a total of 2,445 (including permanent officers and men attached to nonpermanent force for instruction, et cetera). Pay and allowances for this establishment will be $3,026,777-an increase of $159,873. For the permanent air force the principal other items in the appropriations are: for stores and equipment, $11,889,893; construction of buildings and works, $4,023,000. For the nonpermanent air force the principal items in the appropriations are: pay and allowances, $279,725; stores and equipment, $2,657,591; construction of buildings and works, $189,000, as well as the usual maintenance, transportation, medical and other charges.
New service type aircraft, in addition to training craft to be acquired out of the $6,000,000 training vote, will be ordered during the coming year as follows: for the permanent air force, eighty-eight; for the nonpermanent air force, nineteen, a total of one hundred and seven. In addition, there will be purchased forty-five spare engines. Planes to be purchased for the permanent air force will be as follows: six flying boats, six army cooperation planes, twelve general purpose twin engines, ten new type general recon-naisance twin engine planes, ten general purpose single engine, twenty-six fighters, eight-teen bombers twin engines.
For the non-permanent air force:	four
advanced trainer aircraft and fifteen observation aircraft. Of the above, fourteen fighters and the eighteen twin engine bombers will be purchased abroad for delivery within the fiscal year. The others will be manufactured in Canada and cannot be completed for delivery within the year, but deliveries of these will be made very quickly. Total payments during the coming fiscal year on the above
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new aircraft will be: for the permanent force, 84,471,003; for the non-permanent force, $1,173,646, a total of $5,644,649, leaving to be paid in 1940-41, when it is expected that delivery will be effected, a balance of $2,350,000.
Out of the appropriation for stores and equipment there will be payable on seventy-four aircraft, already ordered and not delivered, the following sums: on fifty-two aircraft for the permanent Royal Canadian Air Force, $2,292,169; on twenty-two aircraft for the non-permanent Royal Canadian Air Force, $820,030, a total of $3,112,199. The total cost of the planes ordered during the past two years on which this balance of payment remains to be made was: fifty-two for permanent Royal Canadian Air Force, $3,439,043; twenty-two for non-permanent Royal Canadian Air Force, $1,091,434, a total of $4,158,477.
It will be seen, having regard to what was explained with regard to progress during the past three years, that without the planes to be ordered from the 1939-40 estimates we have provided, in allowing for wastage, for 250 aircraft out of an objective of 527. The additional 107, to be ordered in the coming year will raise the total to 357, which is approximately two-thirds of the objective laid down for the twenty-three squadrons.
Progress payments made on planes under construction in the new aircraft industry in Canada, which these orders have assisted to develop, amount so far to approximately 45 per cent of the total. It is expected that all deliveries will be completed during the coming fiscal year.
It has taken longer to procure these aircraft from Canadian industry than would have been the case had they been bought abroad. This delay was considered well worth while, because the development in Canada of a future source of supply for service aircraft is in itself a major contribution to national defence. Until this department went into the market and sought to develop this domestic source of supply, the manufacture of modern service aircraft was an industry that did not exist in Canada. Whatever benefits may accrue to Canadian industry from the recent decision of the British air ministry to purchase aircraft in Canada are attributable to the policy of the Department of National Defence in fostering this Canadian industry, because the air ministry decided to deal only with firms which were already engaged in production. On the other hand, the decision of the British government to place orders in Canada will have several benefits to the Department of National Defence. On the strength of British orders additional plants and 
equipment will be brought into use; additional engineers and workers will be trained in the production of service craft and, due to the larger operations, the unit cost to the Canadian government of similar orders will be substantially reduced.
In addition to the new aircraft above enumerated, the department will purchase during 1939-40: thirty-eight new aircraft engines for the permanent air force; fifteen new aircraft engines for the non-permanent air force.
Construction of buildings and works. Out of the $4,023,000 to be expended on construction works for the Royal Canadian Air Force there will be further development of the program on both Atlantic and Pacific coasts, as well as the provision of increased facilities at Trenton and Ottawa and the construction of a central repair depot at a site not yet finally determined. The chief activities on the Pacific coast will be as follows: At Patricia bay: completion of the grading, hard-surfacing the runways, construction of two hangars, one each for land planes and sea planes, barrack block, et cetera; at Prince Rupert: clearing and excavating of site, construction of slipway, apron, wireless station and storage tanks; at Aliford bay : completion of the apron, slipway and wharf; provision of light and power, construction of wireless station, storage tanks, et cetera; at the Kamloops magazine: officers' and men's quarters; at Vancouver: construction of radio station, stores building, pier and breakwater, additions and improvements to quarters, et cetera.
On the Atlantic coast the following will be the chief undertakings: at Dartmouth: construction of four hangars, grading and hard-surfacing of runways, et cetera; at Yarmouth: completion of grading and hard-surfacing runways; at Sydney: filling, levelling and hard-surfacing the runways, and construction of a road t-o the site; at Truro: grading and hard-surfacing the runways, completion of magazines, construction of tank and water supply, construction of quarters for officers and men. Other works will include: at Trenton: a training workshop, hospital construction, boundary lights and further grading and dredging; at Ottawa: construction of an additional hangar, hard-surfacing two runways, construction of a garage and married officers' quarters. At locations not yet decided there will be constructed a central repair depot and four direction finding and one wireless telegraph stations.
I come now, Mr. Chairman, to the $6,000,000 vote for the training of pilots. This coincides with the discussion which took place last year with respect to cooperation with the British authorities for the joint training of pilots. It

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covers the cost of individual instruction, teaching the young applicant what he needs to know about actual flying up to the point where he is able to take his place in an established squadron. The program laid down under this appropriation is intended to cover the training of 126 pilots for the Royal Canadian Air Force and the Royal Air Force. It includes:	(1) pay and allowances for the
pilots themselves and for the instructional and ground staff necessary to their training; (2) cost of the varied types of equipment required, including aircraft and engines, together with spares; (3) cost of buildings and construction work necessary to the scheme. These expenditures, as with the other national defence estimates this year, are classified as follows: ordinary, $2,771,840; capital, $3,228,160. The relatively large capital amount is for the acquisition of new equipment and buildings necessary for the addition of this large new program. For new buildings and works there will be required $932,000; for new aircraft and engines there will be required $2,123,160; barrack equipment will require $116,500; and aircraft spares, $56,500.
Because not all deliveries can be completed within the fiscal year, the appropriation for aircraft and engines involves a commitment of S641,840 aaginst the future, while the building program involves a future commitment of $120,000. Training will be conducted in three stages: (a) elementary training, which will be carried out at civilian schools at various places; (b) intermediate training, to be carried out at Camp Borden; (c) advanced training, chiefly at Trenton.
Personnel. The instructional and maintenance staff required for the intermediate and advanced stages to be carried out at Camp Borden and Trenton will require approximately sixty-eight officers and 600 airmen. It will be necessary to increase the air force by those numbers during the coming year. Key positions in the training scheme will be filled as far as possible from the existing complement of the Royal Canadian Air Force. The remainder will be appointed or enlisted from civil sources or from the auxiliary' active air force. The scheme will require ninety-three training aircraft, of which seventy-one will be required for active and immediate reserve purposes. The other twenty-two will be in reserve stores. Pay and allowances for personnel in the first year's operation will run to slightly more than one million dollars. The maintenance cost of stores and equipment in the first year is estimated at $1,319,000. This includes the items for fuel, overhaul of aircraft and engines, spare equipment, clothing, miscellaneous stores, et cetera. The whole estimate is based on existing regulations and the actual experience in administering them.
I would refer hon. members to the statement made by the Prime Minister in this house on July 1, 1938. I quote:
We are quite prepared in connection with our own establishments, to help in affording facilities to British pilots if that will be ol service to them.
And again:
We ourselves are prepared to have our own establishments here and to_ give in those establishments facilities to British pilots to come and train here.
Discussions on the basis of these statements have been proceeding. While the final detailed technical arrangements have still to be completed, it is possible to say now that agreement has been reached on a scheme whereby pilots from the United Kingdom will come to Canada to be given the intermediate and advanced stages of training under the auspices of the Canadian Department of National Defence.
iMr. BROOKS: Will that be training under our pilots or under the British pilots?


Ian Alistair Mackenzie: I shall come to that in a moment, if my hon. friend will allow me. One of' the main reasons for sending men to train to Canada is that Canadian topographical and climatic conditions give opportunities for specialized training.
The duration of the scheme will be three years. It is contemplated that the number of pilots coming from the United Kingdom for training will not exceed fifty in any one year. It is planned that, after twelve months' experience of the working of the scheme, the actual costs involved should be investigated by representatives of the Department of National Defence and the air ministry jointly and that, if needs be, the basis of payment should be revised after such investigation.
There are already in existence three methods of entry of Canadian candidates for Royal Air Force commission: (a) two locally accepted Canadians may be selected and trained each year in Canada for permanent commissions in the Royal Air Force; (b) fifteen locally accepted Canadians are trained each year in Canada for short service commissions in the Royal Air Force; (c) one hundred and twenty applicants for short service commissions in the Royal Air Force are interviewed, medically examined and selected in Canada. All the foregoing methods of entry will remain in force, and their existence will not be affected by the introduction of the scheme referred to above.
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In regard to the question asked by my hon. friend it is anticipated that there will be a limited number of high grade instructors attached to our own instruction staff under the jurisdiction of the department here for purposes of training. I have not the exact figures at the moment, but shall be glad to get them.
Two other innovations are embodied in the program covered by the vote for "training of pilots": (1) initiation of the "short service commission" as a feature of the Royal Canadian Air Force establishment; (2) utilization of approved civilian flying clubs for the elementary stages of training.
In regard to short service commissions, present regulations provide that candidates for commissions in the permanent Royal Canadian Air Force are required to be graduates of the Royal Military College or of a Canadian university. This high standard has been based on the assumption that the permanent air force officers must all be competent to assume the most exacting technical and administrative duties of what is, in a sense, a very large engineering organization.
Two problems have developed during the period of rapid expansion during the past three years: (1) The extreme physical strain of active flying necessitates a certain amount of turn-over among the junior officers; there is a tendency for the force to become grounded through lack of physical fitness; (2) If all officers hold permanent commissions there will not be enough administrative posts for those who attain seniority in the service. Accordingly it has been decided to introduce a short service commission scheme similar to that in the Royal Air Force. The scheme contemplates 50 per cent permanent and 50 per cent short service officers ultimately. The period of service on the active list for short service commissions will be four years-to be followed by six years on the Royal Canadian Air Force reserve. The ordinary conditions as to physical fitness, nationality, et cetera, will be required. The educational standard, however, will be lower. The required standard will be the equivalent of junior matriculation, plus three or more senior matriculation subjects.
Candidates will be considered under three categories: (1) Those without previous flying experience who are unmarried and between eighteen and twenty-five years of age, inclusive; (2) Qualified pilots of the Auxiliary Active Air Force and the Royal Canadian Air Force reserve; (3) Commercial pilots.
Qualified candidates of the latter two categories who are married may be carried supernumerary to the married establishment.
Provision is made for the award of a limited number of permanent commissions to those

accepted for short service commissions. It will also be possible for a limited number to remain on medium service commissions-that is, to remain for an additional five years on the active list-making nine years in all. Candidates without previous flying experience will receive their elementary flying and ground training at civilian schools-namely, with the approved flying clubs.
Pay of the short service officers will be the same as that for general list officers, excepting that provisional pilot officers will receive $3.50 a day, augmented by fifty cents in lieu of rations and quarters, during the time of training at civilian flying schools.
Assistance in reestablishment in civil life for these young men after their four years' service is part of the program. Upon transfer to the reserve each officer will receive a gratuity calculated on the basis of $500 for each year of service, excepting the first year. In addition, 5 per cent of the pay of the short service officer will be deducted as deferred pay and returned to him on transfer to the reserve or on being gazetted out of the service, or to the estate of an officer who dies while on service. At the end of the ordinary four year term the young officer would thus leave the service with $1,500 cash, plus 5 per cent of all pay earned.
The civilian flying clubs have played an important role in the development of aviation in Canada. It is proposed now to assign them a definite role in the training of pilots for the Royal Canadian Air Force. As a result of the decision to train 126 pilots a year for the Royal Canadian Air Force and the Royal Air Force, the elementary stage of training is to be done through the instrumentality of the flying clubs. Canadian applicants will be trained by flying club instructors in flying club planes. The department will provide two planes to each approved club and the club will provide one plane. The instructors must have the standard certificates laid down by the force, and it is proposed to bring them in at the outset for refresher courses of instruction at Camp Borden. This will ensure equality of standards in the instruction at all clubs throughout the country.
The contract between the department and the flying clubs will be in the form of separate contracts with each club to which is assigned one or more pilot officers for training. The form of the contract was worked out with the flying clubs association, and the rates of compensation and other terms are based on the existing experience of the clubs, checked against departmental information. The clubs are endeavouring to render this vital service to our aerial defence without profit to their organizations. The club undertakes to pro-

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vide one training aircraft of approved type; the department agrees to furnish two additional planes. The club is to provide two instructors and contracts to carry out the training according to the syllabus laid down by the department. The club is to be paid on the basis of so much per flying hour, but in addition the department is to pay $200 to the club for each officer whose training is completed satisfactorily to the department.
A scale of compensation for lectures and instruction on ground subjects is also provided, and it is estimated that the department will pay in cash to the flying club a total of $840 with respect to the training of each pilot. Each of the three periods of training: (a) Elementary-with the flying clubs; (b)	intermediate-at Camp Borden; (c)
advanced-at Trenton, will be of approximately sixteen weeks duration, with one week between each stage for travelling. This permits the three stages of training to be completed in one year.
That completes a description of the estimates now before us for consideration. I should like now to approach more general conclusions with regard to the philosophy of defence.
To approach the broad question of defence in a scientific manner it is necessary to ask: First, what national or other interests shall in the last resort be defended by force of arms; second, from what quarter are these interests exposed to attack?
The general and particular defensive requirements, tasks, organization, composition, strength and distribution of the armed and other forces must be worked out in detail in the light of the interests to be defended and what they have to be defended against. President Roosevelt, in a recent memorable speech, held that there are forces in the world to-day that threaten not only national existence, but all that makes existence worth while. He said that three institutions, indispensable to America, are being challenged, and that the first of these, religion, is the source of the other two, democracy and international good faith.
Mr. Walter Lippmann described these as the most important landmarks in the history of western thought. In the New York Herald-Tribune of January 7, 1939, he said :
It marks the reconciliation which is now in progress, after more than >a _ century of destructive conflict, between patriotism, freedom, democracy and religion.
Again to quote Mr. Lippmann:
And so this message expresses a philosophy, as new to the president as it is new to the world that heard it, a philosophy which formulates in outline the positive answer of the west to the forces which threaten to destroy
the western world. One would greatly underestimate its significance in thinking of it only as a response to the challenge of nazism. It is in a much more important sense a response to those forces of moral disintegration which communism, fascism and nazism inherit and exploit .	.	. This message contains within
it. hy implication and in embryo, the _ outline of that reconstruction in their moral philosophy which the democracies must undertake if they are to survive.
These sentiments reflect Canadian opinion fully as much as that of the United States republic. In the light of this declaration it may be said that Canada should be prepared to defend by force of arms if necessary: (1) Our religion, our freedom and our institutions; (2) our coasts and coastal regions, our centres of population and industry, our main ports and the focal sea areas where trade routes converge in the vicinity of our main ports; (3) our neutrality in a war in which Canada is not a belligerent; (4) internal order.
As to the extent to which the armed forces of other powers influence the form and scale of attack to which the above interests may be subject, large scale attacks by enemy forces upon our coasts and our trade at its congested points adjacent to our main ports and focal sea areas are out of the question at the present time, for the following reasons:	.
1.	Geography, distance of bases.
2.	World political situation.
3.	Existence of British and United States navies.
On the north Atlantic the British fleet, whose task it is to keep open vital sea lines of communication, is predominant and is sufficiently strong either to destroy or to contain any potential hostile navy. So long as that condition exists, assuming that Canada for any reason become involved in conflict, a major expedition against our east coast is considered to be practically impossible.
On the United States side of the north Pacific the United States fleet is equally predominant, and any hostile fleet contemplating an attack has to bear this risk in mind, also the risks inherent in the existence of the Singapore base.
It is to be assumed that hostile fleets will be restrained and constrained by the presence of the British and American fleets on the Atlantic and the Pacific, but under modern conditions complete blockade is impossible, and attack upon Canada's overseas trade at its congested points will be by way of minor raiding forces. Raids are a possibility, in fact a probability, but their strength in the contingencies mentioned would be limited by the strength and position of the British and United States or other allied navies.
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Beyond our focal sea areas Canadian, overseas trade receives a measure of protection by the British navy on the north Atlantic route and by the United States navy on the coastal route to the Panama canal. Therefore Canada's responsibility with respect to protection of her trade is limited to the protection of our own ports and of the relatively short distances between those ports and the main trade routes policed by the great navies of Britain and the United States.
In regard to internal order and neutrality, the hazards to be encountered would be less than those coming from enemy action, therefore the forces required to resist external attack would be adequate for these purposes, should any such need arise.
In regard to coasts, coastal regions, ports, focal sea areas, inland centres of population and industry, a minor combined sea, land and air force expedition launched against our coast for the purpose of destroying something of strategic or commercial value, or for the purpose of securing an advanced base from which hostile sea and/or air force raiders could operate against our focal sea areas, our main ports and centres of population and industry inland, might be directed against our own interests or against those of a friendly power, and so has application to all aspects of our direct defence, including the protection of our neutrality. Sporadic hit and run raids by one ship of the line or by one or more cruisers or submarines or armed merchantmen, each carrying one or more aircraft, might have the purpose of destroying vulnerable points by small landing parties, or of raiding focal sea areas and main ports by sea and/or air, of raiding inland centres of population and industry by air.
The forms and scales of attack to which our religion, freedom and institutions are exposed is difficult to estimate, and can perhaps be best expressed in the words of Right Hon. Anthony Eden on January 14, 1939, when he discussed the realities of the situation that confronts the world. He said:
In the autocratic states there is a vitality and an enthusiasm on behalf of the faith that has been fostered among them, which it would be a grave mistake to belittle. We may dislike the methods, the suppression of criticism, the ruthless use of propaganda, and deplore the loss of individual freedom of thought and action, yet the results are there in mass enthusiasm and national fervour, and they are very formidable indeed.	*
From the earliest years a child, if living under a ^ dictatorship, is trained to dedicate his or her life to an ideal of nationhood constantly placarded and paraded. No opportunity is left for doubts or questions. The propaganda machine and all the resources of a highly organized state are there to see to that. He or she is a cog in a machine, and in most cases is well content to be so.

I come now to the defence measures required to protect Canada's interests against the probable risks. In the first place, there is the preservation of internal order; this is a task for land forces and consists mainly of protecting vulnerable points against sabotage. The recently adopted principle that vulnerable points to be guarded by the militia must be of national importance, and that transportation companies, power companies, et cetera must be prepared to take certain protective measures at their own expense, has met with considerable success. This policy reduces the number of troops required. Their duties are, internal order, guarding of internment camps, and cooperation with the Royal Canadian Mounted Police in rounding up enemy aliens.
In regard to neutrality, if indeed that is possible now, it requires the constant patrol of the coastal area by auxiliary surface craft and aircraft in order to spot the location of any temporary refueling base for submarines or aircraft from which such craft could operate against United States shipping and other targets within aerial reach; bombing aircraft to destroy such bases when found, and the retention of means to despatch a small expedition of all arms to destroy the base, should bombing aircraft not be equal to the task.
With regard to focal sea areas, coasts, main ports, inland centres of population and industry, the defence of these areas and points requires, for focal sea areas, sea and air forces capable of finding and destroying hostile surface craft, submarine or aircraft raiders. This task would require reconnaissance, fighter, bomber and torpedo carrying aircraft, and adequate naval strength. In regard to coasts, main ports, inland centres of population and industry, it would require fixed coast and anti-aircraft defences at and in the vicinity of the main ports, improvised coast and anti-aircraft defences at strategical points, anti-aircraft defences at important inland centres of population and industry, ground troops to protect and man the coast and anti-aircraft defences, to watch important points on the coast, and to provide a small reserve for the unexpected; naval craft for examination services, mine laying, mine sweeping and cooperation on seaward defence; army cooperation aircraft to work with the fixed coast defences, and fighter aircraft to work in conjunction with the anti-aircraft defences.
In regard to the larger issues, as I mentioned before, no one can foretell the extent to which the resources of Canada might come to be committed in a world-wide struggle between ruthless aggressive forces of conquest and destruction, against which the combined

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democratic and liberty loving peoples would be compelled to unite for the defence of their freedom and their ideals. Each democratic country, once involved, would have to contribute her best efforts according to her capacity, resources and geographical position. The extent of the effort required would be governed by the scope, intensity and length of the struggle.
Then, very briefly, the real tasks of our three services may be outlined. The land forces may be expected to be required:
1.	To man all coast and anti-aircraft defences.
2.	To maintain a reserve for protective garrisons for coast defence and other strategic points.
3.	To provide guards for vulnerable points of national importance.
4.	To provide such assistance as may be required by the civil authorities in the rounding up of enemy aliens.
5.	To provide guards for internment camps.
6.	To have a reserve force available to meet the unexpected.
7.	Should the eventualities of intensive conflict necessitate it, for the fundamental protection of Canadian institutions and Canadian ideals.
The militia system of Canada to-day is capable of having ready, subject to public demand and parliamentary approval, a substantial force ready for active service within six months after mobilization. Our militia system of a large non-permanent force, with a small permanent establishment to provide highly trained staff and instruction, is precisely calculated for the necessities which have just been described. It is this desirability of capacity for quick expansion which explains the high proportion of officers and non-commissioned officers on peace establishments.
The coast defence units are localized in the fortress areas concerned. The reserve units are localized throughout Canada, and have been allotted in accordance with population ratios.
In regard to coastal and anti-aircraft defence, troops allotted to these categories comprise artillery, engineers, signals, infantry, ordnance, army service corps, and medical units. The total peace establishment of such units is about 20,000, actual strength being 12,000 and training strength 9,000.
Troops allotted to reserve consist of skeleton units, comprising those required to form one cavalry division, and six divisions of ancillary troops. No such divisions exist at present, but Canada does maintain sufficient skeleton
units to form that number of formations on mobilization, and a scheme for such divisions is always in readiness for use. For these purposes the establishment is: peace establishment, about 65,000; actual strength, 37,000; training strength, 31,000.
Concerning equipment, most of the efforts of the department in the past three years have been directed to the objective of providing the equipment necessary to the discharge of the duties which have just been described, according to the organization plan just set forth.
Concerning the air force, I have already mentioned the objective, to build up eleven permanent squadrons and twelve non-permanent squadrons. The tasks of the air force are:
1.	Air action in defence of points of national importance from air attack in conjunction with ground anti-aircraft defences and observer corps.
2.	In cooperation with the sea forces to reconnoitre coastal regions, focal sea areas and vicinities.
3.	Operating alone or in cooperation with the sea and/or land forces to destroy hostile surface craft or aircraft or land force raiders.
4.	Air observation for coast defence artillery.
With regard to these tasks the air force has
a tremendous advantage over the other two services. The inevitable growth of civil aviation in a natural flying country such as Canada has provided and will continue in greater degree to provide a reserve of experienced pilots. The accompanying growth of the aircraft industry and its recent expansion into the production of service type aircraft will complete the twin essential bases of an effective military air force, namely, a reserve of experienced pilots, and the means of producing major types of equipment and armament within our own borders.
The existing twenty-three squadrons of the Royal Canadian Air Force are grouped into three commands, western, eastern and central. The western command consists of eight squadrons and one flight. The eastern command consists of nine squadrons. All of these seventeen squadrons are allotted to duties of direct defence. The remaining six squadrons are in the central command and would be available for use as a reserve in accordance with exigencies that might arise.
Sea forces. Naval defence policy, in cooperation with the land and air forces, aims at the security of both coasts and the focal sea areas in the vicinity of the main ports against the probable forms and scales of seaborne attack. The tasks of the navy are:
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1.	In cooperation with the air force to reconnoitre coastal maritime regions, focal sea areas and their vicinities.
2.	In cooperation with the land and air forces to destroy surface craft and submarine raiders.
3.	To provide examination services at our main seaports.
4.	In cooperation with the land forces to
provide anti-motor torpedo boat and antisubmarine protection for our main seaports.
5.	To keep the approaches to our main seaports clear of mines.
I think I can safely say that I have now covered, in the first place the situation that confronted the Department of National Defence in 1935, and in the second place the steps taken between 1935 and the present time to remedy the deficiencies and close the gaps found to exist at that time.
I now approach the conclusion of my remarks on this occasion. I have endeavoured to give an accurate description of the actual situation that existed when I was entrusted with the responsibility of the direction of the Department of National Defence. I have endeavoured to inform the house and the country, perhaps in elaborate and laborious detail, in regard to the progress made during the last three years. It has been stated here and elsewhere that we have nothing to show for the moneys that have been voted by parliament. That, I suggest, in view of what I have placed upon record this afternoon, is a thoughtless, unfair and somewhat harmful statement. I trust that the information I have given to-day will prevent a repetition of such unworthy allegations and ill-informed statements.
I have also endeavoured to inform the committee as thoroughly as possible in regard to the purposes for which the estimates now being presented are required. I know, Mr. Chairman, they may be attacked from two angles. There may be those who conscientiously believe and will say that we are spending too much on national defence, seeing that a measure of economic distress exists in our country. My answer to them would be, with great respect:	Can you have social or economic security if national security is imperilled in our country? There also may be those who, with equal honesty, will say that the estimates are not large enough. That may be indeed a fair criticism, but when we cast our minds back three years I think that we will all admit that we have progressed far along the road of realization of responsibility. We may have to go further, much further, but that is a question for the future.

These estimates are for the purpose of our national security in Canada. We in this house are all deeply proud of our kinship in the family of British nations. We are all deeply conscious of our responsibilities and obligations in that free and friendly partnership. We are deeply grateful, I believe, for the continuing manifestation of earnest and sincere friendship shown to us by the grandest neighbour any nation ever had, the republic to our south and beside us. We rejoice that a great newspaper such as the New York Times could say, as it did, in its editorial columns of February 21, 1939:
It is a sign of the times and of the changed values in the contemporary world that this greatest of British armament programs should cause no concern to our side of the Atlantic. We do not regard it with suspicion. We do not *ask for "parity" as we once did in this or that category of naval strength. We do not fear an increase of British power-we welcome it, for we know that while there can be no question of an alliance between the British and ourselves, the facts of geography and the lessons of history have created -a common interest between Britain and the United States. That common interest is an orderly and stable world.
I have also endeavoured to analyse the cardinal principles and fundamental features of Canadian defence policy. Two years ago I stated in this house that Canada was becoming defence conscious. To-day, in the light of the developments that have taken place, the menace of the hour, and the clouds on the horizon, I think it is safe to say that Canada is becoming defence anxious. No country ever had a greater heritage, a more vivid consciousness of freedom. No country ever had a deeper sense of national pride, and no country has ever possessed a more decent and dauntless people. That consciousness of freedom, that national pride, that fine, free fibre of our people, must be mobilized through our realization of our great responsibilities and through the knowledge that science and invention have made isolation a myth and a dream. They must be mobilized along the avenue of real and earnest cooperation, cooperation within the commonwealth of our own family of nations and cooperation for the preservation of the principles of liberty and freedom with the kin democracies of the world.
In conclusion, Mr. Chairman, may I venture to suggest that it is our earnest hope and prayer that out of the shifting issues and changing policies of these times, out of the dangers that seem to confront the liberty-loving democracies of the world, there will emerge three great principles, ultimately

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coalescing into one: the security of our own people, the solidarity of the empire and the preservation of freedom itself in our time.


Grote Stirling: Mr. Chairman, first I should like to express my pleasure that the minister has been able to return to the house this afternoon to deliver this statement. I know that for some time he has desired to make a statement for the information of hon. members, and it must have been extremely annoying two days ago when indisposition prevented him from accomplishing his desire. So I congratulate him upon having been able to do so to-day.
It would seem almost like cruelty to animals to continue this debate before an exhausted house which for two hours and fifteen minutes has listened to one of the most comprehensive exhortations, shall I say, to have been delivered in this house for some time. The first part of the minister's remarks was devoted to the past, the present and the future, and during the course of that portion of his address he quoted at some length from recent utterances by the Prime Minister (Mr. Mackenzie King) and the Minister of Justice (Mr. Lapointe), also referring to the fact that my hon. leader (Mr. Manion) had expressed his opinions on the questions with which he was dealing. Perhaps it might not be out of place for me to refer to what my leader did say, in order that it might be placed in juxtaposition to the other remarks quoted by the minister. I should like to point out that on March 27 of this year, three days before the Prime Minister's speech in the house and four days before the speech of the Minister of Justice, my hon. leader made a public statement in which he made his position perfectly clear. That position was stated as follows:
1.	That there should be no profiteering in war-time.
2.	He quoted his predecessor, Mr. Bennett, to the effect that when Britain is at war Canada is automatically at war, because the enemy would consider us liable to attack; and the leader of the opposition supported that position.
3.	He stated that neutrality by Canada in a war in which Britain was participating was impossible, and he supported full cooperation in every way by Canada with Britain in wartime, short of conscription of men to serve outside Canada.
4.	He stood out for adequate home defence for Canada.
5.	He believed that we should have an understanding with the United States, and
that there should be a united front of all democracies against world domination by any dictator.
In my opinion that fills out the picture drawn by the minister in his reference to the Prime Minister and the Minister of Justice.
It is not my purpose, Mr. Chairman, to attempt, even were that possible, to follow in any detail the statement made by the minister. His object, I know, was to give every available bit of information to members of this committee in order to facilitate discussion when we get into the estimates and to enable that discussion to be carried on in an informative manner. It would appear to me that in the very short statement I propose to make this afternoon the note I should strike is that the position in which Canada finds herself to-day is entirely different from that in which Canada has found herself at any other period of her history. From confederation to the time of the great war Canada had her militia. Air defence was unheard of. Two or three attempts had been made to provide at least the foundation of a naval defence force. For this reason and for that the force did not come into being. Frankly, Canada relied for the defence of her coasts, her commerce and her neutrality upon the Royal Navy; and the Royal Navy has of course always been kept up by the taxpayers of the United Kingdom. To that upkeep Canada made no contribution.
It would be impossible to compare Canada's condition to-day with the period of the war. It would be just as impossible to compare it with the period which existed immediately after the war, when demobilization was the main business of the day, and when retrenchment was evidently necessary. And that condition carried on until the end of 1934.
Canada, in her position as a member of the League of Nations, in concert with her fellow members of the league, was just as imbued as any other nation of the whole world with the pursuit of peace. It was Canada's desire that it might be proved that the war which had just been completed was to end war. True it was that there were some who doubted it. True it is that their numbers increased as that period drew towards an end.
Then, in the year 1934, it became more and more evident to Canada and the rest of the peace-seeking world that one of the great nations of the world was intending to strike out her signature to documents, to go back on her spoken word, and to throw off the shackles of the Versailles treaty, and an entirely new state of affairs was placed before the world.
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But there is one reason to my mind greater than all others to demonstrate the fact that Canada's condition to-day, the condition of defence which she faces, is different from that which faced her at any other period of her existence. I refer to the fact that this parliament passed the statute of Westminster. The foundation of that statute was the resolution in the 1926 imperial conference, to which Canada deliberately and delightedly consented. And when we passed the statute of Westminster we said to the world that we stood on our own feet. Canada then said that she gloried in her position. And whilst there were shoutings to that effect, there were, too, whisperings of the fact that Canada, having adopted that glorious and honourable position, must henceforth seek to defend herself more potently than she had defended herself in the past.
We trusted, as did the other nations of the league, in the integrity of the other nations who joined in the cause of disarmament. True, we can be wise after the event, and say that we went too far. There are hundreds- there are millions to-day who consider that Great Britain, leading the pace in disarmament, went too far. But is it fair to be wise after the event? Will not the students of history, going back over that period, give some praise to Great Britain and those who followed her in the attempt she made to live up to .the spoken word and to the signed document which enabled the world to move towards disarmament?
It appears to me the same remark could be made with regard to the minister's reference to the condition in which he found his department when he took over as minister. It reminded me, Mr. Chairman, of the byelection in Victoria, when the minister announcing that he did not wish to make any use of expenditures for defence purposes at the time of an election, felt constrained to do so-and did so. On this occasion the minister draws attention to the fact that he would not be critical, and that he was merely stating facts. And yet it leaves a taste in my mouth that is extremely akin to partisanship. However, it is a factual truth that the minister found those three branches of the defence of Canada in a poorer condition than a)t the end of 1935 they should have been, and he quite properly proceeded to improve it.
But through those years, when disarmament ruled, was the government of that day to be blamed because it voted only sufficient barely to keep up the three branches of the service? We are a democratic people. Whatever its colour may be, the government of the day, if it be a wise government, is dependent

for its policies on its reading of the opinion held by the public. I ask you, Mr. Chairman: Would it have been possible through those years of disarmament for a government to come before the House of Commons and ask parliament to vote increased sums for national defence purposes? It has been possible since to do so, and this government has done it. It was its obvious duty to do it But have not all the salient facts on which such matters are based been entirely changed since those days?
We barely maintained the Canadian navy. When an auxiliary vessel was wrecked, we did not replace her. We barely maintained the militia services. When equipment and munitions were depleted, they were barely replaced. Retrenchment took place in the air force, and planes became obsolete. But the atmosphere of those days was entirely different from the atmosphere of to-day. And the minister would have been recreant in his duty if on assuming office he had not made himself cognizant of all these facts, and then laid before his council his expression of opinion with regard to rectifying them. Many, many times have the figures showing the per capita expenditures of the nations which go to make up the British commonwealth of nations been laid before the House of Commons. Canada has not shown up well in the comparison. I am interested to note that again this afternoon the minister has tabled figures which will more nearly bring the comparison up to date. So with the statement the minister has made assisting us in the discussion which will take place, it will be possible, I believe, to arrive at least at our own opinions in regard to the wisdom of the suggestions and the expenditures of money to be made.
What have we now? We have a small but highly efficient Canadian navy. We know it is efficient because we are able to measure it against the yardstick of the Royal Navy. Last month our six destroyers and our auxiliary vessels carried out combined exercises with the squadron in the Atlantic, and I am given to understand that our ships carried out their portions of the exercises with distinction. It is true that they ought to be good. All our young officers are trained in the Royal Navy for four years, dating from entry as a cadet to the end of the examinations which produce an acting sub-lieutenant. Those four years are spent in ships and establishments of the Royal Navy. True, their pay and allowances are found by this country. But, this country makes no contribution to the highly valued service which we receive from the Royal Navy in connection with the training of our young officers.

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Unfortunately there is perhaps nothing that
is more liable to deterioration than a warship. While we have to-day six efficient torpedo boat destroyers, besides auxilary vessels, we should remember that two of these torpedo boat destroyers were built ten years ago. These boats were purchased to replace two other destroyers which could hardly be kept in commission. Three years ago we purchased two more destroyers from the Royal Navy to replace two destroyers which required such major refitting that it was not considered advisable to spend the money. That made four destroyers; last year the government purchased two more so that we now have six. Efficient though they are to-day, let us not forget that they are of a class which has been set aside by the Royal Navy as being obsolescent, but not obsolete. Within a very few years we shall find ourselves faced with the necessity of purchasing new destroyers to replace the present equipment.
Our militia is divided into the permanent force and the non-permanent active militia. I think it is quite realized that the permanent force is a small but extremely efficient force, whose duties are largely instructional. It is a matter of great regret to me that the estimates for the permanent force have not been increased. The engineering and ordnance services are undermanned and overworked, and the expenditures we have been making on munitions and fortifications have added to the work of these units. The number of trained instructors available to do the work of training in connection with the non-permanent active militia is such that applications from the non-permanent active militia have to be turned down.. I regret that it has been found impossible to increase the vote for the nonpermanent active militia as well as for the permanent forces. A few months ago a balance sheet of one of the units of the non-permanent active militia was laid before me, and I was shocked at the amount of money which it is necessary for the officers, non-commissioned officers and men of the non-permanent active militia to put up in order to keep up the efficiency of their unit. I am delighted to hear that the minister is proposing expenditures on these units, and I believe he referred to boots. These are articles which have been urgently needed.
It must be remembered that when after long consideration the reorganization of the nonpermanent active militia was eventually carried out, it meant that we set up units which required modem equipment. I think the minister will have to tell us when we deal with the item that many of the nonpermanent active militia units are without
necessary mechanized equipment, instruments, guns and so on which are required in order to train, and much more so in order to use efficiently. The recompense received by a unit of the non-permanent active militia is based upon the numbers of days spent in camp. It seems to me that so long as we look upon the non-permanent active militia as the back-bone of our defence, especially now that we recognize the different position in which Canada is placed, it will be necessary to increase drastically the amounts allowed to these militia units. It will be necessary to increase the training time in order to give more recognition to these men who volunteer for training after they have spent time at their ordinary work. Perhaps it would be better if I curtailed my remarks on this matter until we have had an opportunity to digest the enormous quantity of information the minister has laid before us. Before I sit down, let me say that towards the end of his remarks the minister touched upon one most necessary consideration. I think there are three things which the public will want to ascertain from this discussion. The first is: What have we received for the $90,000,000 spent in the last three years? It is true the minister explained this during his speech, but he read it with such rapidity that it was impossible to assimilate it.
Second, the public will want to know whether the progress which has been attained since the minister took charge of this department is as great as it should have been. We must remember that he himself has admitted, and everybody connected with the department knows that in future it is perfectly hopeless to rely for our needs upon Great Britain. The minister himself has told us how he set up an inquiry into industry in this country. I am sorry to say that when this inquiry was first instituted it was credibly reported to me that the political tinge of the company was looked into before it was examined. 1 believe that this was drawn to the attention of the minister and I understand that it has been changed entirely. I have no doubt that today there are few firms in Canada capable of making anything that could be used for defence, the names of which are not on the list and upon which a report has not been made as to their capacity to produce.


Ian Alistair Mackenzie: I do not think any company has been turned down.


Grote Stirling: Not that I am aware of. I have heard it said that such and such a company was not examined, but I have not the facts.
Small Loans

Then, the public will want to know if, in view of the inability to obtain deliveries from Great Britain, sufficient progress has been made in the expansion of Canadian industry in every direction so that that industry can provide Canada with her requirements. Then the public will want to know what Canada will get for the $60,000,000 which is to be spent this year. The minister has referred to this matter. Perhaps I had better cut short my remarks and carry on in detail when the item is before the committee.
Progress reported.
At six o'clock the house took recess.
After Recess
The house resumed at eight o'clock.



SMALL LOANS


[Stage Direction]
The house resumed from Tuesday, April 25, consideration of the motion of Hon. Mr. Ilsley for the second reading of Bill No. 97, respecting small loans.
Mr. SPEAKER:: Is the house ready for the question?


Ernest Lapointe: The hon. member for Lethbridge (Mr. Blackmore) may continue.


Mr. BLACKMORE:: I have finished.


[Stage Direction]
Motion agreed to, bill read the second time, and the house went into committee thereon, Mr. Sanderson in the chair.
Sections 1 to 9 inclusive agreed to.
Section 10 stands.
Section 11 agreed to.
On section 12-Application of part II.
Thomas Langton Church: On part II, dealing with small loans companies, and section 12: Has the minister considered since last night the suggestions made in various corners of the house regarding this particular section, to empower either separately or jointly with the bill, the chartered banks to take care, with a small rate of interest, of this whole program?


Mr. ILSLEY:: Yes, I have carefully considered all the suggestions which were made in the debate last evening. The chartered banks now have power to carry on a sort of small loan business, and one of the banks, the Canadian Bank of Commerce, is carrying on such business. Nothing further in the way of legislation is required to empower them.

The suggestions last night were not that any legislation be passed to give the banks further powers, but rather that the government use its influence with the banks to try to induce them to go into this type of business.


Thomas Langton Church: I have a short second question. How does it come about that under existing relief legislation of this kind, farmers and fishermen are treated in one way, and industrial workers, the other 50 per cent of the people, in another way? How does it come about that there is not an equality of treatment in respect of these protective measures, bonuses, subventions and subsidies? I cannot understand it. Why not under part II, in the alternative, give chartered banks the power and invest them with concurrent jurisdiction to make these small personal loans, because they are personal loans? That is what a bank is for; it is to advance money on the security of a man's salary and wages and his job. The lack of credit for white-collar workers compared with the favoured class, the farmers-although they do not get much, either-and the fishermen, was referred to in the price spreads investigation. I proposed in 1935, under a similar bill, that we should empower the banks, even if it were only by enabling legislation, to make these personal loans.
I wish the minister would consider a moment the cases I cited last night. I will not detain the committee more than a couple of minutes, but I wish to remind them what happens when an industrial worker who is out of work is in need of money. He has probably bought a house with a first mortgage, has obtained a second mortgage, and also has a chattel mortgage, 'bill of sale, and lien on his property. He goes to the bank, and under the scheme of the Minister of Finance he has a hard time to get a loan to improve his property, while he can get no personal loan from anybody. He has medical, hospital, insurance and other bills to meet, yet he has to pay two per cent a month, or twenty-four per cent a year, to discharge a few doctors' bills. I know a number of physicians, and they hate to take his money. I have sat in my day on five or six hospital boards, and I know well that physicians are ashamed to take the money when they find that it comes from one of these shark loan companies.
The government of the day are, I think, very unfair about these particular matters, the different rates to which I have referred. If there is to 'be class legislation in this country for one section, legislation like this bill, parts I and H, the people should know what is the purpose of the government. I suggest that the minister should amend the section

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to give enabling legislation. There are many cities and towns which have no loan company of this kind. Persons in small cities who wish to borrow have to come down to Toronto in a boat or train and in a bus to the centre of the city to seek these loans. From my office I see every day a bus stop in front of our building where there is located one of the old pioneer companies which started this kind of racket; for that is what it is, and it was referred to in the British House of Commons as a racket. If the minister wants to have up-to-date legislation, let him make the bill workable. He will never gain anything by a policy like this. This particular kind of legislation, dealing with personal loans, is only in its infancy. Where did personal loans come from previously? They came from members of parliament, aldermen, people like that, who would lend a fellow ten or twenty-five dollars or endorse his note at the bank. He would probably pay, although sometimes he did not.
The present bill is going to be a flat failure from the start. It will not be workable. While the minister provides under another clause for inspection by the inspector of insurance, such action will amount to little or nothing. How can one inspector in Ottawa here deal with nine provinces, or even with the city I come from, and Hamilton, Oakville, and Halifax? When under the authority of this measure someone wants to lend a man three hundred dollars, how can the inspectors check him up, when the payment is a dollar a week or a dollar a month, to find out whether the legislation is being complied with?
The present government started off these companies in 1927 and 1928. There was a great deal of opposition to it on this side of the house. We did not believe in that legislation. It took the companies out of the Interest Act, the Money Lenders Act and the Companies Act, and made them a law to themselves, unregulated by any law, human or divine, and look where it has landed this country. It has put, in my constituency alone, dozens of industrial workers on relief. I know that to be a fact. This bill may be drafted by lawyers and experts and gentlemen in the minister's office and other places; but let me tell him this, as far as offering any relief to the industrial workers is concerned, it will be a flat failure from the start. I hope that this legislation will not be passed. I hope that when it goes to another part of this building it will be thrown out, because that is what should be done with it; it should be thrown out of the high court of parliament.


[Stage Direction]
Section agreed to.
Section 13 agreed to.
On section 14-Powers of company. Lending on security.
Walter Adam Tucker: There are just two things as to which I should like to have the assurance of the minister. The first is, that section 14 will not cause section 6 of the Money Lenders Act to be regarded as repealed as being repugnant to this legislation; and the other is, that the right of the provinces to deal with service charges is preserved subject only to the qualification that the total cost shall not exceed two per cent a month.


James Lorimer Ilsley: I have the opinion of Mr. Varcoe to the effect of the hon. gentleman's statement, that is, that the Money Lenders Act is not repealed by implication or otherwise by this bill. I sent a copy of this opinion to the hon. gentleman, and I do not think it is necessary to put it on Hansard.
With regard to the second point, I think the hon. gentleman is right. In fact, I do not think there would be any two views about that. My hon. friend in his speech last night set forth the situation correctly from the legal point. If any province chose to pass legislation providing that nothing could be charged except interest, I think the Money Lenders Act being in force would limit to 12 per cent charges which companies could make in that province. I believe that is the effect of the legislation. I did not get an opinion on it because that is the view I have held throughout, and I do not think there is any doubt about it.


Walter Adam Tucker: That opinion is concurred in by the law officers of the crown?


James Lorimer Ilsley: I have not the confirmation here. I do not know that I really considered getting an opinion of the law officers for the reason that the Money Lenders Act has been on the statute books since 1906. During that time it has always been open to any province to regulate charges over and above interest and none has done so. They can do so, of course, but I do not think they will.


Walter Adam Tucker: I wish to have it made
clear that notwithstanding section 14, which provides that a company may charge 2 per cent a month, the province can still intervene and cut down the rate to 12 per cent per annum. I understand the minister has an opinion from the law officers to that effect.
Mr. ILSLEY': Yes, the hon. member is correct. I did not realize that in the latter part of his opinion Mr. Varcoe covers that point.


Mr. CASSELMAN:: Will the minister put the opinion on the record?
Small Loans


James Lorimer Ilsley: Mr. Varcoe's opinion is as follows:
Dear Sir,
You ask to be advised what the effect would be of omitting from the proposed small loans interest act the provision for the repeal of the Money Lenders Act. Section 6 of that aot provides that no money lender shall charge a rate of interest greater than twelve per centum per annum. The question is whether this section 6 would be superseded or stand repealed as being repugnant to the provisions of the proposed statute.
The view that commends itself to me is that section 6 aforesaid relates to the nominal rate of interest, i.e., the compensation payable to the lender which the parties choose to call interest; the lender may not charge under the name of interest more than the statutory rate. On the other hand, the proposed small loans interest act-should it become law-will limit the total charges, whether called interest by the parties or otherwise, to two per centum per month. It appears to me that these two enactments may consistently be said to stand side by side.
Then you require to be advised whether the enactment of the small loans interest >aet will preclude the provinces from dealing with service charges. It is not my opinion that by enacting this legislation parliament will have occupied the legislative field so as to preclude any action by the provincial legislation. On the contrary, I would think that the provinces could deal with service charges in just the same manner and to the same effect as at present, subject only to the qualification that the total cost of a loan must not exceed two per centum per month.
Yours truly,
F. P. Varcoe.


Mr. CLARKE (Rosedale):: It seems to me that this bill is in the interests of the loan companies and does not protect the borrower. I understand that 2 per cent a month is the maximum and the minimum.
Mr. VIEN; There is no minimum. There is a maximum but no minimum.


Harry Gladstone Clarke: Suppose someone had to borrow from a company and agreed to pay back monthly payments with 2 per cent interest. Suppose something happened that prevented him from carrying out his contract. I do not see anything in the bill to protect him against compound interest being charged until, instead of paying 2 per cent a month, he would be paying a substantially higher rate of interest than that. I do not believe the minister himself has faith in this bill. Those who have spoken in favour of it have represented it as a half-hearted, in my opinion a half-baked, way of trying to accomplish something, without any specific provision for the protection of the borrower.


Mr. VIEN:: If the hon. member will read page 7, line 30, of the bill, he will see a direct provision that there shall be no compound interest.
Mr. CLARKE (Rosedale); I am glad to hear that; I had not noticed it. These companies are supposed to give some consideration to the industrial worker and others wishing to borrow on short term, persons who have no security to offer, but there is nothing in the bill stipulating that, provided there is a certain type of security, the loan company must lend money. They are not obliged to do so. If a borrower comes they can say at once, "We are not interested, we cannot accommodate you," and there is nothing he can do but fall back on the usurer, the high percentage man. I cannot see why the Canadian government should legalize a high rate of interest of 26J per cent when they are not obliged to do so. It is only for the benefit of the loan companies that it is being done. This business has proved profitable to these companies. They have expensive offices and staffs which they can easily maintain on 2 per cent a month, and I contend that such a rate of interest is too high. I do not think the government should pass this bill until it is in a more acceptable form.


Mr. McIVOR:: Every time private bills
of this sort have come before the house I have risen in my place and spoken as clearly as I could, not because I liked to do SO'-because I admire the ability and the character of the members who sponsor these small loans bills- but because I have felt that these small loan companies are, as they are called throughout the length and breadth of Canada, sharks of the worst kind. For that reason I have denounced them, and I would be remiss in my duty now if I did not commend the committee and the senate as well as the minister for bringing down something that will cut down interest rates. As I understand it, the highest rate they can charge with all costs is 2 per cent. Is that right?


James Lorimer Ilsley: A month.


Daniel (Dan) McIvor: Well, that is very far
short of 100 per cent per annum. As a social worker, I have known of men and women, especially women, who would have been far better off if they had lost that which they had tried to hold. That is all I wish to say, but I commend the minister. There are times when I think high interest is commendable.
The Minister of Transport (Mr. Howe), if I may refer to him, has been paying fairly high interest, far more than 100 per cent, on a group of Bear Cats. They went west from

Small Loans
the head of the lakes, played a great hockey game, and covered themselves with glory. I congratulate the minister and the team upon the way in which they conducted themselves and upon being a credit to both Port Arthur and Fort William and the whole head of the lakes.


Thomas Langton Church: I would suggest to the
minister that section 14 be amended to read as follows:
The company may
(a) buy, sell, deal in and lend money on the security of cemeteries in which to bury industrial workers unfortunate enough to elect to come under this Shylock act to get a small loan at such exorbitant rates.
If that amendment were adopted it might provide a good many customers.


Mr. PELLETIER:: The minister stated
a moment ago that he had carefully considered the suggestions made yesterday from different parts of the house. One of the suggestions made was that the Canadian banks should go into this small loan business. Would the minister be good enough to state what is the chief objection of the Canadian banks to going into this field?


James Lorimer Ilsley: All I can do is to read the evidence of Mr. Dobson, president of the Canadian Bankers Association, which appears at page 126 of the proceedings of the banking and commerce committee of last year:
Now, if your committee should recommend and the government should decide to ask us to cooperate in the small loans field and provide an increased rate for monthly payment loans, I believe it is quite possible and probable that some other banks might then decide to take up that extended loan field. I do not mean to say they are going to take the business away from the small loan companies and go right through with that type of business. I do not believe for a moment that the small loan companies are not going to stay in business. I believe they are required there, but the banks might extend their field further, that is all.
The banking and commerce committee recommended against an extension of banking facilities along this line. Perhaps I should refer the hon. gentleman to the reasons then given. I do not know that I altogether subscribe to these reasons, but at least they are deserving of consideration; I have not formed an opinion on them. The chairman of the banking and commerce committee is here and probably could amplify the reasons which the bankers gave. I quote from the committee's report:
Your committee discussed at length a proposal that parliament should encourage the chartered banks to expand their personal loan services; but it was the consensus of opinion that such action should not be taken without carefully considering the effect on general bank-71492-206
ing policy. The Canadian banking system is generally regarded as organized to finance industrial productive effort and facilitate the movements of trade and commerce; and, as illustrated by the restriction of loans on real estate, banking regulations are expressly designed to maintain the liquidity of banking assets.
Before encouraging Canadian banks to engage upon a greater volume of consumers' credit, it would appear to be the part of wisdom to have further information as to the relation between consumers' credit and business depressions. Quite obviously unemployment creates difficulty in the discharge of debt obligations; and it is then when threatened with financial crisis- that Canada depends upon its banking system to preserve its social solvency.
As custodians of the people's savings, it may well be that the chartered banks should not be called upon to arrange their investments so that, in the unfortunate event of crisis, we should find public savings converted into small loans on personal security which, under normal conditions, are regarded as tolerably safe only when administered by highly specialized organization.
Apart from these reasons, which are carefully thought out, I may say that it occurred to me-I am really quite an amateur in this business-'that if the banks went into the small loan business and were charging about 12 per cent, inclusive of all charges, on small loans; I believe the law limits them to 7 per cent for interest proper-the tendency would be for a number of applicants for loans in the regular course of business to be referred to the small loans department. That would be a real danger, it seems to me, if the banks were carrying on this business along with their ordinary commercial business. In the province from which I come nearly everyone who borrows money borrows it from the banks in the usual course of business, but a good many of them do not expect to pay it back on the maturity of the note. I am afraid that if the banks had a small loans department a good many loan applicants would be referred to that department, which means that the banks would be charging them a very much higher rate of interest. But that is only my personal opinion.


René-Antoine Pelletier: The contention that a small loans department w.ould disturb the balance of the banks' activities is, I think, ridiculous because from the figures presented to the house last year the total loans by these three small loan companies amounted to only $7,000,000.


James Lorimer Ilsley: More than that. The loans of the three dominion incorporated companies totalled about $10,000,000 last year.


René-Antoine Pelletier: At all events it was under $20,000,000. which is a very small amount indeed for the banks of Canada,

Small Loans

whose loans run into hundreds of millions of dollars, if not billions. So I do not think that factor influenced the banks in their decision. As regards people being referred to the small loans department and having to pay a higher rate of interest, it is entirely within the power of parliament to enact legislation to give the banks the privilege of going into this business.
But the real reason I think is this, that the banks are unable to get proper security for small loans. I understand that under the present banking laws the banks cannot secure title to property or take a chattel mortgage when they make an advance of any kind, and I was wondering if that restriction was not perhaps the reason why they did not wish to enter this field.


James Lorimer Ilsley: I think one of the reasons for the strength and solvency of the Canadian banking system is that it is framed in such a way that liquidity of assets is provided for and secured by every possible safeguard. When that situation disappears, when bank loans are made for a long term or on real estate as security, as in some other countries, there is a great lessening of the solidity of the banks and of their ability to meet their obligations promptly.


René-Antoine Pelletier: I have no desire to labour the point, but if the minister really desires to do something to protect the people" of this country from loan sharks I think he might well inquire into that phase which I have mentioned with a view to enabling the banks to enter this field. Although the minister's views and mine differ radically concerning banking and monetary policy, nevertheless, since this type of loan seems necessary, I would suggest that the minister inquire into that particular phase of the banks' reasons for not going into this business. If certain of their objections were removed and proper protection afforded by parliament, a better remedy for the present situation might be found through the banks than this measure will provide. I trust the minister will look into my suggestion and receive the cooperation of the banking institutions of this country in arriving at an estimate of what should be done.


James Lorimer Ilsley: I think the suggestion is well worthy of consideration. I believe it would be well if the banks would carry on this business to a greater extent than they do, despite the recommendations of the committee. That is merely my personal opinion. As the hon. gentleman will have noted, it really does not bear on the merits of this bill because it is admitted that there is going to be

a large volume of business which the banks do not touch at all, and would not touch no matter how much pressure one put on them or how hard one tried to persuade them, and which will be done by the small loan companies.


Harry Gladstone Clarke: Section 14
reads:
Provided, further, that the borrower may repay the loan or any part thereof before maturity on the date on which any instalment thereof falls due, without notice, bonus or penalty.
Here is the catch:
.	.	. the borrower shall, when making such
repayment, pay the portion of the cost of the loan accrued and unpaid up to the date of such repayment.
I should like to ask the minister whether any definite percentage of that cost may be charged the borrower, who wants to get out from under this high rate of interest, particularly when he reads in the newspapers that the loan companies borrow money at less than three per cent on which he is charged two per cent a month, or approximately 26-8 per cent annually. They say, "Well, the difference is due to the charges in connection with investigating this loan,." What percentage of such charges would the borrower have to pay? I should like that to be known in order that the public may not become communistic and feel that once more we have given wealthy people an opportunity to borrow money at a very low rate of interest and loan it to a poor industrial worker or someone else in need at an exorbitant rate of interest.


James Lorimer Ilsley: The portion of the cost
of the loan accrued and unpaid up to the date of such payment is the rate charged, which cannot be more than two per cent a month up to the date when the amount is repaid. It may be less, but it cannot be more than two per cent.


Harry Gladstone Clarke: Is there any
reason why it should be more than one per cent under this section? I do not think it should be left open to these loan companies to say "Well, we had the cost of floating this loan for you, making our investigations and so on, and for that service we will charge you two per cent for the balance of the period and make that a bonus if you pay off the loan in advance." The section reads very nicely, but as I see it there is a catch in it.


James Lorimer Ilsley: No. Either the hon. gentleman has not read, or if he has read has not appreciated, the meaning of the definition of the cost of the loan. That does not mean

Small Loans
the cost over and above the interest; it means everything. It means interest, expenses, penalties and so on. Those are all included in that two per cent, and the contract will specify whether the rate is one per cent, one and a half per cent or two per cent. In the case of these companies I presume it will be two per cent, but the total cost cannot be more than that. If the borrower goes to the company before the loan falls due and pays it off he need pay only that two per cent, if that is the contract rate, up to the date the loan is paid off.


Mr. STEVENS:: I am afraid the minister
is not quite right in that. If my memory serves me well, this proviso was added for the purpose of protecting the company in regard to that portion of the cost applying to the whole loan.


Thomas Vien: It works both ways.


Henry Herbert Stevens: Just a moment; let us
read it. We will say an individual makes a loan which is to be repaid within twelve months. The maximum charge that may be made is two per cent a month, including all costs. Now we will say he comes along in three months and wants to repay the loan. What is he compelled to pay? This proviso was injected into the bill:
.	.	. the borrower may repay the loan or
any part thereof before maturity on the date on which any instalment thereof falls due-
Up to that point it is all right, but then it continues:
-without notice, bonus or penalty, but the borrower shall, when making such repayment, pay ithe portion of the cost of the loan accrued and unpaid up to the date of such repayment.
The point, I think, is this: Is the company permitted to charge an inspection fee, we will say, which will apply to the whole period of the loan, or is the company to be satisfied with, say three-twelfths of the inspection fee? If that point is made clear I believe my hon. friend will be satisfied.


James Lorimer Ilsley: That point is absolutely
clear. The company is entitled to three-twelfths and no more; and the reason for putting it in-


Henry Herbert Stevens: If that is clear it is all right.


James Lorimer Ilsley: To satisfy hon. gentlemen who may say, "If that is the case why is there any clause at all," as I understand it this is necessary in the case of a borrower who pays off in the middle of the month. His instalment may not be due until the end of the month, and he has to pay half a month's interest cost beyond the last instalment.
71492-206J


Harry Gladstone Clarke: I am quite
satisfied with the explanation of the minister, but I wanted it on record so that if any loan company tried to collect more than that there would be a statement on Hansard making the position clear.


Mr. REID:: Does the penalty clause in
section 3 of part I of the act apply with equal force to small loan companies? It speaks of money lenders, and then in part II we are dealing with small loan companies. Does the penalty clause apply to part II also?


James Lorimer Ilsley: Under the definition in section 2, "money lender" includes the money lenders mentioned in part II of the act. Therefore any penalty relating to money lenders relates to the money lenders mentioned in part II.


Mr. JOHNSTON (Bow River):: I do not think it should be necessary for this house to pass a dominion law authorizing a loan company to charge the exorbitant rate of 26-8 per cent. It seems to me some satisfactory arrangement could be made with the already existing lending institutions, approved by this government, whereby people would be able to procure money at a rate much lower than this. I remember last year when the banking and commerce committee were sitting that, although I was not a member, I listened to several hon. members complaining bitterly against this rate of 2 per cent. I remember particularly that one of those hon. members was the hon. member of Rosthern (Mr. Tucker). Why it is that he now turns round and sponsors a measure like this is quite beyond my conception.


Walter Adam Tucker: I explained it last night; I cannot help it if the hon. member did not understand it.


Charles Edward Johnston: Another point upon which I should like to comment is this: It is said that according to the Money Lenders Act, 12 per cent is the maximum rate. Yet we are permitting these companies to charge two per cent a month.


James Lorimer Ilsley: Not interest.


Charles Edward Johnston: The suggestion comes in again that the provinces should exert their rights, under civil and property rights, and thereby force these loan companies to charge only 12 per cent. That seems ridiculous to me. Here we are passing a dominion law. So far as I can gather from the observations of the minister he has had the opinion from the Department of Justice that this extra 12 per cent would come under civil and property rights of the provinces.
Small Loans

We are putting the provinces in the position whereby they must take it to the courts before they can settle the point whether or not the matter falls within civil and property rights, and I very much fear, from past experience when the courts have made declarations as to matters being ultra vires of the provinces, that they would have practically no civil or property rights.
We now have a dominion law before us. I think in all fairness to the provinces and to the people who are going to borrow the money, that this point should be definitely settled here before we permit the provision for two per cent a month to go through. If the provinces are positive that they have the right to protest this extra 12 per cent under civil and property rights, then they would know where they stand. But as I understand it, nothing wliich is reported in Hansard can be used in court as interpreting the intention of the statute; is that right?


Mr. MARTIN:: That is right.


Charles Edward Johnston: Anything the minister may say here with regard to clarifying a point has nothing to do with settling the matter in a court of law. They will settle it solely on the wording of the bill. Then, for anyone to make the suggestion that he thinks or that it is his opinion that the province would have the right to complain against that extra 12 per cent, under their civil and property rights, seems ridiculous to me.


James Lorimer Ilsley: What would the hon. member suggest? How does he suggest we can settle the point?


Charles Edward Johnston: The minister has said that there has been an opinion from the Department of Justice. Does that make it legally so?


James Lorimer Ilsley: No, not necessarily.


Charles Edward Johnston: Then why put the provinces in that position?


James Lorimer Ilsley: What would the hon. member suggest?


Charles Edward Johnston: I would suggest without hesitation that this bill be thrown out altogether.


James Lorimer Ilsley: I see.


Charles Edward Johnston: I certainly would not ask our people to pay 26 per cent. Then there is another point which comes to my mind: Supposing a man goes to a small loan company and asks for a loan of $100, is that to be discounted?


An hon. MEMBER:: No.


Charles Edward Johnston: I do not see any information to the contrary.


Thomas Vien: Yes.


Charles Edward Johnston: Even if it is discounted-


Thomas Vien: It is not discounted.


Charles Edward Johnston: Such a thing to my mind is ridiculous. I do not see why the house cannot have some other arrangement made, and have this thrown into the wastepaper basket, where it rightly belongs.


Mr. HOMUTH:: Have the attorneys general of the provinces been consulted with regard to this?


James Lorimer Ilsley: They gave opinions, and appeared before the banking and commerce committee last year. Their opinions are to be found in the evidence before that committee.


Karl Kenneth Homuth: Was there unanimity of opinion among them?


James Lorimer Ilsley: No, no unanimity of opinion. They had various opinions as to the effect of this legislation.


Mr. NEEDHAM:: Definitely this bill is meant to authorize a rate of two per cent a month. Is there any penalty against a person who makes other arrangements with a borrower who, by mutual agreement, charges three per cent or five per cent a month? We know that the legal rate of bank interest is 7 per cent, but if the other fellow will consent they can charge 70 per cent.


James Lorimer Ilsley: Yes, there is a penalty. It is found in subsection 1 of section 3, where it states:
.	.	. indictable offence and liable, if an
individual, to imprisonment for a term not exceeding one year and to a penalty not exceeding $1,000 and, if a corporation, to a penalty not exceeding $5,000.
The same provisions are to be put in the criminal code. A bill has been introduced by my colleague the Minister of Justice making provision whereby these same penalties will be enforcible under the criminal code.


Charles Edward Johnston: Is there any law to compel people who have borrowed money from these so-called loan sharks-I am not speaking about the loan companies, because I think they are just as big sharks-to pay an exorbitant rate of interest? Supposing a man borrowed $100 from a loan shark and was charged 100 per cent; in the event of his refusing to pay, could the loan shark collect in court?

Small Loans


James Lorimer Ilsley: The loan shark is subject to a penalty of imprisonment for a year and an amount not exceeding $1,000.


Charles Edward Johnston: I believe
if that were commonly known we would not have to pass legislation of this kind. If people knew they did not have to pay these loan sharks, then it would be just too bad for the loan sharks. When they came to collect their money the people would refuse to give it to them. For his services a loan shark would probably get a year in gaol. If that is not enough, make it two years in gaol.


Thomas Vien: The penalty the hon. member mentions is enacted in this bill. Unless the bill passes the penalty will not be enacted.


Charles Edward Johnston: If the minister puts that in another bill I will vote for it, but I will not vote for this bill.


Thomas Vien: It is in this bill now.


Charles Edward Johnston: That is no excuse for it.


Harry Gladstone Clarke: In view of the minister's statement to the effect that his word will not have any weight in a court of law, I feel I must ask, in my most modest tones, that after lines 35, 36 and 37 there be added another line setting out a specific amount. The minister has said that if a loan were repaid at the end of three months the company would be entitled to only three-twelfths of the cost of inspection, or such added costs. I think there should be a statement to the effect that on any other repayment date a relative proportion shall be charged.


James Lorimer Ilsley: I do not think there can
be any doubt as to the meaning of the language in the section. I do not remember ever having seen a clause added to a bill in which an instance was set out. I suggest there can be no doubt as to the meaning.


Karl Kenneth Homuth: I believe there is provision for the penalty in the criminal code amendment


James Lorimer Ilsley: Yes, and there is also provision in this bill.


Karl Kenneth Homuth: There is provision not
only in this bill but in the criminal code amendment ?


James Lorimer Ilsley: That is correct.


[Stage Direction]
Section agreed to.
Sections 15 to 18 inclusive agreed to.
On section 19-Application of act to already incorporated companies.
Mr. LENNARD:: There is just one comment I should like to make, and that is that I am absolutely fed up with the barrage of propaganda which has been focused on the members of this parliament during the last two or three months. I have not opened a morning's mail without finding one or two letters from these one or two small loan companies which are going to benefit, and to no small extent, if this bill is put into force. I consider that this bill has been fostered, during the past two or three years by these small loan companies, and the attitude shown by this propaganda is a selfish one for them; to take. Can the minister assure us that if this bill is enacted, as it apparently will be, having government support, he is satisfied that the small loan companies will not attempt to defeat the object of this bill and make it harder for the small borrower to: borrow money under any conditions?


James Lorimer Ilsley: I do not see how they can.. On nearly all the money they lend they are charging more than they will be authorized' to charge by this legislation. I gave the rates yesterday. Under the present legislation their charges will be limited to per cent a month, so I do not see how they will be able to take advantage of this legislation to charge more. I am referring to the three dominion incorporated companies, but there are other provincially incorporated companies which charge more than that. These companies certainly are not in favour of this legislation. It may be that the dominion incorporated companies would like to see their competitors placed in a position where they could not charge any more than they do. They may want to see everyone placed on an equal basis, but I do not see how they can take advantage of this legislation; in fact, they cannot take advantage of this legislation to charge more than they are charging at the present time.


Frank Exton Lennard: I do not mean that they would charge more, I mean that having a restricted field to themselves they might be fussy about what loans they accepted. I just want to reiterate what I said a few moments ago, that I am absolutely fed up with the barrage of propaganda we have been under during the past two or three months. If there are any representatives of these companies in the galleries I hope I am speaking loudly enough to have them understand that I am able to form my own opinion and do not need any barrage of propaganda from them
Small Loans

to persuade me to view a matter in a different light from that in which I normally would view it.


Arthur Graeme Slaght: Mr. Chairman, I should like to express some views on this bill. Before doing so, may I pay a tribute to the minister and to those who have supported the bill. I believe they have been sincere, I believe that they have been imbued with the idea that this bill will tend to hold stationary the needs of those poor people who are in distress to the extent that they have to borrow money to carry on. Having stated this, I want to submit one or two considerations to the committee. I share largely the view of the hon. member for Kootenay East (Mr. Stevens), with whom I am not always in agreement, that the passage of this bill would indicate to the people of Canada that the parliament of Canada was authorizing and encouraging needy men of small means to borrow money at rates of 24 and 26 per cent per annum.
To-day the banks pay 1J per cent on funds that are deposited. Under the successful guidance of our finance minister, Canada has been able to reduce the rates of interest paid upon our national debt from 5 and 51 per cent to 3 and 3J per cent. If we are to believe the economists in every group in the house, this country of great natural resources is carrying a burden, by way of interest charges on our national debt, which increases unemployment and stifles our national progress. Yet our debt is being carried at rates of 3, 3i and 4 per cent per annum, and we are told the country is strangled because of the rates of interest which we have to pay. It is suggested that the rates of 24 and 26 per cent mentioned in this bill are necessary because these usurious companies cannot afford to lend the money at a lower rate. My view is that if that is true, and I think we ought to accept the evidence upon which that statement is based, then the sooner this parliament says to these needy borrowers, "We will shut you off and prevent you from putting * yoke of that kind round your neck," the greater service we will render to men who are in need. How can a man making $145 a month pay such interest rates?
I know something of the practices of these companies from my experience in the courts, and I know something of the conditions under which they would hope to operate because of my knowledge of my own constituency of Parry Sound. In more than one small community in that constituency most of the workers are engaged in seasonal employment, the men working from the opening of navigation in the spring until the close in the fall. The

majority of the men in these communities are receiving no wage cheques during the winter months and they rely upon the credit advanced by the local grocer, the local doctor and the other merchants in order to get through the non-productive months of the year. When the spring comes round and they are again receiving their cheques, they pay off honestly and fairly out of their wages during the season the debts they contracted during the winter. I want none of these loan companies to invade communities in my district and lend money at 24 or 26 per cent. The result would be that instead of the local merchants or doctors receiving one hundred dollars of a workman's earnings, the loan sharks would go away with twenty-four or twenty-six dollars and leave the man with seventy-six or seventy-four dollars to distribute among his local creditors. Is that the assistance which the parliament of Canada wants to hold out?


An hon. MEMBER:: That is robbery.


Arthur Graeme Slaght: My friend says it is robbery. Do not let us be extravagant in our condemnation in this matter. Let us view it from a fair point of view, and let us appreciate whether, when we put opportunities before needy people to borrow money at extravagantly usurious rates, we are befriending them, or rather are encouraging them to their own downfall. That is the way in which I view this legislation.
Let me conclude by saying that it has been pointed out by many students of economics- by the minister, for whom I have the greatest respect-that this is supposed to be the best we can do under the circumstances. Well, is the best we can do brought about because we have permitted usury to gain a stranglehold. in Canada; or is it because the British North America Act stands in our way, as in part it does, in solving this problem as regards provincial and federal legislation? Let me again join in the hope expressed by the hon. member for Kootenay East when he suggested that the Canadian Bank of Commerce might be joined in this matter by other chartered banks when they realize the injustices of the present practice; or perhaps a corporation, although not backed by all the banks, might be formed to supply the needs of needy men at decent and bearable rates of interest. If that should be accomplished through a candid discussion of this bill we shall have achieved something.
I say to the minister that if this bill carries, with the power of inspection which he is assuming as against both licensed and unlicensed money lenders, he should speed up

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and equip that department with the fullest of plenary powers, so that during the next twelve months, before we convene again, he will be able to analyse what I regard as a nefarious racketeering business and come back to this house with instances, causes and effects, which will enable us, when a year from now we discuss this problem, to say that no longer will Canada endorse 24 per cent as a rate of interest which we invite poor men to pay in this country.


James Lorimer Ilsley: I should like to say just a word in reply to the hon. member for Parry Sound. I thank him for his tribute to my sincerity, and I wish to pay a tribute to his.
I am sure that the views he has expressed are those which most people spontaneously express when they hear mentioned a rate such as 24 per cent per annum. But we have a large volume of evidence before us as to the effects of doing what he suggests, that is shutting off the general public from an opportunity of borrowing money at rates of interest such as these. The hon. gentleman said that if companies will not or cannot carry on business in this particular field unless they are permitted to charge rates of interest as high as this, the sooner we make it impossible for the public to pay these rates, the better for the public itself. He said that, he thought, spoke for itself.
Unfortunately that is not the way in which it works out. The universal experience, in other countries at least, has been that when companies are denied by law the right to charge rates of interest which will lead them to do business and, therefore, to invest their capital in the business, the general public is not prevented from borrowing money; the needy borrower, the man with a sick child or a sick wife, finds someone who will lend him some money, and unfortunately the man he finds who will lend him the money is usually lawless, is usually cunning, and charges him a rate of interest far in excess of the rate which strikes us all at first blush as being pretty high.
I read-and if the hon. gentleman has not read it I suggest he do so-the evidence on this point which was given before the banking and commerce committee, particularly the evidence of the representative of the Russell Sage foundation and other witnesses who gave expert testimony as to this business in the United States of America. Their evidence was substantially to this effect, that in those states which passed laws cutting down to one and a half or one per cent a month the rate which loan companies could charge, those companies, which they termed legitimate companies, left the state, they did not bother
with it, they did not carry on the business. The result was that a large volume of loans continued to be made, but the loans were made by loan sharks and the ordinary rate of interest was not two per cent a month but, in a great many of these cases, about twenty per cent a month. That was also the experience in other countries.
If we could put on a huge police force, possibly we could prevent anybody from borrowing money from anybody else at a high rate of interest. Even then, I am afraid, there would be some way of circumventing the law. That is the reason for the government's action. It is not because the government or anybody else likes the sound of two per cent a month or 24 per cent a year; it is because experience has shown that this is, not the ideal way but the only practical way, of preventing far worse abuses, terrible abuses, abuses that bring all sorts of misery in their train. That is why this legislation is being introduced.
The hon. gentleman made some reference to his constituency. He said that if these companies go into his constituency and start lending money at 24 per cent per annum abuses and evils will result. Well, these companies at the present time have the power to lend and are lending money at more than tiwo per cent a month; they are lending money at two and a half per cent a month. That is not the worst of it. All I can speak about with personal knowledge is the condition in my own constituency. There is in my constituency a loan company incorporated under the laws of Nova Scotia. I find that this company or one allied with it has been lending money in that province at an effective annual rate of 53-31 per cent. This is something that we have to meet. If we pass this legislation, in my constituency the rate is going to be cut down to two per cent a month, and that is going to happen all along the line to these forty-six companies which are incorporated by provincial jurisdictions from one end of the dominion to the other. The dominion-incorporated companies are not going to be allowed to charge as much as they are charging at the present time, and with a certain amount of what I think it is fair to call legitimate capital in the business, the general public, the people who have to have money, who feel that they have to have money, will not be driven up the alleyways and into the back offices of high buildings to cruel and ruthless exploiters who will charge them 50 and 100 and 1,000 per cent. I gave one instance here yesterday of 91,000 per cent. That is the reason for this legislation.
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Mr. HAYHURST:: I realize that the
minister is having a difficult task because he is trying to make the best of a bad job. There is a principle at stake here, and we rise to protest more against the principle than to question the actual legality of the idea which the minister has in mind. The effect of shutting off the general public from borrowing at such rates would, I believe, be beneficial. We were brought up on this philosophy:
Neither a borrower nor a lender be;
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry.
If we carried that principle into our later years we should be much better off. This country would have been much better off had that idea prevailed generally, and when we have before us a bill which proposes to reduce the rate of interest to a certain limited amount, that is a step in the right direction. There is no doubt about that. But the principle here is one of usury, and we are probably encouraging people to borrow money. As the hon. member for Parry Sound (Mr. Slaght) observed, we are encouraging them to borrow to their own downfall. I suggest, therefore, that constant vigilance is needed on the part of the government. Perhaps a few words of Edmund Burke would not be out of place here. He.was a great British statesman, who saw many injustices in the laws of the land, and in his day he said:
The question is not whether you have a right to render your people miserable, but whether it is not in your interest to make them happy.
It seems to me it is the right of the government if possible to make our people happy, and the only way in which we can make the people happy is to remove the causes of unhappiness. But the principle here is one that more or less backs up usury, something that we should like to get rid of.


Mr. COLD WELL:: Practically everyone who will vote on this particular bill is between the devil and the deep sea. I listened to nearly all the evidence given before the banking and commerce committee last year, and like many others I was impressed with the evidence that was submitted by the Russell Sage Foundation and by Mr. Bunce of the state of Iowa. During the past year I have been waiting for this general legislation to come down and I have been giving it a good deal of consideration. Someone said last night, I forget who, that there were really three classes of lenders and three classes of borrowers whom we might consider apart from the loan shark. We have the banks, who take only what one might term A-l risks.


Mr. SPENCE:: They get some of the
bad ones, too.


Major James William Coldwell: Yes, but those are infinitesimal.


Paul Joseph James Martin: They are estimated as A-l.


Major James William Coldwell: Next we have the
friendly societies, or the credit unions, where people know one another and their limitations; and third, there is the small loan company which ostensibly is designed to meet a need. If it meets that need, then I should think that, taking a larger risk, it might be entitled to a higher rate of interest. As a matter of fact, however, on reviewing the evidence I have come to the conclusion that they have not taken these risks but that their loans are very carefully made and that their losses are very few indeed. In my opinion the persons who go in the main to the small loan companies to get money to tide them over a difficult time could go to an institution like the Canadian Bank of Commerce and get pretty much the same accommodation. When the time comes to revise the Bank Act we should see to it that our banks are not only encouraged but obligated to go in for this larger class of business. The banks may object, of course, but I notice that the other day, in reply to a question by the hon. member for Rosthern (Mr. Tucker), the governor of the Bank of Canada, according to the press, made the statement that these things might have to be done through a larger measure of national ownership and control. That may be so, but in my opinion a rate of 24 per cent, 26i per cent effective rate, is too high, and I am impressed with the argument advanced in this chamber that if we pass this legislation, which will affect the dominion companies, then we shall be establishing in effect a vested interest in this rate of interest. I think, therefore, we are justified in voting against this measure.
Every attempt should be made, as was suggested yesterday, to bring this matter more clearly within the criminal code. I know there is an evil, and I know the minister is quite correct when he says that tfipre are in his constituency companies operating under provincial charter that charge effective rates of over 50 per cent. In my home city we have companies that charge that and even a higher rate, and I want to see these rates cut down.


James Lorimer Ilsley: For my own purpose, perhaps I should say that one company in Nova Scotia, which I had in mind, was charging that.

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Major James William Coldwell: I should say the same
thing.


James Lorimer Ilsley: I do not know whether they may have modified their charges, and I should not like to do them an injustice in case they have, but I know that when their contracts were examined by the superintendent a rate of 53-31 per cent was found in one instance.


Major James William Coldwell: I should have said that. I believe that as a matter of fact the superintendent of insurance, who is here to-night, actually compelled the company to which I have reference to reduce its rate a year or so ago. I should have used the past tense if I used the present. At any rate, an evil exists, and I am faced with the difficulty, which I believe a large number of the members are faced with to-night, of desiring to bring down these rates and yet on the other hand not feeling justified in voting for a rate of two per cent and thus creating a new vested interest in that rate on the part of the dominion. Consequently I am going to vote against the bill on the principle that we must not create this vested interest and that we must use the criminal code to eliminate the loan shark.


James Lorimer Ilsley: I think I should say most solemnly that no vested interest is being created by this legislation. I said yesterday that this was not necessarily a final rate, that so far as we could ascertain, it was the proper rate to start with, not because we liked a rate of two per cent a month but for the reasons I tried to express. If it is discovered from experience that by reason of profits, too high salaries, or for any other reason, these companies can operate at less than two per cent a month, then parliament should act to bring that rate down. As the minister responsible for this legislation I say that no vested right of two per cent is being created by this legislation.


Major James William Coldwell: I have no doubt that
is the minister's intention, but these vested rights have a tendency to grow up under legislation of this sort.


James Shaver Woodsworth: What about dividends under high tariffs?


Thomas Vien: My hon. friend will admit
that parliament could at any time change this legislation.


David Spence: This legislation applies
only to dominion corporations, I presume.


James Lorimer Ilsley: No; it applies to all money lenders in Canada.


David Spence: Including the three finance corporations?


James Lorimer Ilsley: Yes, including dominion,
provincial and unincorporated companies.


David Spence: That is much better. With much of the minister's argument I agree, and I agree with much that the hon. member for Parry Sound (Mr. Slaght) has said, but these arguments would have come with better results many years ago when we did not have so much mass buying and so many chain stores. In those days the butcher, the baker and the grocer were the consumer's bankers, and when people got out of work and were in distress they were carried over by the grocer, the butcher and the baker, until they got back into work again and paid off their loans. But that condition does not exist to-day, I am sorry to say. If parliament, no matter which party was in power, had looked after the internal business of the country in years gone by and had not allowed these big corporations to grow up, we would not have had this situation to-day, with so many people wanting to borrow from money lenders. That is the absolute truth, and those who are trained in the business world know it. The grocer, the butcher, and the baker were the consumer's banker in those days, but that banker has been killed because nobody was looking after the internal business of the country, and consequently big corporations were allowed to grow up and monopolize everything and drive the small business man out of business in Canada and everywhere else. That is how we are up against the present situation.
Further, I think, when a man borrows $100, he should get $100. It is a peculiar situation that when a man borrows $5,000 he is credited with only $4,000 odd. Do I understand that the poor man who goes to these money lenders and borrows $100 gets only $75 or less, that he never actually receives the $100 at all?


Thomas Vien: He will under this legislation.


David Spence: He will get the full amount? Well, that is better. And he pays it off at the end of the year?


James Lorimer Ilsley: Every month.


Thomas Vien: Heretofore these companies
were operating on a discount basis, but now they will operate on a straight interest basis. The interest will be charged only at the expiration of the first month, and every month thereafter on a reducing balance.


David Spence: That is better than I
thought it was. The inference I drew from

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remarks made by hon. friends to my left was that the borrower did not get the full amount he borrowed. I have always thought that the system under which a merchant borrows money from a bank is not square to him because when he borrows $5,000 he does not get $5,000. The trouble to-day is that too many corporations dominate business in this country and have ruined business and trade generally. The governments of this dominion and of the provinces are to be blamed for that because they did not take care of the situation. We would not have half the distress there is to-day if the chain stores and large corporations had not been allowed to grow up.


Mr. MITCHELL:: How does this rate of two per cent a month compare with the rates charged by automobile, radio and refrigerator finance companies?


Thomas Vien: The rates vary a great deal.


James Lorimer Ilsley: I am informed that there are so many forms of charges, such a great variety, that no comparison is possible unless one takes a particular contract and makes a comparison. The situation is not susceptible of any general comparison.


Charles Edward Johnston: This calls for a rate of two per cent a month, and the minister said payments would be made monthly. Is the two per cent going to be charged on the unpaid balance at the end of the month, or has interest to be paid on the full amount borrowed, clear through?


James Lorimer Ilsley: On the unpaid balance only.


[Stage Direction]
Section agreed to.
On section 20-Offence and penalty.
Thomas Langton Church: This section provides for a fine not exceeding $1,000. According to the legal text-books the penalty clauses of a statute are construed strictly. In the lower courts magistrates and county court judges usually impose only a small fine, construing the act strictly, and not imprisonment where the penalty clause provides for only a fine.
Second, should not this parliament have the power to enforce federal acts itself? The enforcement of this section, for example, like all federal law, will not be on the insurance department of the federal government but on the provinces. It is all very well for the minister to say that the superintendent of insurance will regulate this business, but who is going to prosecute these cases? They will (ome before magistrates and, in some instances, before county court judges. In the Alien Labour Act, in its last sections dealing with penalties, fines and all that kind of thing,

I find the very same words as appear in this section 20. The enforcement of all federal law is on the provinces and on the provincial attorneys general; the enforcement of the criminal code and of every statute that we pass in this parliament is on the provinces and on the provincial attorneys general.
About two weeks ago I asked in the 'house if there had been any criminal prosecutions under the Alien Labour Act. The answer I was given was:	"No information.'' The
enforcement of that act was entrusted to the immigration department, and the section before us is now supposed to be enforced by the department of insurance, but not by the widest stretch of the imagination can it be said that there is any officer in that department in charge of the enforcement of this section. Does anybody expect Mr. Finlayson to go down to the police court in Hamilton, for example, if one man there lays a complaint about another man owing him $50. If a man makes a loan to a friend he comes under this section of the bill and can be fined.
We should have a committee on legal bills. There have been many appeals taken to the Supreme Court of Canada from British Columbia for determination whether acts passed by this parliament were constitutional or not, and several acts have been upset as not being within our powers. In England they have a committee on legal bills, and they also have one in the Ontario legislature and some other legislatures.
Next, has the Department of Justice passed on this bill?


James Lorimer Ilsley: Yes.


Thomas Langton Church: The Department of Justice should be the law department for every department of the government and for outside commissions. This very question came up in connection with the radio commission. The Department of Justice should pass on every federal act, as to whether it is within our powers or not. The penalty provided for by this section is a fine not exceeding $1,000. The full penalty will never be imposed. This bill may be all right for the lawyers, but I doubt if the minister will borrow any money under this legislation. Oh, no; he will not borrow money under this statute, but he will apply it to other people. I wonder if he has had any practical experience in connection with the enforcement of statutes of this kind. For many years I was chairman of a police commission; I saw many of these federal acts in the police court under Colonel Denison. He would not enforce them because they contained such loopholes and jokers as are in this section. A magistrate will construe an act according to the

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text-book concerning the construction of statutes; that is, strictly and in accordance with the words of the section and the marginal notes. He will not link it to any interpretation act or any other part of the statute. It must be definite and exclusive; it cannot be made cumulative with any other penalties under the act.
In my opinion it is no wonder that we have over-government and over-taxation in this country with the way in which the departments go about their business. Each department has a law officer who passes upon the statutes concerning that department. Why, that law officer is over the Attorney General of Canada, who is the chief law officer of the crown. He is not here at the moment, but he would tell you that in practice he cannot give an opinion; it is against the rules for him to give a legal opinion in regard to any bill before the house or any committee of the house. The practice should be to have all bills of this kind passed upon by the Department of Justice. A statute of this kind may be declared ultra vires of this parliament by some magistrate. Mind you, a magistrate can declare an act ultra vires of parliament; so can a county court or a supreme court judge.
In my opinion there is more red tape about this statute than about the Bank Act or the Bills of Exchange Act, which are simple statutes, easily understood. The metaphysical language used in the bill and by the minister to-night may be all right for the shark loan companies and Shylocks, but it cannot be understood so clearly by the law courts. I do not wonder at the expenses of this country going up as they are when we have such overlapping and over-government, and when we have a responsible minister of the crown coming here and introducing a bill like this, which has not received the stamp of approval of the chief law officer of the crown.


Karl Kenneth Homuth: What other penalty is provided?


James Lorimer Ilsley: There is a penalty provided in section 3, and it is also provided in the criminal code.


[Stage Direction]
Section agreed to.
On section 21-Regulations.
Thomas Langton Church: I do not believe it is in the public interest that a section of this kind should be inserted in this bill. Every statute we pass seems to have this provision, which has been condemned by Lord Ewart in his book, The New Despotism. We are divesting ourselves of all our powers. What are we doing here? We are giving the governor in council, which means some ministerial officer,
71492-207J
the right to make rules and regulations which will have the force and effect of statute law. We tell the magistrates and judges of this country by this section 21 that any rule or regulation under which somebody may be summoned for a violation of the statute has the force of an act of parliament. Surely, if there is anything this parliament holds dear to-day, it is the liberty of the subject.
In my opinion no provision of this kind should be passed. If the preamble, the interpretation clauses, the various sections, the marginal notes and the headings of the bill were sufficiently clear, there would be no need to tack on to a statute of this kind a provision giving the governor in council power to make rules and regulations. They can even create separate courts. Look at the wardens' courts, which can do things which are beyond the power of a provincial legislature or of this parliament. I believe this section should be struck out. I should like the minister to say whether he has consulted the Department of Justice in regard to it.


The CHAIRMAN:: Shall section 21 carry?


Thomas Langton Church: I am asking the minister to give the committee an explanation. If he has no reply, all well and good.


James Lorimer Ilsley: The explanation, if one is needed, is that section 21 merely authorizes the making of regulations for the efficient enforcement and operation of the measure. Surely anyone who wants it enforced efficiently cannot object to power being given the governor in council to make regulations for its efficient enforcement and operation.


Mr. LOCKHART:: Is the minister not of the opinion that this bill should be so clarified that it might be interpreted by the courts without any need for a great many regulations passed afterwards? Should that not be done?


James Lorimer Ilsley: No regulation can be made which is not authorized by the measure.


Norman James Macdonald Lockhart: I should think the bill could be made sufficiently clear that it would not be necessary to have so many of these regulations. Could not the Department of Justice draw it up in such a way?


James Lorimer Ilsley: I do not anticipate that many regulations will be necessary; but for instance, it might be necessary to pass a regulation placing upon an official the duty of laying information to enforce the measure. That is not the sort of thing you put in a statute. A regulation cannot go beyond the bill; if it does, it is ultra vires. All regulations must come within the four comers of the bill. A clause like this is found in almost every statute.
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Norman James Macdonald Lockhart: la the past so many tricks have been played on the public that it should be quite clear that no more tricks will be played on them in this way.


[Stage Direction]
Section agreed to.
On section 22-Coming into force.
James Shaver Woodsworth: I should like to ask the minister whether, if the proposed amendment to the criminal code should fail to pass, this bill by itself is capable of being efficiently operated and enforced.


James Lorimer Ilsley: Yes, I think so, because all the penalties provided in the criminal code are provided also in this bill. The advantage of having them in the criminal code is that the attorneys general have a duty cast upon them by the British North America Act to enforce such legislation as may be contained in the criminal code. The provincial jurisdictions are charged with the administration of the criminal law of Canada.


James Shaver Woodsworth: And failing that-?


James Lorimer Ilsley: Failing that, it is all here.


James Shaver Woodsworth: And is it capable of efficient operation?


James Lorimer Ilsley: I would think so. Perhaps the attorney general of a province would not take as much interest in it, but the courts would be there; undoubtedly the superintendent of insurance and his staff would lay charges, and probably they would secure convictions. It was thought that perhaps it would be better to put it in the criminal code as well, in order to provide an additional impetus to enforcement, through the responsibility of the attorney general.


Mr. QUELCH:: Have the provincial governments agreed to stop issuing provincial charters or licences?


James Lorimer Ilsley: No, they have not.


Victor Quelch: Then is there not the danger that they will continue to do so and that companies will operate under provincial charters?


James Lorimer Ilsley: They are subject to the provisions of this bill.


Victor Quelch: Then it would be for the courts to decide whether they have that power? You are assuming that you have the power, but you have not an agreement with the provinces?


James Lorimer Ilsley: No.


Karl Kenneth Homuth: Under this section eight months will go by during which these com-

panies will be able to make loans. Would it not be possible to have this bill come into force when it receives royal assent, but not apply to loans already made? If it is a good measure, and if it is going to do what the government expects it to do, why not have it come into force right away, after it receives royal assent? It need not necessarily apply to loans which have already been made, but would apply only to loans made after the date of royal assent. If it is a good bill I think it should come into force right away.


James Lorimer Ilsley: It is a matter of judgment as to how long a time should be given. Some notice should be given, I believe, before the change-over is made. There will be a considerable change for many of these companies. It is a matter of judgment as to how long the period should be. I believe the bill of last year had a similar clause in it. I imagine the recommendation made last year by the committee was that it should come into force on January 1, 1939. This measure carries it forward to January 1, 1940. I am not particularly wedded to this date, but it was assumed there would have to be a few months given, and this was taken as the natural date.


Karl Kenneth Homuth: I have in mind legislation of a more or less drastic type which I have known to be passed where some line has had to be drawn. Sometimes measures have been made retroactive. I have in mind, for instance, a provincial act respecting osteopaths, and another one respecting horse farriers, where a certain line was drawn. If this measure is as good as we hope it will be, it will at least clean up some of the mess which exists in respect to these loan companies. I do not see why it could not come into force when it receives royal assent except in so far as it may affect loans which have already been made. At least it would preclude these companies from making loans from now until the end of the year at these exorbitant rates of interest.


James Lorimer Ilsley: That is worth considering, but I would say that loans already made would have to be exempted anyway, no matter when the bill comes into force. However, the superintendent of insurance points out to me it will be necessary to make a survey of all the money lenders in Canada who can be found. I say that because it is provided under subsection 2 of section 5 that licences must be issued. The decision as to whether or not any company shall be entitled to a licence depends upon the minister being satisfied that the "experience, character and general fitness of such person or, if such person

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is a corporation, of the officers and directors of the corporation, are such as to warrant the belief that the applicant will, if granted a licence, carry on with efficiency, honesty and fairness to borrowers the business of money lending pursuant to this act."
The superintendent of insurance points out it will take at least some months to make a survey of this field. As I said yesterday, we know of at least forty-six companies incorporated under provincial jurisdiction. Then there may be some individual money lenders who could be located-I do not know about that. At any rate it will take some time to decide whom to license. Some period-, therefore, should be given. Then, I suppose some regulations will have to be made-although I do not know particularly about that.


Thomas Langton Church: I am wondering who suggested this date of January 1, 1940. No doubt if the measure did not become effective until that date it would give the government time to hold another election-because, as the Minister of Finance (Mr. Dunning) has said, we are on the eve of an election. Why not bring it into force at an earlier date? Let us adopt the practice of the Minister of Justice (Mr. Lapointe) and refer the bill to the supreme court, under the Supreme Court Act, to see if we have power to pass it. Why not do tha't-if they must tide it over, as a life-saver, until after the next general election?
I had a letter from a lawyer friend of mine who has been interested in these bills, and he has suggested that I withdraw my objection-and I have been making objections since 1928-to the bill coming into force on January 1, 1940. I wonder how he knew all about this particular bill? He is a reputable lawyer and a member of one of the leading firms in Toronto. But he suggested that I should not object to the bill coming into force before January 1, 1940.
This particular bill, in my opinion enables the government of the day to have this matter spread on all the fences and billboards. They will have the money lenders all in a rowboat-just as they had the hon. member for Dufferin-Simcoe (Mr. Rowe). They will have the	government	all	in a	rowboat toshow how	under this	bill	they	curbed Shylocks and	loan sharks,	and	what	the Liberalshave done	to all these	Shylocks	in the small
loan business.
In my opinion we do not have to wait until January 1, 1940, to have this bill come into force. Let us avail ourselves of the privileges offered under the Supreme Court Act, just as the Minister of Justice does-and he is the best life-saver I know of government bills. He has tided the privy council bill over, all right, until after the election. He moved the adjournment of the debate. No doubt the debate will be continued in the supreme court, and by the time the new building is erected I suppose we shall have a judgment from the Supreme Court of Canada.
If I do not come back to the house-and I do not know whether I will or not; it does not make much difference-perhaps somebody else will move the adjournment of the debate. May I say to the Minister of National Revenue (Mr. Ilsley) that in my opinion this bill should go to the supreme court, too. In other words, we will have this "Ding dong bell, pussy's in the well' kind of shark loan bill on all the fences and billboards of the country. It will be shown in all the colours of the rainbow, all the colours of the racing stables-Seagram's, and all the rest of them- in scarlet and gold, and gold and black. It will be in the rowboat, and it will be said that the Minister of National Revenue under this bill has all the Shylocks under control. There were Shylocks in the days of our Lord, and there will be Shylocks as long as time lasts.
These people operate secretly. They hold in utmost contempt any statutes passed by provinces or by the parliament of Canada. What did the Minister of Justice tell me in regard to another piece of legislation? I asked the Department of Justice about the Alien Labour Act, which contains clauses similar to those appearing in this bill. In that act the penalty clauses are the same. I asked a question in the house the other day, and received a return from the Department of Justice to the effect that they had no information about any transaction, and that they knew of nobody enforcing the Alien Labour Act. Then I asked the Minister of Mines and Resources (Mr. Crerar), and received the same answer: "No information," although it is his duty to act.
The same procedure is being followed in connection with this bill. Mr. Finlayson will have to enforce the bill. Will he go from Vancouver to Halifax, to prosecute every Tom, Dick and Harry who makes a loan of fifty cents or a dollar? Is he going to be delegated to summon all these people before a justice of the peace? Well, if that is so, I would point out that the hon. member for Parkdale (Mr. Spence) used to be a justice of the peace, and that would keep him busy for many a day.
If we are going to have to wait until January 1, 1940, before this bill can be enforced, then I submit it is nothing but a political bill. Its enforcement is being postponed until after the election. Many people will have to
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go through the winter without being able to pay their hospital bills, coal bills, light bills and other bills. This is a political bill from cover to cover. We are all being put out in a rowboat. I do not think the Minister of Justice should be there, because he has been pulling a heavy oar for the government for many years past.


Harry Gladstone Clarke: I have another suggestion I should like to make to the minister. When a man is unable to pay the full amount of his loan at any one time and can show that he will not be able to pay it in the near future, I think there should be a provision whereby this rate of 26 per cent would cease to operate. A wage-earner may be taken ill and be faced with other bills that must be paid, and there would be no certainty of his being able to pay the loan for a year or so. In such a case I think the interest rate should drop back to 5, 6 or 7 per cent for the unpaid amount.


James Lorimer Ilsley: I do not think I could accept that suggestion because it would change the character of the bill entirely if we inserted a provision to give a man the right to defer payment because of personal circumstances. This would necessitate a tribunal like the one set up under the Farmers' Creditors Arrangement Act. I do not think that has a place in a bill of this kind; it would have to be looked after by general legislation applicable to all debts rather than to a particular debt.


Walter Adam Tucker: There is a provision such
as that suggested by the hon. member already in the bill. Section 14 reads in part:
.	.	. but if default in the payment of any
instalment continues beyond the date on which the last instalment of the loan falls due, interest shall accrue thereon at a rate not exceeding twelve per centum per annum from such date.


Harry Gladstone Clarke: That still
keeps it at a high rate. There are no charges that can be made against the continuance of the loan. The loan is already floated and that high rate of interest should not be chargeable. The rate should be no higher than is charged by the banks for loans.


James Lorimer Ilsley: The rate drops.


Harry Gladstone Clarke: It drops to
12 per cent, but I maintain that is not a sufficient reduction.


Mr. LAWSON:: Mr. Chairman, it is not
pleasant on an occasion such as this to be in the position of disagreeing with the views of so many of one's colleagues. In view of the attitude I took in connection with the small loan business; in view of the representations that I made as one of a large majority of a

committee urging the government to take over this matter and legislate with respect to it, I feel that I would neither be true to my stand on that committee nor to the representations I made did I not say a word at this time in support of this bill. I have no intention of entering upon a detailed discussion of the provisions or the objections which have been raised, I merely wish to say that I was a member of a committee which spent days and weeks and months in a previous session inquiring into this whole matter and obtaining all the data and information which were available to us, as a result of which at least a substantial majority of that committee came to the conclusion-


Henry Herbert Stevens: Seventy to five.


James Earl Lawson: I thought the number was much larger. All I can say is that the vote of seventy to five did not represent the extent of the majority opinion in the committee, because it was a very large committee. The substantial majority opinion was that once you grant the principle that loans of this kind serve a useful purpose in the community, a rate of 2 per cent a month was a reasonable rate under which these companies might be asked to operate.- Those members of the committee who were in favour of such legislation were motivated by the fact that there were tremendous abuses throughout the country in connection with loans made by companies which were in no way responsible to the superintendent of insurance, who has supervision over some of these dominion companies. We felt that ther was a necessity for providing facilities for loans of this kind and having granted that principle, we felt that there should be some legislation to bring all the operators in Canada under the same specific provisions. Therefore we favoured a measure such as this. I believe the government has in this bill summarized those majority opinions of that committee, and therefore, I must support the bill.


[Stage Direction]
Section agreed to.
Schedules one and two agreed to.
On section 10-Annual assessment.
James Lorimer Ilsley: The procedure at this stage is to move a resolution authorizing the introduction of section 10, so I beg to move:
That it is expedient to empower the superintendent of insurance to cause an annual assessment to be prepared against each licencee under bill No. 97, an act respecting small loans for the purpose of meeting the expense incurred by the government for or in connection with the administration established under the provisions of the said bill and the provisions of sections six and eight of the

Small Loans
Department of Insurance Act, chapter forty-five of the statutes of 1932, shall mutatis mutandis apply an the case of every such licencee to the same extent as if the title of this aot were inserted in the schedule to the Department of Insurance Act.


[Stage Direction]
Motion agreed to.
Henry Herbert Stevens: The minister might explain that it was not within the jurisdiction of the senate to include section 10, and that he is taking the proper way to see that section 10 is introduced into the bill.


James Lorimer Ilsley: The hon. member is correct. This is a money provision.


[Stage Direction]
Section agreed to.
Bill reported.
Mr. ILSLEY moved the third reading of the bill.
Angus MacInnis: Mr. Speaker, like so many other members, while this bill was under discussion I was in two minds whether to support or oppose it. I realize that the committees which considered it last year and this year gave the matter a great deal of thought, and I feel that the minister must have given much thought to the bill, so I should have liked to support it. Yet I believe that it is wrong to support a bill of this kind, carrying this exorbitant rate of interest, even though the rate of two per cent a month includes something besides interest. Surely this government can produce a better measure than the present bill. I am almost convinced that we are not conferring a favour upon people who have to resort to borrowing of this kind, by making the opportunity available to them, because we are binding them forever to payment of usury. Also it seems to me, in view of the barrage of propaganda to which hon. members have been exposed since this measure came forward, that the lenders regard it as very good legislation from their point of view, or they would not be so anxious to see it passed. I also had my mind influenced against the bill by what was said by the hon. member for Kootenay East (Mr. Stevens), the hon. member for Parry Sound (Mr. Slaght) and a number of others.
I do not believe that we should at this time pass this measure. If the government cannot devise a better method of protection for people of small means, who are the people who would borrow under this bill, I do not think they are capable of doing very much for the people of Canada.
I therefore move, seconded by Mr. Coldwell:
That this bill be not now read a third time but that it be referred back to the committee of the whole with instructions that they have
power to amend it so that the "cost" of a loan as defined by clause (a) of section 2, shall not exceed one per centum per month on a loan for a period of fifteen months and one-half of one per centum per month for a loan for a greater period than fifteen months.


James Lorimer Ilsley: For the reasons that I have given on the second reading of the bill and in committee, I of course cannot accept this amendment. I am satisfied that if the bill were amended in this manner the companies now engaged in the small loans business in Canada would go entirely out of that business and that it would be carried on by loan sharks in all parts of the country, particularly in the large cities. I am convinced that the experience of the dominion would be that of every jurisdiction in the United States which has tried this sort of thing. It has been tried repeatedly in various states of the union. Evidence covering the experience of these trials was given fully by experts before the banking and commerce committee. The result in all jurisdictions without exception has been that as the result of legislation of this kind, loans at twenty per cent a month have taken the place of loans at two and three per cent a month. For that reason I cannot accept the amendment. I believe it would inflict a great blow on the Canadian people. It may sound better to say one per cent a month instead of two per cent a month, but it would be a ruinous thing in the interests of the people to adopt an amendment of this kind at this stage. I believe, and I think everyone who has made a study of the matter is satisfied of the same thing, that if we adopt this amendment we shall not meet the problem at all; we shall be simply scuttling and sinking all this legislation. I cannot accept the amendment.


Henry Herbert Stevens: I cannot follow the minister's reasoning. He leaves the impression that if this bill is not passed the business of small loans will pass into the hands of so-called money sharks and private uncontrolled money-lenders of that class.


James Lorimer Ilsley: Yes. And I not only say it. I-


Henry Herbert Stevens: That is the point which is covered in the amendment to the criminal code which is about to come up.


James Lorimer Ilsley: Which cannot be enforced.


Henry Herbert Stevens: I want to make this point clear. It has been my position in this house for years and years. I can go back to the first session when I was in the house, when I sought an amendment to the Money Lenders Act.
Small Loans

That is twenty-eight years ago, and from that day to this I have fought this sort of business, and I have always contended that there was one way to control it, namely through the Money Lenders Act and through the criminal code. At this session-and I give the Minister of Justice (Mr. Lapointe) commendation for his action'-an appropriate amendment to the code will be brought down. That is the way in which you will control your money sharks

there, and there only. It is a grave question whether under this legislation you can control the money sharks at all. Personally I do not think you can. But you will control them through the criminal code. Therefore, when the minister says that if hon. members do not enact this legislation they will throw things wide open and increase distress, all you have to do is to go on with the amendment to the criminal code and apply the penalties therein set forth to anyone who charges these exorbitant rates of interest.
I invite the Minister of Justice to consider this point. As regards the section of this bill whereby we change costs and fees into interest by merely calling them costs and not interest, I question whether it will stand up in the courts, because I do not think this parliament can say that a charge to inspect a chattel mortgage, or a fee for this, that and the other, can be called interest. I do not believe that you can change by legislation the meaning of a term. Under the British North America Act we can legislate only in connection with interest unless through the criminal code we make a given set of actions criminal. That we are proposing in another bill to do. Give us this amendment to the criminal code; give us the present Money Lenders Act, and we shall then have power to correct these abuses -all of them, I do not care what they are- without thinking ever again of this bill. I would bring every one of these companies, from the so-called A class down to the most disreputable money lender, under the jurisdiction and control of the criminal code and the Money Lenders Act. I deprecate, therefore, the insistence of the minister that if we vote against this bill we are going to perpetrate some sort of ruin and desolation upon small borrowers in Canada. This will not happen if we proceed with the criminal code amendment; it will not affect the situation one iota. I will, therefore, support the amendment just offered because I am convinced that through this amendment to the criminal code and through that source only can we meet the terrible evil which is now abroad in the land.


Mr. HUGHES CLEAVER (Halton):: It is quite obvious that the easiest thing for us to

do would be to throw up our hands in holy horror at 26 per cent and say that we shall have nothing to do with it. But one thing that has not been called to the attention of the house is this. We have already three loan companies operating under dominion charter, authorized to charge up to 2} per cent a month, and if we fail to-night to carry this bill into law, what will happen? I have not the evidence before me and I can speak only from memory, but other members of the committee will put me right if my recollection is at fault. I believe there is evidence adduced before the committee that this reduction in interest rate which we are making by this bill will mean the saving of something over $40,000 in one year to borrowers from one existing company. That is a distinct advantage in itself and a move in the right direction.
I am not in favour of high interest rates; far from it. But unless we leave some reputable companies in the field, then the work will be carried on by the so-called loan sharks; and from the evidence given to the committee it has been established to my satisfaction that two per cent is perhaps as low a rate as these legitimate companies can operate under. Every safeguard is set up under the Loan Companies Act to ensure that these companies cannot water their stock, cannot plough back profits, cannot issue bonus stock. We have a complete record of their earnings, and if in future years it is found that they are making more than a legitimate profit, then I am sure that every member of the house will unite in lowering the rate. It does seem to me, however, that for the sake of the poor unfortunates who need to borrow small sums of money we should maintain the legitimate companies in the field from whom these people can secure their requirements.
I think this country is deeply indebted to Mr. Finlayson for the long fight he has carried on for this reduction which will be put into effect if this measure passes. From questions asked from time to time this evening, I gather that hon. members do not fully realize the rates that are being charged. I take the $100 loan as an example. This rate of two per cent a month, figured out on a monthly retirement of an equal amount each month over fifteen months, would mean that the borrower would pay just over $16 as an overall charge of all costs including interest, legal charge for drawing up the chattel mortgage, legal charge for official registration of chattel mortgage, the expense of the company in sending out fifteen notices of monthly payments as and when they come due, expense of receiving fifteen payments and issuing receipts, setting

Small Loans
out bookkeeping entries each time a payment is made, and so on. Does anyone suggest that these services could be supplied for less than $16 and some cents?
For the reasons I have given I am going to support the bill.


Walter Adam Tucker: I understood that, in regard to the proceedings of the house, if the leader of a party took a certain stand in committee it might be taken as more or less representing the attitude of his party in that respect. I think the members of the committee will bear me out that the attitude of the Cooperative Commonwealth Federation group when they were represented on the banking and commerce committee was that we should assume jurisdiction and deal with the evil which was being considered at that time.


Paul Joseph James Martin: That is right.


Walter Adam Tucker: I took the attitude before the committee that I should like to see the interest set at one per cent and all further charges set at not more than one per cent, so that the provinces would clearly have the right to prohibit all other charges than that one per cent a month. The attitude of the Cooperative Commonwealth Federation group, whenever they were represented on that committee, was that the dominion as a whole ought to assume jurisdiction and deal with the evil as a national problem, and they certainly led the committee to believe that was their attitude.
I was more or less censured by the leader of the Cooperative Commonwealth Federation for my attitude on this point, and bearing that in mind I have just now looked into the proceedings to some extent. I have not had a chance to read all the proceedings of the banking and commerce committee, but everyone who was on the committee will bear me out that this was the attitude, and supported by the man who now seconds this amendment and who was on the committee, that we should deal with the question as a national problem and set a limit that would include interest and cost of loan.
In this connection I wish to read from the proceedings of the banking and commerce, committee, No. 13, of May 12 to June 1, 1938.


Paul Joseph James Martin: What page?


Walter Adam Tucker: Page 8. There was present on May 20, 1938, the leader of the Cooperative Commonwealth Federation (Mr. Woodsworth), and the motion before the committee was:
That the committee go on record as being of the opinion that the federal government should enact legislation assuming such power
as will render (the operation of such legislation the same in all provinces with respect to interest and costs.
The hon. member for Selkirk (Mr. Thorson) moved in amendment thereto the following:
That that portion of the "cost" of a loan, as defined in section 2, paragraph (a) of the draft bill, which is interest be fixed at a rate not exceeding 12 per cent per annum and that the right of any provincial legislature to reduce the remainder of the said cost be preserved.
It was quite obvious from that amendment it was clearly envisaged that a higher rate than 12 per cent would be charged, because the idea was that interest should be 12 per cent and then the provinces should be given jurisdiction over any balance. How did the committee vote on that motion?
The question being put on the amendment it was negatived on the following recorded division: Yeas. Messrs. Donnelly, Dubuc, Thorson, Tucker (4); Nays, Messrs. Cleaver, Kinley, MacDonald, McPhee, Martin, Ward, Woodsworth (7).	*
The question being put on the main motion, it was adopted.
Everybody knows that I fought in that committee first of all to have the rate set at 1 per cent, but as it was clear that the majority of the committee considered that if these companies were going to stay in the field and not withdraw and force small borrowers into the hands of unlicensed and unregulated "loan sharks,'' they would have to be given the right to charge at least 2 per cent. Thereupon some of us took the attitude that the rate of interest should be fixed at one per cent and the balance regarded as a service charge, so that the province would have the right to intervene, and thereby any province could cut the rate to one per cent. When that question came before the committee, the leader of the Cooperative Commonwealth Federation, speaking as we thought for his party, took the attitude that parliament should enact a bill providing for a rate of 12 per cent and such additional charges as were thought proper. They must have presumed there would be additional charges, or they would not have fought on that question. They voted that parliament should assert its jurisdiction.
Now we have the spectacle to-night of a motion being made that this bill be not now passed and therefore that the jurisdiction which they urged the government to exercise be not exercised.


Angus MacInnis: On a point of order, Mr. Speaker, the hon. member has put into the motion something that is not there. The motion does not seek to take the bill away from this parliament. It simply asks that it
Small Loans

be referred back for amendment to the committee which was considering it a few moments ago. The government's responsibility is the same as before.


Walter Adam Tucker: It is suggested that the bill be referred back and that the rate be reduced to 12 per cent, although it was obvious when the bill was before the committee that the leader of the Cooperative Commonwealth Federation thought the rate would have to be higher than 12 per cent, and I do not think he will disagree with me on that point.


James Shaver Woodsworth: I do disagree, and I object to the hon. member putting words into my mouth and attributing to me positions which are not in my mind.


Walter Adam Tucker: All right, but there was the definite suggestion made, when I was fighting to keep the rate down to 12 per cent, that we were playing to the Saskatchewan electorate; for the leader of the Cooperative Commonwealth Federation made this motion.
Mr. Woodsworth moved that the sittings of the committee be adjourned until after the general elections in the province of Saskatchewan.
Does not that bear out what I have said?


James Shaver Woodsworth: If we are going to get into a political discussion, that is one thing. A great many members from Saskatchewan were out of the city at that time; I have no recollection of putting that motion with any insinuation in my mind. I do not think it is fair for the hon. member to attack me as to my reasons for putting a fair motion before the committee.


Walter Adam Tucker: Just a word in conclusion, Mr. Speaker. As the bill now stands, any province that does not want to have this rate applied can pass a law that no charge other than interest shall be made, and it can thereby reduce the rate within the province to one per cent a month. So the thing we were fighting for, and which the hon. member for Winnipeg North Centre voted against, the government has granted to us, and it is because the government has been good enough to meet by concession the stand for which we have fought for over a year, including our request for an amendment to the criminal code-and I say this for the benefit of the hon. member who said that he could not understand my position-that I am supporting this bill.


Major James William Coldwell: Mr. Speaker, I do not think any of us doubt the sincerity of the hon. member for Rosthern (Mr. Tucker), nor would any of us say that he did not always put up a fight 
in the banking and commerce committee for the conviction that he held. I think all of us who were members of that committee recollect that on every occasion he put up an . argument for the point of view which he says he advanced. I am not questioning his sincerity to-night in supporting the bill on the grounds which he has just given, but I would point this out, that in the final stages of that committee's deliberations many suggestions were placed before us and some of them were advanced in a manner to try to bring its proceedings to an end.
With regard to the question that the hon. member raised as to the motion of the hon. member for Selkirk (Mr. Thorson), his motion was designed to keep the rate of interest down to 12 per cent, as he says; but it seems to me, and it seemed to me all through the argument, that the vital weakness in the position taken by the hon. member for Selkirk and the hon. member for Rosthern was that the charges were going to be under provincial jurisdiction, and I felt then, as I feel now and as I know the hon. member for Winnipeg North Centre (Mr. Woodsworth) felt at the time, that if we could we must bring the whole question of charges and interest under dominion jurisdiction. I do not and shall not at any time question the sincerity of any hon. member who votes either way on this bill tonight because I recognize, as I said before, that it is a difficult decision to make. But in the amendment that has been moved the rate has been fixed at 12 per cent because (a) that is the rate in the Money Lenders Act and (6) it is the rate which has been adopted by the credit unions, some of which, I understand, have managed to get along with a lower rate.
It seems to me that we should endeavour to pass legislation that would not permit these loan companies to charge the poor and the needy a higher rate than is charged by the credit unions at the present time. I know it may be said that in the credit unions there is a great deal of voluntary effort. So there is. But on the other hand the volume of the business of the loan companies is very much larger. Then we have the experience of the chartered banks as well.
To the minister I would say that I did not like the manner in which he said, "12 per cent sounds better but is not fair." I do not think he intended (to say exactly what his words might have conveyed. This parliament, as the hon. member for Kooteney East (Mr. Stevens) has said over and over again, has passed the criminal code, and I think we should fix the rate suggested in the amendment.

Small Loans


John Horne Blackmore: Mr. Speaker, there have been several points of view expressed on this bill to-night. I indicated last night that I was going to oppose the bill. I have said nothing to-night, but I propose to support the amendment for several reasons. In the first place I do not agree with those who feel that we should make it difficult for needy people to borrow. There are so many times in the life of any man when he needs money, and needs it sorely, especially in our cities-and under present conditions it is rapidly coming to be the case throughout the country-that I am not in favour of the point of view which seemed to be expressed by the hon. member for Parry Sound (Mr. Slaght) that we should make it difficult for these people to borrow. My feeling is that we should make it easier for them to borrow. There are those who will say immediately, "That is weakening the morale and economic fibre of t'he people." Well, Mr. Speaker, it is a fundamental truth that there is a condition developing in our society which must be met by adjustments different from any we have known previously. This insistent demand for small loans is another evidence that there is a decrease in the purchasing power in the hands of the people which simply must be met. Any light treatment of this condition certainly will not remove this condition.
That being so, I am going to point out several factors which I believe have a bearing on this situation. I am told that the losses sustained by the loan companies amount to less than one per cent of the money loaned; I am speaking entirely from memory. This would indicate that the people who borrow money under these circumstances are honest people who intend to pay back and who do pay back the money they borrow. Certainly we ought to be ready to favour people like that. I was interested in the remark of the hon. member for Parkdale (Mr. Spence) a short time ago, to the effect that not so many years ago the bankers of the needy were the butcher, the baker and the grocer of the community, and he deprecated the fact that those small businesses were being forced out of existence by the development of large organizations such as the chain stores. This makes it so much more important that we should make available to the people who are suffering loans at low rates of interest. But if the ordinary grocer in the community could carry the needy people of that community for six or eight months I am utterly unable to see why the people of the whole dominion cannot be so organized that they can become the banker for the needy people
of the country. Many a time the small grocer charged no interest at all on his overdue accounts; and many a time those who were able to pay were charged just a little extra in order to make up his loss-those of us who are familiar with the way in which the small country or community grocer carried on understand this very well. So I utterly fail to see why the people of this dominion cannot manage to carry those who are in necessitous circumstances.
That may sound strange, but in future we shall have many things that may sound a good deal stranger. I feel that those who suggested that the banks of this country should be called upon to make loans to needy people were on sound ground. When we refer this bill back to the committee I am not going to require that we should pass a law to enable any loan company to grant these loans. It might be wise for the government to reorganize the whole set-up and see to it that the banks attend to the matter right away. So far as I can see, there is no reason why within three months we could not have the banks of this country making these loans, as the Canadian Bank of Commerce is doing to-day. Our banking institutions are already there; they have their equipment, personnel and organization. These small loan companies are merely duplicating the services the banks are already amply equipped to render. and I feel that we should call upon the banks to do their duty.
So, Mr. Speaker, for the reasons I have indicated, as well as for other reasons, I am going to support the amendment.
The house divided on the amendment (Mr. Maclnnis) which was negatived on the following division:
++YEAS
Messrs:
Barber
Bertrand (Prescott)
Blaekmore
Brooks
Church
Clarke (Rosedale)
Coldwell
Esling
Fair
Fleming
Graydon
Green
Hayhurst
Homuth
Jaques
Johnston (Bow River)
Kennedy
Lennard
Lockhart
McGregor
Maclnnis
MacMillan
MacNeil
MacNicol
Marshall
Mitchell
Needham
Neill
O'Neill
Pelletier
Perley
Quelch
Reid
Rowe (Athabaska) Rowe
(Dufferin-Simcoe) Senn Stevens Tustin White
W oodsw'orth-40.

Small Loans
NAYS Messrs:
Anderson
Beaubien
Bertrand (Laurier) Black (Chateauguay-Huntingdon)
Blair
Blanchette
Bonnier
Bradette
Brunelle
Cameron
Cardin
Clark
(York-Sunbury)
Cleaver
Cochrane
Cote
Damude
Denis
Deslauriers
Dupuis
Evans
Ferguson
Ferland
Ferron
Fontaine
Fournier (Maison-neuve-Rosemount) Francceur Gardiner Gariepy Gladstone Golding Hanson Howard Hushion Ilsley Isnor Jean Kirk Lacombe Lapointe
(Quebec East) Lawson Little MeAvity
McCallum
McCann
McCulloch
Macdonald
(Brantford City) McDonald (Pontiac) McDonald (Souris) MacKinnon
(Edmonton West) MeLarty
MacLean (Cape Breton North-Victoria) McLean (Melfort) McLean
(Simcoe East) MacLennan McNiven
(Regina City) McPhee Martin Mills Moore Mullins Mutch
Parent (Quebec West and South)
Patterson
Plaxton
Pottier
Power
Purdy
Robichaud
Rogers
Ross (Moose Jaw)
Sanderson
Stirling
Streight
Sylvestre
Thauvette
Thorson
Tucker
Vien
Walsh
Ward
Weir
Young-82.
Motion (Mr. Ilsley) agreed to on division and bill read the third time and passed.
On motion of Mr. Lapointe (Quebec East) the house adjourned at 10.55 p.m.
Thursday, April 27, 1939