Hon. C. D. HOWE (Minister of Transport):: I desire to lay on the table the budget of Canadian National Railways and Canadian National Steamships for the year 1940, and to move:
That the annual budget of Canadian National Railways and Canadian National Steamships, tabled herewith, and the annual reports laid on the table of the house on May 17, 1940, be referred to the standing committee on railways and shipping, together with the following items in the estimates:
US, Maritime Freight Rates Act; V/G, Maritime Freight Rates Act; 1/58, Canadian National (West Indies) Steamships Limited, capital advances; }59, Canadian National Railway Company; 1/60, Prince Edward Island car ferry and terminals.


[Stage Direction]
Motion agreed to.


Right Hon. W. L. MACKENZIE KING (Prime Minister):: Mr. Speaker, with respect to matters having to do with the Department of National Defence I should like to follow the practice of having my colleagues of that department make any announcements that have to be made in connection with that branch of the public service. However, there is one announcement which I feel will touch so deeply the hearts of the public of Canada that on this occasion I might, I think, depart from that rule and myself make the statement which it is necessary to make in the house.
I am greatly distressed to have to announce that, while engaged in the pursuance of hazardous duties off the mouth of the Gironde river near Bordeaux, France, His Majesty's Canadian ship Fraser was lost in a collision. One hundred and fifteen of the gallant crew have been rescued. I regret to have to say that forty-five are either dead or missing. The next of kin have already been informed.
His Majesty's Canadian ship Fraser has been on active service since the commencement of the war. At a few hours' notice she speeded, in company with another vessel of His Majesty's Canadian navy, from Vancouver to the Nova Scotian coast, via the Panama canal. Since then she has seen arduous
Loss of H.M.C.8. Fraser

service both off the coasts of Nova Scotia and in the Caribbean. Recently she has been on duty in European waters with sister ships.
There are four destroyers of the Fraser type in the Royal Canadian navy. Formerly known as H.M.S. Crescent, she was launched on September 29, 1931, and was acquired by Canada in 1937. Her displacement was 1,355 tons, and she was built at the Viekers-Armstrong works, England.
The commanding officer of the Fraser was Commander Wallace B. Creery, R.C.N. I understand the commanding officer's life has been spared.
At the present time, for reasons of naval ' secrecy, nothing more can be divulged of the operations of His Majesty's Canadian units operating in overseas waters.
I have just this minute received the following communication from the admiralty in London:
Please convey to officers and men of the Royal Canadian Navy their lordships' sympathies in loss of H.M.C.S. Fraser.
Their lordships wish to take this opportunity to express their thanks to all ranks and ratings of the Royal Canadian Navy for splendid contribution they are making to the work of his majesty's fleet in common cause.
Mr. Speaker, I should like to add on behalf of all hon. members of this house an expression of sympathy equally deep with the officers and men of the royal Canadian navy in the loss of the ship Fraser, but even more to express the very deep sympathy of this House of Commons to the relatives of the gallant men who have been lost in their country's service in the manner that I have been obliged to describe.


Hon. R. B. HANSON (Leader of the Opposition):: I am sure we all join with the Prime Minister (Mr. Mackenzie King) in the expression of sympathy with the next of kin and loved ones of those who have been lost in this sad event. It is the sort of thing that Canada and Canadians may expect to happen at this time. May it be a challenge to every one of us to support our people at the front, our gallant lads in the navy, in the air and in the army. I am sure that their example and devotion and the sacrifice they make for Canada and the empire will not be forgotten.


Mr. M. J. COLDWELL (Rosetown-Biggar):: I just wish to say very briefly that with the sentiments expressed by the Prime Minister and the Leader of the Opposition the group with which I am associated are in hearty accord. We too extend our deepest sympathy to those who are bereaved.


Mr. J. H. BLACKMORE (Lethbridge):: It hardly needs to be said that our group is in most sincere accord with the sentiments which

have already been expressed. It must be impressed upon us all that we are at the beginning of a long, long list which will have to be recorded of those about whom it will later be said, as it was said of the heroes of the past: "Their name liveth for evermore."



BRITISH CHILDREN


Richard Burpee Hanson: I should like to announce to this house that the loyal city of Fredericton, in which I have resided for forty years, which I have served as mayor, and whose citizens have been so good to me in days gone by, has announced through its mayor that it will bear the full expense of hospitalization of all evacuated children who may be placed in Fredericton homes.
I make the announcement in the hope that other cities and municipalities in Canada will follow this example.


William Lyon Mackenzie King: May I ask my hon. friend when he returns, as I understand he does at the end of the week, to his native city, to extend to the mayor of Fredericton, an expression of our appreciation of the action the city has taken; and also to say that by taking the action it has, the city of Fredericton has set an example which we feel sure will be followed throughout Canada.



PRIVATE BILLS


[Stage Direction]
Bill No. 62 to incorporate Sisters Servants of Mary Immaculate.-Mr. Lapointe (Lot-biniere).
Bill No. 63 for the relief of Margaret Somerville Sickinger.-Mr. Hill.
Bill No. 64 for the relief of Romain Cleophas Moreau.-Mr. Macdonald (Brantford City).
Bill No. 65 for the relief of Dorothy Florence Donn Martin.-Mr. Graydon.
Bill No. 66 for the relief of Phoebe Doris Edge Pott.-Mr. Graydon.
Bill No. 67 for the relief of Filomena Grego Sauro.-Mr. Bercovitch.


[Stage Direction]
On the orders of the day:
Richard Burpee Hanson: I should like to direct a question

The Budget-Mr. Reid
to the Minister of Transport, based upon a press report appearing in to-day's Ottawa Citizen. Is it true that the Canadian Broadcasting Corporation has lifted the ban on Trans-Radio news which was proposed to become effective from July 1? In view of his earlier statement made on June 6-page 557 of Hansard-will the minister give the house detailed information as to the proof or bona fides furnished by Trans-Radio news officials to the Canadian Broadcasting Corporation, particularly as to its ownership, and the authenticity of its reports dated from London?
I sent notice of this question to the minister earlier in the day and he has informed me that he has not the information at the moment. Of course it is quite satisfactory to me if he has to postpone his reply.


Clarence Decatur Howe: Perhaps I can give my hon. friend the information he desires. The board of governors of the Canadian Broadcasting Corporation met in Ottawa yesterday. Attending the meeting were representatives of the Canadian Press and of the privately-owned broadcasting stations. A general policy was evolved which will mean that within a reasonably short time -the shortest possible time-sponsored news on the air will be a thing of the past. There are details to be worked out; I have asked a man in whom I think all hon. members of this house have a good deal of confidence, Mr. Walter Thompson, to look into all sides of the question on my behalf and to bring in a report, which I think will finalize the matter and evolve a policy more satisfactory to listeners in Canada. Whether in the meantime the present news services will be allowed to function I am not sure. I rather think they will, although I have no definite knowledge. It would perhaps be a mistake, for a matter of two or three weeks, to make any radical change in the existing situation. But I think I can say that within the next month there will be a new policy for news on the air, which I shall announce as soon as I can, and which I think will be recognized by all as an improvement on the present situation.


Richard Burpee Hanson: Will the announcement be made in this house?


Clarence Decatur Howe: Sometimes these announcements get out before they reach me, but I assure my hon. friend that as soon as I receive it I will make the announcement in the house.


Richard Burpee Hanson: Any announcement of public policy on behalf of a government-owned institution should be made here first.


Clarence Decatur Howe: I may be scooped by my news service.



NATIONAL DEFENCE


[Stage Direction]
On the orders of the day:
Mr. G. K. FRASER (Peterborough West):: I should like to ask the Acting Minister of National Defence (Mr. Power) if anything is being done to fix special and reasonable rates for enlisted men and women travelling by train. I ask this question because last week-end men travelling from Ottawa to Peterborough on regular vouchers had to pay $5.50. The regular coach fare is $6.90, but there was a special excursion rate of $4.60, and I know that some of the men paid $5.50 and found out about the lower rate later. In other words soldiers had to pay 90 cents more than civilians. I honestly believe something should be done-


Mr. SPEAKER:: Order.


Hon. C. G. POWER (Acting Minister of National Defence):: I shall be glad to make inquiries. I cannot answer the question offhand.



THE BUDGET


[Stage Direction]
The house resumed from Thursday, June 27, consideration of the motion of Hon. J. L. Ralston (Minister of Finance) that Mr. Speaker do now leave the chair for the house to go into committee of ways and means.
Mr. THOMAS REID (New Westminster):: In my first words this afternoon I should like to join in the regret that all must feel following the announcement by the Prime Minister (Mr. Mackenzie King) of the loss of one of our Canadian destroyers, the Fraser. Those of us from British Columbia have taken perhaps more interest than other hon. members in this destroyer, because, if I am not mistaken, this destroyer was first welcomed to Canada at the port of New Westminster, and I believe most of the personnel come from British Columbia. We are inclined to be more conscious of the other branches of the service and to forget at times that great, silent service, the navy. Some of the boys returned at Christmas time on leave, and the stories they told of their work in the north Atlantic were very thrilling indeed. They spent many days at sea; some had their fingers and toes frozen; many times they encountered a temperature of 40 degrees below zero, with a howling gale. So I cannot but grieve this afternoon at the loss of this destroyer.
With other members on the government side I have refrained from making speeches
The Budget-Mr. Reid

during this session because of the serious war situation in which we find ourselves. I would not make that statement, Mr. Speaker, but for the fact that an impression has been gained in many parts of the country that those of us who do not speak are not doing our duty here as members of parliament. Each of us has been extremely active since coming here, but realizing the war situation, we have refrained from making speeches which otherwise might have been made.
There are one or two matters, however, upon which I should like to dwell this afternoon, but in so doing will endeavour to be brief. In my first words I should like to congratulate the Minister of Finance (Mr. Ralston) upon his splendid presentation of the .war budget. At the same time I want to extend to the minister every good wish in the new position he is to assume very shortly, because we all realize the onerous and heavy responsibilities which fall upon the man holding the important position of Minister of National Defence at this time.
It is not my intention to deal at any great length with the various ramifications of the budget. It was generally well received by the people of Canada; in fact, I think they expected it to go much further than it did, and I believe they were prepared to bear even greater burdens gladly. I should like to make one comment, however, in connection with any future borrowings. The minister pointed out that he expected a total expenditure this year of well over a billion dollars and that the estimated revenue would be something like $750,000,000, leaving an estimated deficit of between $550,000,000 and $600,000,000. At a time like this I do not believe the government should pay any greater interest on loans than the one and a half per cent which is paid by the banks of Canada. As a matter of fact, I believe that thousands of our citizens would gladly lend their money to the government at this time without interest, fully realizing and knowing that if we fail now, nothing else matters. I believe some explanation is due the house-and I hope it will be given before this debate is ended-with regard to the interest paid on some past loans. In May, 1939, we borrowed $95,000,000 at one and a half per cent. Later in the same year we borrowed $200,000,000 at two per cent. In February of this year we raised $250,000,000 at three and a quarter per cent, and I understand that the greater part of that loan was taken up by the financial institutions of the country. Then we have the war savings certificates, on which the rate is three per cent. I am going to urge upon the Minister of Finance, whoever he may be, and upon the government, that in 'Mr. Reid.]
any future borrowings during these trying times we pay no more than allowed by the banks, namely, one and a half per cent.
I am not going into the question of finance generally, although I might very well do so. Sometimes, however, when the leader of the Social Credit party (Mr. Blackmore) holds forth with regard to changes in our monetary system which will have to take place, I hear some hon. members laugh, while others call out "funny money." In my opinion the world is changing, and many of us will have to give up our old ideas. To those who laugh so loudly I would direct this question: How many members here could rise in their places and explain the present monetary system?


Mr. JOHNSTON (Bow River):: There is
the first good Liberal I have heard in this house.


Thomas Reid: The other evening the leader
of the opposition (Mr. Hanson) and some other hon. members were speaking of the increasing cost of government, and something was said about the bureaucracy which exists in Canada at the present time. I do not want to be misinterpreted, in what I am about to say, because I am all for the civil service merit system; but unconsciously we have built up a bureaucracy which has become almost, if not entirely, our master. Why, Mr. Speaker, I could name government departments here in Ottawa with which no minister can interfere. They have been left on their own too long. That is what ruined France; it is, I believe, injuring Great Britain very seriously, and unless we control this evil now I am afraid it may strangle us also.
I am afraid I do not quite agree with the Minister of Finance with regard to the tax on motor cars. Personally I should like to see them banned entirely for the duration of the war and our factories turned over to war work. Be that as it may, however, the minister pointed out that the graduated tax on motor cars w'as imposed not so much for the purpose of revenue as with the intention of keeping Canadian dollars in this country. I am glad the government is taking that view at last, because I am thinking of the farmers in Canada, particularly in British Columbia, who for many long years have been subjected to the importation of fruits and vegetables for which we are spending millions of dollars yearly, although we grow them in abundance in this country. We have potatoes, turnips, onions, tomatoes and like vegetables in abundance here; and yet, Mr. Speaker, last year we sent across the border to the United States over $4,500,000 for commodities which are

The Budget-Mr. Reid
grown in abundance by our farmers, commodities for which they can scarcely find a market.
I am an advocate of free trade.


Mr. MacNICOL:: I am surprised to hear that.


Thomas Reid: But when I see the hold the industrialists have in Canada, and when I see the protection given to them, I believe that in fairness to the farmer the same kind of protection should be given to him. It should be either free trade for all or protection for all.


Mr. BROOKS:: You voted for the United States agreement?


Thomas Reid: Then, we send half a million [DOT]Canadian dollars across the line to buy strawberries grown in the United States, and yet no better strawberries are grown anywhere on the north American continent than are grown in British Columbia.


Mr. SENN:: Except in Ontario.


Thomas Reid: In 1938, according to the
Canada Year Book, we had an adverse balance of well over $13,000,000 in connection with agricultural products. I am reminding the Minister of Finance and the government that if from now on the policy is going to be one of preserving Canadian dollars, then I say, let us go the whole way and give the farmers the protection they need-protection which the industrialists already have. I say that because the farmers are, and for many years have been, placed in an invidious position, because they have to sell on a low priced market and buy in a highly protected market.


Mr. WARD:: How can we protect the
wheat grower?


Thomas Reid: I will deal with that later.
When I read in Hansard statistics prepared by economists with regard to price levels, incomes and salaries, and when I hear speeches made and statistics quoted by hon. members in an endeavour to make it appear that the farmers and those on relief are not doing too badly, I am reminded of an historic statement in the British House of Commons by Mr. Baldwin when he said to Mr. Snowden, "First there are lies; second, there are damned lies, and third, there are statistics." My statement may sound harsh, but I will say that one can take statistics and prove practically anything from them. But we cannot improve the lot of the workers or the farmers by any such citation of figures.
I was interested, and I have no doubt most hon. members were interested in the radio address delivered a short time ago by Mr. Bruce Hutchison, correspondent of the Vancouver Sun. In that radio address he pointed out the great change in respect of trade which has come over the north American continent, and made special reference to the new economic scheme suggested by President Roosevelt. To my mind Canada must find new markets, if she is to survive the blow of the loss of her European market. The markets in Europe are lost now, and perhaps will be lost for some time to come, if not for ever. I suggest to hon. members that conditions are changing so fast that we might well forget all past arguments in respect of tariffs. I am doubtful if we can do all that will be necessary to be done, and at the same time allow business to go on in its own usual way. All notions of money and of spending are going fast, if indeed they are not already gone. At this session we have budgeted for well over a billion dollars, and it was only a short time ago that in the short space of an hour and a half the United States government passed votes aggregating four billions of dollars.
Hon. members may be interested in some particulars respecting our trade. I shall not deal extensively with this point; but when one realizes that two countries, the United States and Great Britain, took over 78 per cent of all Canadian exports, that those same two countries furnished 7fi per cent of all Canadian imports, and that our exports to the continent of Europe, exclusive of Russia, comprising
190,000,000 people, was just over $32,000,000, and our imports from the same sources were about $24,500,000, we are forced to wonder if we are treating Great Britain fairly. We have not in the past, but I trust that during the war we will improve that situation, so far as trade is concerned. While we sold goods to the value of $423,191,091 to the United States, our imports from that country were valued at $487,279,507. On the other hand, while we sold to Great Britain goods to the value of $409,411,682, our imports were valued at only $145,050,000.
I am sometimes surprised at the attitude of many of our industrialists. Even during the present war some of them have been complaining privately to me that Great Britain has been making engines which could very well be made in Canada. When I am approached like this, I ask them this question: If we sell Great Britain our wheat and many other products, how is she going to pay us for those goods if we do not buy from her? I have mentioned these facts particularly so that I might bring to the attention of hon. members the fact that Europe has been cut off, so far as the factor of markets is concerned, and that with the loss of those markets
The Budget-Mr. Reid

we had better give serious consideration to the proposal of the President of the United States to set up an economic customs union consisting of the entire Americas.
I wish now to deal briefly with a local matter, namely, the serious situation affecting the fishermen of the Pacific coast. I suppose all hon. members from British Columbia have received telegrams and perhaps telephone calls from fishermen in British Columbia pointing out the serious conditions confronting them in connection with the matter of arriving at a price which will enable them to carry on. They have, called attention particularly to the price of sockeye salmon offered by packers or canners.
So that the problem might better be understood, for the benefit of hon. members may I point out that there are five varieties of salmon, and that the highest priced variety is known as the sockeye or red salmon, the market for which is found principally in Great Britain. At the beginning of every fishing season fishermen and packers get together to arrive at prices. This year they have met, but have not arrived at an agreement because the cannerj'men are this year offering a price almost 30 per cent less than has been offered in previous years. They are saying, "Well, we do not know what the market will be. Great Britain is not eager to take our sockeye salmon." The result is that they are offering the fishermen in some instances 13 cents to 14 cents less per fish than was offered in 1939. This is serious enough, but when one considers that the cost of nets and gear has gone up 30 per cent in some instances, he will understand the plight of the fishermen. At the moment these men are refusing' to go out to the fishing grounds until this matter is settled. The British Columbia members have been negotiating with the Minister of Fisheries (Mr. Michaud) in an endeavour to have him take some action, but so far nothing has been done. Our argument to the minister is that precedents have been created, and something can and should be done.
We do not complain when the fishermen in the maritime provinces receive over half a million dollars. We are not against the government guaranteeing the price of apples or the price of pork. We are not adverse to the government guaranteeing the price of wheat to the farmers. But we ask for equal treatment. When the fishermen of British Columbia, numbering nearly 9,000 this year, ask that something be done, they are told that nothing can be done. We are informed that it is a matter for the cabinet to decide. This is the reason why I bring this matter to the attention of the house this afternoon. Time is short because the fishing season opens on
[Mr Reid.]
June 30. Is the government going to stand by and see between eight and nine thousand families deprived of their living? All this is likely to cause more unrest on the coast.
This food will be required later, if not immediately, at least in the near future. We are being urged to produce more food. I contend that the government should take note of this dispute and at least offer a guaranteed price so that these men can carry on their fishing operations.
One word on the war situation. The response of the people of Canada to our war effort has been simply wonderful. We have a perfect example of the unity that exists between Great Britain and ourselves in the way in which Canadian homes have been offered to British children. Some time ago the leader of the opposition referred to immigration and pointed out the number of people who had come to Canada from the continent of Europe. I was looking over the figures the other day, and it may interest the house to know that in 1871, 92 per cent of the population of Canada were of British and French stock. The last census of 1931 shows a drop in this percentage to 80 per cent. In other words, in 1871 there were in this dominion only some 302,000 persons who had come from the continent of Europe or other countries, whereas in 1931 there were in this country 2,000,000 persons who were not of British or French stock.
It may well be that many of the British children who are sent here will remain. I hope it does not happen, but if Hitler makes an onslaught on the British isles it is possible that many parents might be killed. Even though that does not occur, there will be great benefits to Canada from this closer contact between Great Britain and ourselves, and we need more British stock.
I do not think the loyalty of any one should be judged by whether or not he gives a gift of money, and I shall not attempt to make such a judgment at this time. However, I think some praise should be given to those citizens of Canada, from the poorest to the wealthiest, who have given willingly, and, in some instances, most generously. There are those who have sent their fifty cents and upwards, which reminds me of the parable of the widow's mite. In proportion they gave more than many who gave in abundance. I think the gift of 8100,000 to this country by the lieutenant-governor of British Columbia should give a lead to many other wealthy Canadians. In this connection I have nothing to say about the great city of Toronto. The mayor of that city set out to collect a million dollars, and I believe all he was able to get was $18,000.

The Budget-Mr. Reid


John Ritchie MacNicol: That is most unfair. No city in Canada is more generous than Toronto.


Thomas Reid: I should like now to say something about the splendid work being done by the women of this country. On Thursday morning it was my privilege to attend the Capitol theatre to witness a picture put out by the motion picture bureau of the dominion government. After seeing that picture, one could not help but feel impressed and elated by the work being done by our women folk. The women from one end of Canada to the other are busily engaged in many endeavours and I think worthy note should be taken of what they are doing. They are showing a splendid example to the rest of the country.
I come now to the civilian defence units which have been set up in many parts. It is my opinion that when these units were first started they were not well received by the government. Speaking for at least part of British Columbia, I can say that the people there had two motives in mind when setting up these civilian defence units, particularly in the lower Fraser valley and other parts of the province. The first was a desire to do something about the possible unrest which was evident in certain quarters. It was said here that there was no danger, but those of us who live in British Columbia know what is going on. We have been greatly perturbed over the possibilities of what might happen in the future.
The Minister of Justice (Mr. Lapointe) has stated repeatedly that there has been no sabotage in Canada. That has been true so far, but that does not mean that there will not be attempts at sabotage. I think we would do well to utilize these civilian defence units. My opinion is that they should not be left to operate simply as civilian units; they should be tied up in some way with our military operations. Perhaps they could be drafted into the militia units. We should take advantage of this willingness to protect the life and property of our country. I trust the government will take serious note of this and give official recognition to these units.
I do not intend to mention the many vulnerable points of British Columbia because they should not be made public on the floor of the house. But we are greatly perturbed. I trust the Minister of Justice and the government will give consideration to the representations which are being made by the attorney general of British Columbia. I urge upon the government also to have additional naval units placed on the Pacific coast. No one can tell at what moment there may be other nations arrayed against us. We have our groups of nationals in that province in great numbers,
and if other countries should turn against us, these with others might create a serious problem indeed.
I ask the government to do a little more for British Columbia. When members speak of the west they often think of it as stopping at the Rocky mountains. We have always to mention British Columbia as a separate province. But it should not be forgotten that we are the gateway to the Pacific. Frankly, those of us from British Columbia would like to see more protection given and much more done to prevent possible sabotage.
In conclusion, Mr. Speaker, as all well know, the situation is serious, but there is no reason for fear, let alone panic. If we gave way to that, we should only be playing into the hands of our ruthless enemy. Hitler's plans are, first, propaganda to create unrest and then fear, and then at a chosen moment to move in ruthlessly on the country he wishes to conquer. I advise hon. members who are interested to read Hermann Rash-ning's book, "Hitler Speaks," and then hon. members will realize that we must be prepared for any eventuality in Canada. Read of Hitler's plans and what he said in 1934 about what he would do to France, and you will see, Mr. Speaker, that his plans have been carried out exactly as predicted; and then read in this same book of Hitler's scheme with respect to the United States and Canada, and you will realize just why many of us are greatly perturbed over possible fifth column activities in this country. The present conflict springs from a pagan conception of some kind of new social order which is founded on might and cruelty, and which ignores the individual. Hitler has declared that he will obliterate religion from the face of the earth. Our civilization is founded upon the Christian conception of the brotherhood of man, the sacredness of human personality, and the sanctity of contractual relations. It is disgraceful to my mind that men in Canada have given utterance to the thought that they would prefer Hitler to this country.
Let us throw everything we have into the struggle now, and quickly, for we are fighting not only for democracy but for our very lives.


Major James William Coldwell: Mr. Speaker, my first word, too, will be one of congratulation to the Minister of Finance (Mr. Ralston) upon his presentation of the budget and the manner in which our national accounts were placed before the House of Commons. It was an exceedingly able piece of work.
I should also like to associate myself with very much of what the hon. member for New Westminster (Mr. Reid) has just said.
The Budget-Mr. Coldwell

I disagree with him in his commendation of the ten per cent exchange tax, which affects us in the west in an altogether different manner from that in which it affects the people of British Columbia and of some other parts of Canada. As was anticipated, the new taxation necessitated by the war is heavy, and our country is perhaps unfortunate in that many of the taxes which were instituted during the great war of 1914-18, and in subsequent years, still remained on our statute books when this war broke out. Consequently, in order to raise additional revenue to conduct the present war, new ways and means of raising money had to be devised. Luxury taxes and taxes of that description were imposed previously, and to-day we have had to turn to other forms of taxation which bear heavily upon many classes of our citizens.
I should like to point this out, too, that we frequently make comparisons between Great Britain and Canada to show the effect of certain of our taxes, but we forget that indirect taxation in Canada bears heavily upon our people, particularly upon those with low incomes.
I notice it is estimated in the present budget that customs, excise and sales taxes will yield some $415,000,000 out of the $650,000,000 expected to be raised by taxation; and the taxes which I have just mentioned, particularly the sales tax and such a tax as that on sugar, bear heavily upon those with low incomes. May I interject that the new tax on cigarette papers will be a hardship for many of the poorer members of our population who roll their own cigarettes.
We have in the present budget a wide extension of the income tax, to which no real objection can be taken so long as those in the higher brackets bear their fair proportion of that taxation.
But the new national defence tax is in reality a tax on wages, affecting even the most lowly of our wage-earners. In my opinion the exemptions of $600 for a single person and $1,200 for the married are too low, particularly when we remember, as I said before, that we collect heavy indirect taxation from our people. In considering wage taxes, salary taxes and the income tax, the criterion ought to be, it seems to me, not how much do we take but how much do we leave. Even in making a comparison between, we will say, the province of Ontario and Great Britain, we find that the amounts taken leave substantial incomes as the income increases, and the differences between the amounts left in Ontario are relatively more in the higher brackets than they are in Great Britain. I have, as a matter of fact, had worked out the amounts that remain after the income tax is IMr. Coldwell.]
deducted, and I have them before me although I shall not take time to read them this afternoon, but these figures substantiate the statement I have just made.
The increase in the income tax, when we add the national defence tax, is proportionately greater in the lower and lower-middle than in the higher-middle and higher brackets, if I may put it in that way. As I have said, the question is not so much the amount one takes as the amount that is left in order to maintain a reasonable and proper standard of living.	.
I am sorry that the government did not explore certain new avenues of taxation which are, I think, available to them. At least two sources of profitable revenue remain untouched by the dominion, and there may be others. In my opinion they ought to have been utilized before a wage tax was considered. I have often spoken of a capital gains tax-the increase in stock values and unearned increment. I remember, of course, that the Sirois report does not consider that to be a fruitful field for exploration, but I think it ought to be explored by our Department of Finance. The second is a dominion succession duty tax. I realize that the provinces have invaded this field of taxation, but there is no reason why we should not apply some form of dominion succession duty tax. The Sirois report in this connection points out that for the period 1926 to 1935 the yield of inheritance tax per capita in our sister dominion of Australia was 1-8 to 3-8 times as large as in Canada, and in New Zealand 2-1 to 5-2 times as large. That will be found at page 120 in volume 2 of the report. Australia is not as rich a country as Canada, and probably wealth there is if anything more evenly distributed than in Canada; and New Zealand, of course, according to a recent book published by the eminent British statistician Mr. Colin Clark, is the wealthiest country per capita in the world, although income is much more evenly distributed there. But it is safe to say that the wealth in both our sister dominions is at least not more unevenly distributed than in Canada; perhaps indeed the very reverse.
If our provincial governments published each year figures of estates passing at death, as the British and Australian and New Zealand governments do, we should be in a position to estimate with some accuracy what the possible yield of a dominion inheritance tax would be, but unfortunately no such figures exist in Canada. It seems safe to say, however, that on the basis of the New Zealand experience a dominion inheritance tax would produce a very large sum of money.
A further source of revenue might be an increased tax on the non-resident holders of

The Budget-Mr. Coldwell
Canadian securities. The present rate is five per cent. Why should it not be, let us say, twenty per cent? Again, I do not know how much revenue this would produce but I am confident that the return would be considerable. A further tax might be one on the returns from bonds, taken at the source. It seems to me that there is a discrepancy in our field of taxation at the moment. We are taxing incomes derived from industries and from profits. I am making no adverse criticism of that; in fact, I shall have something to say about it in due course. At the same time we have not explored the method of making the other form of capital investment bear its share of taxation, except of course through the income tax.
Then, too, we might ask our people, as they did in New Zealand, to contribute at this time their money in the form of interest-free loans for war purposes. The hon. member for New Westminster (Mr. Reid) spoke of loans at a very low rate of interest. I am in entire agreement with what he said, but I think we might go a step further. The Minister of Finance the other afternoon drew attention to a number of communications which he had received from relatively poor people virtually offering their all in the dominion's hour of need, and I think we have a right to expect that those who have large blocks of money might also be asked and perhaps, as in New Zealand, even compelled at this time to lend at least a portion of their wealth to the state without interest.
One of the most objectionable taxes in the budget, from our point of view, is the new war exchange tax, which was commended highly by one or two previous speakers. Let us not forget that that tax will work not only as a tax but in effect as additional tariff protection on certain classes of goods, and it will be felt by those who have to use certain imported commodities. Nearly all our families on the prairies are bound at certain times of the year to use imported vegetables and fruits, such as citrus fruits for which we can find no substitutes at certain seasons, and this tax will make it more difficult for them to obtain these products because of the increased price. Perhaps the prairie regions will suffer most in this regard, and it will be felt more by our farmers than probably any other group in the community, because they rely to such a large extent upon imported farm machinery of various kinds-imported farm machinery produced in some instances not economically in Canada but which our farmers require for their industry. I suggest to the government at this point that they might reconsider this tax and grant an exemption on farm machinery imported into Canada.
^Imports of agricultural implements from the United States in the calendar year 1939 amounted to 820,098,391. On that basis the war exchange tax imposes upon the farming community in a single year an additional
82,000,000 or so in taxation. Of all sections in the community, with the exception of the unemployed, the farmers are probably the least able to stand the extra burden of taxation. In my opinion the same result in the conservation of our exchange might have been brought about by the adoption of a rationing system rather than by the method of taxation. I would urge, too, that in relation to other commodities as well as farm implements we should see to it that our price control board keeps a tight hand on Canadian commodities of the same class or kind produced in Canada, so that no undue advantage will be taken by Canadian manufacturers of this particular tax in the budget, if it is maintained.
Now I come to what we regard as the most serious defect in the budget proposals, namely, the excess profits tax. Let me repeat that if we ask men to lay down their lives and to die, as we have learned this afternoon that young Canadians are doing, then we have a right to ask that Canadian industry shall forego all profits for at least the duration of the war. Under the budget proposals, industries which made large profits in the pre-war years, especially those engaged in war industries-


John Ritchie MacNicol: Is the hon. member referring to all excess profits?


Major James William Coldwell: I will deal with that in a moment. I say, under the budget proposals such industries will pay no excess profits tax. I have a list of companies with their 1939 capital and their returns, a list which I have carefully prepared, with the assistance of an able statistician, from the Financial Post survey of corporate securities. The list contains the names of thirty-three companies, most of them among the more than usually profitable Canadian companies. Their total profits available for dividends in 1939 were $146,191,262. On the basis of their 1939 earnings, only nine of them would have paid any excess profits tax under the old act, and only two would have paid excess profits tax of more than $100,000. The excess profits taxes of the whole lot put together would have taken just 1-5 per cent of their profits; in fact after paying both the increased corporation tax and the excess profits tax these companies would have had left about 79 per cent of their profits. I may add that only seven of the companies would have chosen plan A which has now been discontinued.
The Budget-Mr. Coldwell

Now we come to the new act. Under the new act, on the basis of 1939 earnings these companies taken together would pay, as in the former case, $28,757,156 in corporation income tax and $18,297,760 in excess profits tax. After paying both the corporation income tax and the excess profits tax they would still have available for distribution over two-thirds of their 1939 profits. It will be noted that our available financial reports cover very few mining companies, which are obviously in some cases among the most profitable of our Canadian companies. Unfortunately complete 1939 figures for these companies are not readily available, but it is safe to say that, if they were, the summary which I have given would have been even more startling.
Let me now give some further figures as to these thirty-three companies. The total capital in 1939 as computed under the Excess Profits Tax Act was $860,454,853. The total profits of the thirty-three companies represent a return of almost 17 per cent on this capital. The new excess profits tax applied to the 1939 earnings would leave a return of 11 per cent on the capital so computed. But there is a very wide gap between the lowest return and the highest, as I shall show in a moment. The total corporation income tax and excess profits tax of these thirty-three companies, on the basis proposed in the budget and assuming the 1939 earnings, would be, as I said, about $47,000,000. If we took everything over 5 per cent on the capital the proceeds of the tax would be about $103,000,000. Of course I am not forgetting that this would mean a substantial reduction in the amount we would subsequently collect in personal income taxes. But collection at the source, as we propose to collect the new defence exchange tax, would prevent evasion, and such an excess profits tax would mean a very considerable levelling off in income and doing away to some extent with inequalities. We might take advantage of the present war situation to bring about that desirable end.
I turn now to one or two of the companies for the purpose of indicating the excess profits tax on the new basis laid down in the budget.
Consolidated Mining and Smelting Company's profits amounted in 1939 to $9,339,586. The corporation income tax is $1,867,917. The excess profits tax on the new basis would be $933,959, making a total tax of $2,801,876, leaving $6,537,710, or, on the basis of capital as defined in our act, a profit of 33-6 per cent after the taxes are paid.
Canadian Industries Limited: profits $6,232,143, corporation income tax $1,246,429, excess profits $623,215. Total $1,869,644, leaving $4,362,499, or a return of 25-2 per cent on the capital as defined in our act.

I give a brief summary of two or three others. International Nickel on the same basis would have remaining a profit of 18-2 per cent on the basis of capital as defined in our act. Aluminium Limited, which because of the peculiar conditions in that industry over the last four years will pay the largest tax of any of these big more or less war industries, would have 11 -8 per cent left. Asbestos Corporation would have 16 per cent left.
Of course we consider that such profits ought not to be permitted during the course of the war, and that we should take all profits above a fair return on the capital invested and the risk taken. That would vary in various industries. The hon. member for Davenport (Mr. MacNicol) asked me a few minutes ago if I would take all profits. I believe that these industries can be classified according to risk experienced, and so on, and after having so classified them we would take all profits above the amount which we consider to be a fair return for the risk taken.
Because we feel that the new excess profits tax fails to tax the profits of profitable war industries, I am going to move an amendment to the. budget resolution, as follows:
That all the words after "that" in the said motion be struck out and the following substituted therefor:
This house regrets the failure of the government to impose a one hundred per cent tax on all profits in excess of a fixed return on capital invested.
This carries out the idea which I have endeavoured to place before the house.
I want also to say something about the other obligations that we have undertaken. In addition to financing Canada's own war effort we are undertaking, quite properly may I say, the financing of certain British purchases and operations in Canada. It is estimated that some two and a half billion dollars' worth of Canadian securities are held in Great Britain, and I am told that of these probably not more than one and a half billion dollars' worth are readily realizable. Dividend and interest payments on this sum, at four per cent, would amount to $60,000,000. I am not forgetting that repatriation of these securities would bring about several good results. If the government retained the securities it would extinguish an appreciable part of the dominion debt and the debt of the Canadian National Railways. It would make the dominion the owner of a large amount of certain provincial and municipal bonds, which incidentally might assist in bringing about the adoption of the recommendations contained in the Sirois report. It would make the government the chief owner and creditor of the Canadian Pacific Railway, and the owner of large interests in various other

The Budget[DOT]-Mr. Coldwell
British-controlled corporations. It would relieve the Canadian economy of a large annual burden of interest payments abroad.
I do not know how the government proposes to proceed in this regard, but it seems to me that these desirable benefits should be secured for the dominion if at all possible. On the other hand it would have another effect which would be bad. At present Great Britain's ability to buy our wheat and other products is due in large measure to the fact that we export large quantities of goods to her, and in this form she receives interest payments on her investments in this country, because thus she acquires a quantity of Canadian exchange. If she realizes upon these investments during the war and these securities are repatriated to Canada at the end of the war Great Britain will no longer have those funds available with which to buy our Canadian products. As I have indicated, the Canadian economy will be relieved of one burden, but the internal result may not be so happy. As one who lives in western Canada, where we are dependent almost solely on one great export commodity and one great customer, I am fearful of the result. We may have a dislocation of the Canadian economy as severe as the dislocation which resulted in many countries from the introduction of machinery. There may be a disastrous effect upon the economy of Canada, and particularly of western Canada, unless we are able and bold enough to take the necessary steps to meet the situation.
Yesterday I was glad to hear from the hon. member for Danforth (Mr. Harris) that the party which he represented was suggesting an import-export board. We have been urging that for years, but the proposal has always been frowned upon. I believe, however, that when this war is over, as the hon. member for New Westminster (Mr. Reid) said a moment ago, we shall find ourselves faced with an entirely new set of conditions which will require new policies; and I agree with the hon. member that the old idea of the flow of trade and interruption by tariffs will be just about as extinct as the dodo. We shall have to plan intelligently our exports and imports to meet the new conditions with which we shall be faced. Not the least of the difficulties we shall encounter will be that of improving our position in relation to Great Britain if we should lose that market on account of the repatriation of our bonds.
It seems to me therefore, that there is a clear case for immediate consideration of the planning of our social and economic structure so that we may withstand not only the stress of war but also the economic and social dislocations that will follow. Indeed,
we may be faced with the problem of a Europe self-contained, though poor, if-as I believe will be the case-we are victorious. I do not think there is any question of that; I scarcely needed to say "if". But if on the other hand-and of course this "if" is bigger- Hitler should succeed even in making a peace that might be advantageous to him, we might find ourselves confronted by a continental economy in Europe and have to consider ways and means of organizing our north American continental economy on this side of the Atlantic ocean.
These are some of the features of the budget that have appealed to us. There are many other matters which we might have discussed at some length. I have tried to deal with just a few of the points that seemed to me to be of major importance at this time; the other matters can be dealt with when we take up the various budget resolutions. Let me repeat, however, that we insist that in all these matters of taxation and collection of revenue there shall be equality of sacrifice. Last week we hesitated to give the government the wide powers which the house finally gave-and which we approved-because we wished first of all an undertaking that before human lives were conscripted some of these great corporations, to which I have referred this afternoon and a list of which I have before me though I did not read it, should be called upon to make at least an equivalent sacrifice. And in our opinion the budget has not ensured this.
These, then, are some of our criticisms. We commend the government for having endeavoured to adopt a pay-as-you-go policy, incidentally to a greater extent than I anticipated. I am glad to see such a large proportion of our war expenditures raised by taxation. I think it only right and proper that this generation should pay for the war which this generation permitted to fall upon the world. But, as I said earlier, if we must borrow money let us borrow it at the lowest possible rate of interest, or let us endeavour to obtain some of the money we need on loan without interest at all.
Yesterday in this house hon. members discussed the pressing problem of the great industry in which my own people are engaged, the wheat industry. Most hon. members refer to conditions in their own constituencies, and before I resume my seat I should like to say that in my opinion as soon as possible-and that ought to be at once-the government ought to tell the producers of that great commodity, upon which such a large portion of this country depends, exactly what the policy is going to be this year in relation to

The Budget-Mr. Caldwell

the marketing of wheat. We know perfectly well that there is a tremendous surplus unsold, on hand, in the country. But when the new crop is reaped, in all probability there will be a much larger surplus than we have ever known. That surplus may play an important part in the world when the war ends. Starving Europe, even semi-starving Britain, may be glad of a goodly portion of it. But it is neither just nor fair to expect the men and women who have produced this valuable commodity to carry the load in the meantime. To my mind the government should take over grain from the farmers at a price which will enable them to live. No one is asking for a profit, least of all the western farmer; he is asking for simply enough to enable him to continue on an even keel. Give him that, and he will be satisfied. Give him that, and he will continue to produce the commodity which may be of vital importance to this country and the world in days to come.
I repeat on behalf of the group with which I am associated that we are prepared to assist the country in every possible way to bring to a successful conclusion the great struggle in which we are engaged. But we urge-nay, we demand-that in this struggle no one shall be permitted to amass great wealth; that there shall be equality of sacrifice, and that all profits, at least for the duration of the war, over and above a fixed amount required to give a reasonable and proper return, shall be taken for the prosecution of the war and the benefit of Canada.


John Horne Blackmore: Mr. Speaker, the point of view my group takes will result in an exactly opposite attack from that just made by the hon. member for Rose-town-Biggar (Mr. Coldwell). The idea of increasing taxes is the idea of increasing poverty, and not the idea of increasing abundance. We, sir, are in an age of abundance; we are in a land of abundance; we are in a world of abundance; we are in the most glorious age the world has ever seen. All we need is to discover how to use what we have. Therefore nothing will be said by my group about increasing taxation, or about sharing poverty. There is enough and to spare for all, even if we are at war.
Having said that, may I turn to the Minister of Finance (Mr. Ralston) and congratulate him sincerely-and he knows I speak sincerely. He took a very difficult job. He has made the best of a very bad job. He had to do his work under the restrictions, regulations and preconceived notions of a system which has made itself a stench and an abomination in the nostrils of the world. So I say he deserves

great commendation for the success he has achieved in connection with what he has set out to do.
His budget is an excellent orthodox budget. Having said that for it, I have condemned it as much as I have praised it. This budget is one of scarcity, not of abundance. Therefore it is completely out of place in this age. It is a budget leading towards inflation and to adverse exchange. Hon. members in the group with which I am associated have been repeatedly accused of advocating inflation. On the absolute contrary we are the only group in the house advocating a policy which will prevent inflation, not only for the present but for all time. As I said, this budget will cause inflation. Every item in it will lead towards inflation, and I believe I can successfully prove my statement. It is a bottleneck budget. It is a budget which in this age is one of timidity, despair and defeat; for it puts money first, and regards money as a cause rather than an effect or a result. It looks down, not up.
It lacks vision. As the scripture says: " Where there is no vision the people perish." There must be new vision, even to fight a war.
May I draw the attention of hon. members to a great remark by a man who, I believe, has been one of the greatest to perform in this assembly; I refer to the Right Hon. R. B. Bennett. Speaking on January 31, 1938, as reported at page 47 of Hansard, the right hon. gentleman said:
I am convinced that there are methods which might he resorted to, even though they might be experiments, that are worthy of the consideration of the Canadian people; and I believe that if the government took a strong lead with respect to these, and commanded, as they would command, the support of men in every part of the house, they would be amazed at the results that would follow.
May I say that those words are as true to-day as they were when they were uttered, and they were prophetically true when they were uttered.
All progress has been due to the discovery and application of new principles and new laws. For example, when it was proposed that Britain should build iron ships, it is reported that men frequently greeted the proposal with such scornful expressions as this: "Iron, forsooth; why not stone, then, for ships?" There is just as much intelligence in that expression as there is in many of the expressions with which the new economics is greeted to-day. They were able to build iron ships because they had learned that if iron is put into a certain shape it will displace more than its weight of water. Immediately that principle was discovered and applied, the

The Budget-Mr. Blackmore
whole shipping industry and management completely changed and the world went forward into a new era.	.
Take aeroplanes. For a long time men did not realize that it was possible to make a body which was heavier than air float in the air by causing it to go so fast that its speed as well as its area created buoyancy. The very minute it was discovered that speed would cause such a body to displace weight; the very minute people discovered successful means of applying speed, they were able to create aeroplanes which were heavier than air and which could float in the air. But for thousands of years they did not know how to apply that principle.
Take the alternating current in electricity. Thomas A. Edison understood electricity as it was manifested in the direct current. According to the principles of the direct current, the greater the power of the current, the larger the wire had to be which carried the current. The result was that a definite limitation was placed upon the power of the current. William Stanley, a reformer who had new ideas in his mind appeared. He had vision. He realized that it would be possible so to manage electricity that a current of increased power could pass through a smaller wire. This he did by passing the current through a transformer to step up the voltage. That principle introduced a new era. Thomas A. Edison condemned William Stanley's idea as impracticable nonsense, but William Stanley was right.
The reformer has always been met with suspicion, scorn, resentment, antagonism and even persecution. Every one of the illustrations I have given proves that. Every political reform has been met with the same kind of reception. Take chartism as an example. One hundred years ago a terrific battle was fought in Great Britain over the reform known as chartism. There were six principles in chartism:	First, equal electoral areas; second,
universal suffrage; third, payment of members of parliament; fourth, no property qualification; fifth, vote by ballot, and, sixth, annual parliaments. There is not a member in this house who would oppose for a split second any one of those first five reforms. To us they are obviously commonplace, but to the man of a hundred years ago they were so revolutionary that the people who advocated them were treated far worse than are the communists in our country to-day. They were alleged to be more dangerous to society. Let hon. members read the story of chartism; it will prove most revealing. Let us not, then, disregard the reformer or his ideas.
Canada can turn the scales in this war. She is the eldest daughter still dwelling under her
95826-78J
mother's roof. Hers is the responsibility to defend the motherland, and hers the ability. She has a marvellous people. May I read one of the last statements made by the late Hon. Mr. Rogers? He said:
The government at Ottawa has been inundated with offers of assistance from individuals and various associations. These have been so numerous that it has not been possible in all cases to send prompt replies.
Not only are Canada's people possessed of the winning spirit, but she has a large population. Just across the border is an elder sister "living on her own," but nevertheless jealously watching the welfare of the motherland. There is a sister within whose borders are over
11,000,000 unemployed, most of whom would be delighted to come to Canada to work in case we needed them. Canada's potential resources as far as people are concerned are almost limitless. Canada's material resources consist of mines, forests, farms, factories, railroads and other means of transportation, which place her among the greatest nations in the world. Canada's financial resources can and should be the result of her people and her material resources. If her people are well-nigh limitless in their potentialities, if her material resources are well-nigh limitless, then her financial resources must of necessity be well-nigh limitless. Before I am finished I shall give the house quotations to show that I am not advocatng anything unorthodox, to prove that such is beginning to be recognized by men like the governor of our Bank of Canada.
May I digress for just a moment to give credit to the governor of the Bank of Canada? I had occasion the first time I spoke in the house this year to make remarks which were in some measure a reflection on that gentleman, but I had no desire whatsoever to disparage him. He had spoken under the restrictions of the present system. He is a progressive, courageous, open-minded, honourable young man of whom we can well be proud. I am going to quote briefly passages from his testimony to support what I have said.
This budget limits Canada's available money to taxation and borrowing. Now taxation has obvious limits. After a government taxes its people beyond a certain point, it encounters the law of diminishing returns. Borrowing, too, has manifest limits both immediately and ultimately. But the limit to the money which we have should be our materials, our capital equipment and our men. Let me read from the proceedings of the banking and commerce committee of this house last year:
Q. -so far as war is concerned, to defend the integrity of the nation there will be no difficulty in raising the means of financing whatever those requirements may be.
The Budget-Mr. Blackmore

Mr. Towers:	The limit of the possibilities
depends on men and materials.
Q. -and where you have an abundance of men and materials you have no difficulty, under our present banking system, in putting forth the medium of exchange that is necessary to put the men and materials to work in defence of the realm?
Mr. Towers: That is right.
That statement has tremendous significance for us at this stage of our national life. May I quote from the Bank of Nova Scotia's Monthly Review of October 1939, entitled "Economics of War, No. 1":
Financial outlays are no more than an outward sign of the inner reality. The true measure of a country's ability to prepare for or to wage war is the degree to which it can enlarge and redirect its productive capacity to this end. So long as there are unused resources of labour and capital and so long as peace-time resqurees may be diverted to war purposes without reducing living standards below a minimum subsistence, it is feasible for a nation to increase its war-time capacity and to find the necessary financial means.
May I quote next from a man who is accepted by most thinkers as at least worthy of attention, Paul Einzig? From his book "Economic Warfare", published in 1940, I quote from pages 80-81:
While it may be open to argument whether in time of peace it is advisable to restrict production in general, in any circumstances, for the sake of preventing a credit inflation, there can be no question about the folly of attempting to hamper production in time of war by means of credit restriction measures.
May I stop there a moment? Credit restriction for primary producers has been in evidence from one coast of Canada even unto the other, and is now. In my constituency there are simply hundreds of farmers who cannot carry on their summer fallow operations because they cannot get credit. And yet these men are engaged in production. And Canada is at war! I quote further:
If the producers have not enough capital, they will have to be assisted by means of an adequate amount of credit, irrespective of the effect of such expansion upon the monetary situation. In any case, the extent to which credit expansion reacts upon the price level is apt to be overrated. In so far as the credit expansion leads to the creation of purchasing power without a corresponding creation of goods, it tends to cause a rise in commodity prices. If, however, the creation of additional purchasing power is either prevented or offset, then there is no reason why credit expansion in itself should lead to a rise in commodity prices.
I think the bearing of what I have said must be clear. There is no limit to the amount of credit expansion or money expansion which is possible to a state like Canada except its men and materials. The government must create, issue and circulate, debtrMr. Blackmore.]
free, such amounts of currency and credit as Canada's materials, equipment and manpower will justify. In other words, money can be created, issued and circulated to the point at which there becomes a scarcity of goods and services. Up to that point there will be no rise in prices-what we call inflation. The government must then manage that new money so as to prevent inflation and adverse exchange.
May I quote another passage. I must crave the indulgence of the house for quoting rather extensively. As matters stand, people in my group are looked upon as crackpots so to speak; people think we do not know. That is just the way Edison felt about Stanley; it is how the opponents of the development of steel ships felt; it is exactly the way people felt about chartism, and women's suffrage, as my colleague (Mr. Hansell reminds me. I can remember being called a crackpot and fool when I was in university because I argued in 1912 in favour of women's suffrage. Conditions being as they are, I have to quote the words of men who might be recognized as being wiser than myself. May I quote these words of the Right Hon. Reginald McKenna in a speech to his shareholders on January 30, 1936:
Additional currency, however, can now be furnished by the authorities, if they choose to exercise their powers without reference to the central bank's holding of gold. Thus the nineteenth century, which brought into general use a means of payment hitherto scarcely known outside London, brought also the machinery whereby it could be subjected to intelligent control.
Again, in the same speech:
We learnt that a shortage of money may be just as vicious in its effects as an excess, though deflation has still a touch of virtue about it in the minds of many people. Nevertheless it is becoming more and more widely recognized that greater productivity calls for an increased supply of money, for otherwise prices will fall, business will stagnate, and the growing productive capacity will be unused.
May I stop to comment briefly on that passage. Every measure in this budget is designed to decrease the amount of money in the people's hands, and consequently is certain to produce the ill effects which Mr. McKenna here points out.
Further on, Mr. McKenna says:
For money to be truly sound there must be enough of it to finance an ordinarily growing volume of trade, yet not so much as to give rise to an inflationary rise of prices.
With that statement I completely agree.
May I quote again from Mr. Towers, in the banking and commerce committee, words the truth of which I think very few people in Canada have come to realize. And before



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The Budget-Mr. Blackmore
I quote those words may I stop just a minute to pay a tribute to the efforts of at least two men who were members of the House of Commons last year. One of them is sitting in his seat, the hon. member for Vancouver-Burrard (Mr. McGeer), and the other is the hon. member for Rosthern (Mr. Tucker). I name these two gentlemen because they are Liberals. There are others in other groups whom I will not name, but these two men were responsible in very large measure for the vast amount of information which was elicited in the banking and commerce committee in clear and simple language so that he who ran might read. I believe that they did a service for the people of Canada the extent of which cannot perhaps be even dreamed of at the present time, and I wish to pay a deserved tribute to them. And now let me quote from the evidence of Mr. Towers:
Q. When a $1,000,000 worth of bonds is presented by the government to the bank, $1,000,000 of new money or the equivalent is created ?
Mr. Towers: Yes.
Q. It is a fact that a million dollars of new money is created?
Mr. Towers: That is right.
That will be found at page 238. Again:
Q. Now, as a matter of fact, to-day our gold is purchased by the Bank of Canada with notes which it issues . . . not redeemable in gold ... in effect using printing press money . . . to purchase gold?
Mr. Towers: That is the practice all over the world. .	.	.
That will be found at page 283.
These words completely support the most extreme views ever expressed by this group. Now, I ask the house this question: If the money can be created and is created, is there any conceivable reason why the government and the people of Canada should be in debt for that money, or pay interest on it? Is there any imaginable reason why we should be short of money provided we have goods and men?
I recall an experience of the last war, to which I referred in one of my speeches, when Canada created $26,000,000 of new money debt free and used it to defray government expenses. I pointed out that the interest saved on that $26,000,000 since the time of its creation amounts to over $1,000,000-I do not remember just how much. In the United States they used greenbacks debt free during the great civil war. Greenbacks were deliberately discredited by several means. If there was any fall in the price of greenbacks from causes other than manipulation, that fall occurred because the people of the United
States at that time did not have sufficient goods. There was a shortage of goods. It is worth knowing that through the greenbacks the people of the United States have been saved eleven billion dollars in interest alone.
I believe I have amply established to anyone who is realistic in his thinking about money that the government can procure, debt free, vast quantities of money the limit of the amount of which is the material and men in the country.
What shall the government do with the money once it is created? That is an extremely important question. To succeed, the money must be managed right. In the first place, the government can lend money at any rate of interest at which it chooses to lend it and for any length of time it chooses to allow. It can lend that money to any primary producer in Canada-farmer, fisherman, any primary producer at all. Our people are suffering acutely because they cannot get loans. In the light of what I have said it is absurd that they should be so suffering. By leaving them without the means of producing, we are sabotaging the country's war effort.
In addition to that, the government can lend money to secondary producers-shoe manufacturers, clothing manufacturers, flour manufacturers, any producers whose product it wishes the country to have or which it thinks the country is likely to need within a reasonable period of time. To do so, all it needs to do is to exercise the power to create currency or credit, the two powers referred to in the two quotations I have just read into Hansard, coming from the proceedings of the banking and commerce committee in the words of the questioner and of Mr. Towers. In the face of these facts, hon. members can imagine what condemnation will be heaped upon the heads of the members in this parliament, and of those constituting this government if anything happens as a result of which irreparable disaster befalls Canada.
Again, the dominion government can lend money for housing, not at the crippling rates now charged, prohibitive rates, but at exceedingly low rates of interest on long and generous terms, enabling the poor man to get money to build his house.
But people will say, "Oh, that will cause inflation." Now, it cannot cause inflation if the money when it is lent can be spent without raising prices. Is there a sufficient amount of lumber throughout the country to build houses in abundance? Is there a sufficient number of mills to replenish supplies of lumber? Are there adequate forests to provide raw materials for the mills? Are there other products and materials needed in the construe-
The Budget-Mr. Blackmore
[Stage Direction]
tion of homes for the people? The answer to each of these questions must be unequivocally yes. Then how can the money possibly cause inflation? Then again, the government can use this new money to pay fair prices, first, for all primary products. Last night we engaged in a most profitable discussion on wheat. There are from coast to coast in this country hundreds of thousands of men producing wheat and other thousands who are in charge of matters who see no hope at all with respect to the price of wheat. That absence of hope need not be. The government can create new money and with that pay whatever price for wheat it sees fit. It can pay a fair price for all other commodities, all meats, all animal products, all vegetables and fruits and fish, and every other primary product. The question will be asked: But will not that cause inflation? The answer is: Would it cause inflation if you could sell these products say to Japan and get the money from Japan and spend it? Manifestly not. Well, if you could spend Japanese money in Canada without causing a rise in prices, unquestionably you could spend Canadian .money without causing a rise in prices.
Furthermore the government can use such -created money to give a lowered price, a discounted price on secondary products. For [DOT]example if a pair of shoes is at present offered for sale by a retailer in Canada at $5, it having been determined that $5 is a fair price, there is no reason why the Canadian government cannot pay with created money SI of that $5 and allow the consumer to buy the article at $4, thus greatly increasing the amount of such goods that can be bought, consequently sold, consequently produced. Therefore the prosperity of the country would be increased. To the question, will it cause inflation, we reply, could you spend the money if it were United States money? The answer of course is yes. Why? Because you have plenty of goods and plenty of productive capacity to produce more goods and plenty of resources to support the productive capacity. That is the test of inflation. I shall in a moment read quotations to support what I say.
Thus the government can make sure that the price level in Canada is just whatever the government chooses it shall be. Hon. members in the debate last night on wheat pointed out that the price of goods, 147 articles, that the farmers in western Canada buy has risen until to-day the farmer is paying $1.34 for goods which in 1914 cost him SI. Manifestly there is a situation which must be made right. As we are to-day situated economically in the world, it is impossible for this government to

do anything to bring those prices down from $1.34 to $1. But if the government began to use the principle that I am outlining, which is one of the principles of social credit, the government could bring down those prices without injuring anyone.
Then again the government could use the new money to construct water conservation projects and irrigation works, to build roads, to carry on reforestation. I tremble to think of what might happen if Hitler should get past Great Britain and attack the sacred shores of Canada. Whereas in Germany they have great roads laid down adequate for the most speedy transportation of the most deadly weapons of modern warfare, we in Canada scarcely have a trans-Canada highway. How helpless we would be to defend our shores! Is there any reason why we could not build desirable roads? The only question is, have we the material, have we the men? The answer must be yes. Then if we have the materials and the men we surely can have the money; otherwise all these authorities whom I have already quoted are wrong; and common sense is wrong.
Again the government could use created money for training men, training its people. Hon. members tell us we need to have our youth trained; the hon. member for Davenport (Mr. MacNicol) has told us that. But about all we do is to wish piously that we knew where to get the money with which to do it. We all recognize that it ought to be done; we all recognize that we are in grave danger, that the existence of this country is threatened when we leave it undone. We say we have not the money, yet we have these declarations of eminent authorities to the effect that the amount of money a country can have depends only on its resources of materials and men. We could train people for military duty. The government could use such money to buy aeroplanes, tanks, armoured cars, munitions of war, anything it chose. During the last war, between 1914 and 1917, the dominion government created $26,000,000 and used it to pay off some debts of the railroads, as I recall. The creation of that $26,000,000 caused no trouble, nor would it to-day.
I come now to another matter which I think should be of interest to the Minister of Trade and Commerce (Mr. MacKinnon). I know he must be greatly worried about where we are going to sell our surplus products. People all over the country are worrying about it. That worry would be needless if the government were to exercise this power of creating money which their own governor of the Bank of Canada tells us they possess and implies

The Budget-Mr. Blackmore
that they could use! In the first place they could buy and preserve and store our surplus goods. They could buy the surplus wheat in western Canada and build storage facilities and store it therein, and entirely relieve themselves of anxiety with respect to our wheat surplus, at the same time building up a store which may be of tremendous value later on, in the vicissitudes which doubtless await us in the dark days ahead. The government could buy our surplus apples, dry them and store them; could buy our beans and peas and corn and other imperishable products. Conceivably they could even buy such perishable articles as fruits, and can them and store them.
But people say, would not that cause inflation? If Uruguay or the Argentine or Germany or England bought those goods, would we be able to spend the money in Canada? The answer is yes. Then you can spend Canadian money without causing a rise in prices. And inflation is a rise in prices. Again, the government could buy the products of our mines-zinc, copper, aluminum, any other product that it found there was need for, and could trade that for products such as oranges, which are produced outside the country. Even in countries where we cannot now sell wheat and the major products of our farms and industries, we could sell some products which we have. Thus the government could overcome the loss of markets by exercising this power of creating money by applying the principles of social credit.
I come now to another extremely important matter. There is not an hon. member of this house who is not eager to do everything he possibly can to help Britain. The hon. member for Dufferin-Simcoe (Mr. Rowe) the other night, as I recall it, suggested that we give Great Britain five million bushels of wheat. Under the system I advocate it would be possible to give Great Britain any quantity of any product that this country can produce, without its costing the people of this country one cent. The pressure upon British exchange, which to-day threatens to strangle her and is gravely impeding her war effort, could be removed by Canada. All that is necessary is that we put more people to work, use more of our resources and produce more of the required goods, using the goods and services as justification for creating the money, then buying the goods and services and giving them to any country we wish. The importance of this principle can scarcely be overestimated. But at present we are helplessly, and I might almost say inanely, wringing our hands and shrugging helpless shoulders and saying: We do not know how we can sell Britain our goods,
because we cannot buy British goods. Our ability to buy British goods has nothing whatever to do with our ability to let Britain have our goods, if we face the facts as they are.
There is another thing the government can do which will be extremely important in the winning of this war. At the present time people are suffering most painfully from small relief allowances. Inevitably prices are rising, notwithstanding the vigilant-I almost said noble-efforts of the government to prevent it. But as prices rise, relief allowances are being cut down instead of being increased. Anyone can see that a situation is being created which is going to be painful in the highest degree, a situation which we have no right to allow to exist if there is any way of avoiding it, and I say there is a way. In addition we can supplement wage rates. As prices tend to rise, men are going to become restless with their -meagre wages and will threaten to strike and perhaps will strike. There is no reason why the government cannot supplement wage rates, rendering the people better able to buy the goods we can produce so abundantly. The government can increase the pensions it now pays, both in the size of the pension and in the extent of their application. The government can increase other allowances to people throughout the country.
Once agaih I must deal with the question of whether or not this will cause inflation. What is inflation? It is a rise in price which results from having more money in circulation than there are goods in markets to buy. That is the only cause of inflation about which we need concern ourselves. The truth of what I say has been indicated by some of the quotations I have already given. To-day there is no gold behind the Canadian dollar. Has that made any difference to any one of us? Not the slightest. Then evidently it is not gold that gives our money value. What does? Well, it is largely our need for the money. Inflation results from a shortage of goods. This can be proved by reference to Germany, where the famous inflation took place. It can be proved by reference to any of the unfortunate monetary experiences which the wiseacres of finance trot out to-day in order to scare people. In every instance there was a shortage of goods. The shortage in Germany in 1921, 1922 and 1923, when inflation took place, was simply appalling; and that shortage of goods and services was the cause of the German inflation. I read a passage from Paul Einzig that applies here. Let me read another quotation, this time from page 1531 of Hansard for March 3, 1939. This was a little conversation between myself and the
The Budget-Mr. Blackmore
[Stage Direction]
former Minister of Finance, Hon.. C. A. Dunning. I made this remark:
The minute you get more money in circulation, let me repeat, than enough to do the work of distributing goods and services which are abroad in a country to be distributed, then you have inflation, and not a minute before.
Mr. Dunning: That is correct.
Now I should like to read from the latest address by Right Hon. Reginald McKenna to his shareholders.
Georges Parent: I must call the hon. gentleman's attention to the fact that his time has expired.


Some hon. MEMBERS:: Go on.


Mr. RALSTON:: There is no objection to the hon. gentleman's going on.


Georges Parent: By unanimous consent.


John Horne Blackmore: Thank you. I was under the impression that I had a little longer. I appreciate the indulgence of hon. members. This quotation, coming as this man's most recent pronouncement to his shareholders, I take to be epoch-making and fraught with the gravest significance to us. These are his words:
Inflation, if it comes, will be due to the growth of consumption, civil and military together, beyond our capacity to produce. The military demand must be satisfied, and in the long run, if no other means can be found to bring the total demand for goods within the limit of production, inflation, with its accompaniment of rising prices, sets in as an automatic cheek on civilian consumption.
But I have shown that in Canada, because of our tremendous productive power, it is almost impossible to get our consumption beyond our ability to produce. Consequently talk of inflation in Canada is idle in the light of existing realities and in the light of the modern conceptions of men best qualified to understand economic matters. Here is another quotation from the same speech:
But the means of restraint, if not of prevention, are at hand. The government has made a great advance in recent years in the management of monetary conditions.
With full powers at its command and wisely used, it can determine the degree, if any, of inflation that will be permitted.
When we gave the government complete control of everything the other day, I say we gave them complete power to prevent inflation, no matter how much money is in circulation in the country. Now, can Canada stand so much money? I have answered that question. Surely she can. The only question remaining is whether she can stand so much goods. The Searle index, which hon. members have heard quoted in this house many times, is made up on the basis of 147 items which

have been selected by the Searle Grain company. These are 147 items bought by the farmers in western Canada. The other day I consulted an authority in Ottawa who told me that of those 147 items only eight came from outside this country. The warehouses, stores and factories of Canada are literally bulging with the other 139. While the resources from which to manufacture more such goods are practically limitless. I think hon. members will be startled, as I was, when they learn how many woollen mills we have in Canada. I received this information just recently from the hon. member for Waterloo South (Mr. Homuth). I have the list here somewhere. According to these figures we have 214 woollen mills in this country. Who can imagine that we cannot produce all the clothing our people can use? An hon. members says we have only
3,000	sheep. Well, Mr. Speaker, budgets such as this and management of this country such as this government is exercising are preventing the people from increasing the sheep population, and we are thereby running the risk of inflation. We can easily increase our sheep population. Then we have forty-four cotton mills and sixty-five silk and rayon mills.
There are certain remedies against inflation which a government can apply. The first of these is generous production. During these last years the men who have had charge of our education have not led us to think of inflation correctly. If you increase production, you decrease the possibility of inflation, because you lower prices. Anyone can realize that. So, if we want to prevent inflation, let us generously increase our production throughout the land. We can store substantial supplies of commodities such as wheat, beef, pork, beans and other commodities, and every bit of those stores is a guarantee against inflation. We can give price discounts to bring prices down instead of up, thereby decreasing the possibility of inflation. Then, we can ration; other nations have had to do that. If we ration any commodity likely to become scarce, we shall prevent pressure from being applied on that commodity, such as sugar, or any other, the price of which may increase through scarcity.
Taxation, upon which this budget is built, does the following things which lead towards inflation: It limits and discourages production. It limits and discourages consumption. Where consumption falls off, production must fall off, because it cannot sell its product. Taxation raises prices, and directly leads to inflation. This causes labour troubles, as a result of applications for increases in wages. It impairs the vitality of the people. It centralizes purchasing power in fewer hands, so that when

The Budget-Mr. Hazen
the money is spent it is spent for more or less specialized commodities such as cars, radios, fur coats of high quality, and the like, and there is a tendency to raise the prices of those commodities. All of these induce inflation.
Taxation, therefore, tends to adverse exchange; for the higher prices rise, the less possible it is for us to sell our goods to our neighbour, and therefore the less chance we have of having a favourable trade balance. Consequently I maintain that this budget is working directly towards inflation and adverse exchange.
Borrowing, the other principle upon which the budget is based, weakens the confidence of the people, engenders anxiety, defers taxation, destroys the morale of the people, makes the soldiers fight the war and then come home and pay for it. That is one of the most monstrous injustices conceivable.
And now, as I conclude, let me say: There is too much of a tendency for Canada to look down. Let Canada look up. We shall not be poorer at the end of this war. There is no reason why we should be poorer. Our productive power is increasing on every hand; our scientific knowledge is increasing. All we lack is a sound financial system.
We are not going to be broken by this war; let us keep that in mind. In due time we shall change our present system for one which will enable us to produce as we can. We are not going to be broken in this war, I repeat and, under God, we are not going to lose. There is a way out; there must be a way out. The future for Canada is glorious. We can, under God, defend Britain, recover Europe and lead the world to a new understanding which could free that world from the causes of war. It can be done. All we need do is discover the underlying principle upon which the new and glorious order is based.


Mr. D. KING HAZEN (St. John-Albert):: Mr. Speaker, I was of opinion when I first entered the house, an opinion which has been strengthened during the eventful days that have passed, that this is no time for us to indulge either in platitudes or in recriminations about the achievements or the mistakes of the government; nor is it the time for us to play party politics, but it is our duty as Canadians to unite and in our own interests do everything within our power to bring the war in which we are now engaged, and in which we have suffered great reverses, to a victorious conclusion.
It is my opinion, and I believe the opinion of most of us, that it is the duty of the government to cooperate with and to assist in every possible way the government of 95826-79
Great Britain and the government of that part of France which proposes to continue the war until the last gun is fired.
It is the duty of the government also to make plans and preparations to defend this country in the event of its being invaded.
I believe practically all members of the house, irrespective of politics, are in agreement on those two policies, and it is not my intention to discuss them in detail this afternoon.
I would say, however, that in my opinion the plans and preparations to defend Canada should be made and should be carried out with all possible speed. Those plans should be based on the possibility that this country will be invaded within three months' time. I do not say that Canada is going to be invaded in that time; I do not know, nor does any other person know what may happen. But the government should be prepared to meet every eventuality. It should set a time limit for the completion of its preparations, and should gear up industry and mobilize manpower to meet requirements so as to come within that time limit.
The government has been given what amounts practically to dictatorial powers under the mobilization measure passed a short time ago. It is now up to the government to put those powers into operation, so far as it is necessary to do so, in order to defend Canada from invasion. Responsibility for our defence rests with the government. No government in our history has had to shoulder such heavy responsibilities, and the people of the dominion look to it, not without some feelings of uneasiness, for greater effort and for more action. They want to see results. They want to see the preparations for the defence of this country completed before it is too late.
Towards the end of 1916, when the existing machinery of the then British government appeared inadequate to deal with the task ahead of it, and when Serbia was overwhelmed, Lloyd George made his famous "too late" speech. "Too late" he said, " in moving here; too late in arriving there; too late in coming to this decision; too late in starting that enterprise; too late in preparing. In this way the footsteps of the allied forces have been dogged by the mocking spectre of too late. And unless we quicken our movements damnation will fall on the sacred cause for which so much gallant blood has flowed."
The Prime Minister of Canada (Mr. Mackenzie King) may well ponder those words. They are not altogether inapplicable to what has happened in Canada in the last few months, since war was declared. Unless we quicken the movement of the machinery of government, damnation and defeat will be our lot.

The Budget-Mr. Hazen

In his budget speech the Minister of Finance (Mr. Ralston) has proposed the most drastic taxation for the current year the people of Canada have ever been called upon to bear; taxation which it is estimated will produce a revenue of $760,000,000. The additional taxes will cause a certain amount of hardship in many homes. In my opinion the increased income tax will not bear equally on all Canadians. Those in the lower brackets will have the greatest sacrifice to make. These taxes will result also in a certain amount of unemployment among certain classes of people. Just how much unemployment they will create it is of course impossible to tell. They will result also in a certain reduced purchasing power and in the lowering of our standards of living.
Most of us will have to curtail. Most of us have found it pretty hard as things have been during recent years to pay our household expenses, to educate our children, to meet the interest on the mortgages on our home, to pay excessive municipal taxes on income and real estate and to pay our insurance policies; in short, to keep our heads above water financially.
I do not wish to be understood as complaining or finding serious fault with the budget brought down by the Minister of Finance. We must make these financial sacrifices and other sacrifices which will be much greater. W e must make them with good spirit and with the knowledge, as the minister said, that every time we pay our tax we know we are dealing a smashing blow at Hitler.
Money must be raised to carry on the war, and the war must be carried on until Hitler and the evils he represents are eliminated from this earth. Victory at all costs is preferable to defeat, when all will be lost.
If the income tax is found to bear unfairly upon certain classes, that inequality can be corrected when the next war budget is brought down. I think we must face the fact that there will be further war budgets, that there will be higher taxes and that greater sacrifices will have to be made. There will be more government control and more regimentation. We must face the situation. We must realize also that the ideals of a more abundant life with higher standards of living, with more luxuries and with greater ease must be set aside. In their stead we must have new ideals of service, of work, of thrift and of sacrifice; we must face a harder, simpler and a tougher way of life.
I have referred to the importance of this government cooperating in every possible way with the governments of Great Britain and that part of France which proposes to continue

to carry on the war. I have referred also to the importance of making immediate plans and preparations to defend this country in case it is invaded. But there is one thing more that this government must do. It must provide efficient leadership in these critical times if the confidence of the people is to be maintained and victory achieved.
The people of this country look to this government for such leadership. They look to it for vigorous and courageous action; they look to it for outspoken and plain speech. It may be all very well in times of peace for a government to say that it is the servant of the people, although I always thought that was only a half truth, but in times of war the government of a country must be the leader of the people in the literal sense of the word. It must take a firm grasp on the situation and it must tell the Canadian people what they are to do and see that its orders and directions are carried out. Most of our people are only too anxious to be told what to do and how they can be of the greatest assistance in bringing this war to a successful conclusion.
In my opinion greater emphasis should be placed upon the glory of war, upon the glory and virtue of courage, upon the glory and virtue of duty, upon the glory and virtue of tenacity and upon the glory and virtue of sacrifice. To all men upon this earth death cometh sooner or later. How can they do better than to face the dangers they are called upon to face in this war in the defence of their families and in the defence of freedom, and in order to conquer brute force, tyranny and enslavement? In my opinion there should be more bands, more martial music, more parades and more flag-flying. Our soldiers should not be allowed to depart in the dark as if they were under a cloud.
In my judgment the time has come when this government should cease to be a party government. In the minds of the people a party government is associated with party politics, with political favouritism and political patronage. The carrying on of a war is not the kind of job that a party government should undertake; it is too big. If confidence is to be maintained, if the utmost effort is to be put forth, we should have a government in which all political parties are represented.
The leader of the opposition (Mr. Hanson) asked on the floor of this house that a national government be formed; but a few days ago, in reply to that request, the Prime Minister (Mr. Mackenzie King) said that a party which had 183 members out of a total membership of 245 might pretty well claim to be a national government in the truest sense of the word. He overlooked the fact

Subversive Activities
i24y
that although the elections were held only a few months ago, since then events of the greatest importance have happened. The war situation has completely changed; the map of Europe has been almost completely changed, and we are living in a different and far more perilous time. However much I regret the decision, the decision was his, and the responsibility rests upon his shoulders.
What else did he say at that time? He said that when he took additional gentlemen into his government to strengthen it, "one of the first qualifications which I shall require of them is loyalty to myself, and not a disposition to stab the leader of the party in the breast when he is trying to serve his country to the best of his ability in a time of war". When the Prime Minister said that he did not want to take into his government any gentleman who would stab him in the breast, I know that he was speaking figuratively and that he did not want to be stabbed politically. But when he made that statement, Mr. Speaker, it seemed to me that he had uppermost in his mind political considerations, and not those considerations which are of most vital importance to Canada at this time of crisis.
This, Mr. Speaker, is a time for iron sacrifice of body, will and soul, and the people of this country, in the knowledge that we strove for _ peace and that we fight for the right, are prepared to make these sacrifices, but they look to the government for more energetic leadership and greater results.


John Ritchie MacNicol: (Davenport): Mr. Speaker, because of the defeatist propaganda being so ardently spread by the nazis, and respread in the United States, whence it rolls over the border into Canada, it is not my intention to discuss the taxation proposals of the budget, but I will confine my remarks to discussing two propositions to help Canada prosecute the war: (a) a method by which the government can find from thirty to sixty million dollars of new money for use in the production of munitions; and (b) a method of sending back to Germany propaganda in the only language they can understand-war materials, shells, bombs, tanks, guns and munitions made out of good Canadian nickelized steel.
As I cannot proceed with the discussion of either one of these propositions in the few minutes remaining before six o'clock, Mr. Speaker, I move the adjournment of the debate.
Motion agreed to and debate adjourned.
On motion of Mr. Ralston the house adjourned at 5.55 p.m. until Tuesday, July 2.
Tuesday, July 2, 1940



REFERENCE OF BUDGET, ANNUAL REPORTS AND CERTAIN ESTIMATES TO RAILWAYS AND SHIPPING COMMITTEE

Clarence Decatur Howe: I desire to lay on the table the budget of Canadian National Railways and Canadian National Steamships for the year 1940, and to move:
That the annual budget of Canadian National Railways and Canadian National Steamships, tabled herewith, and the annual reports laid on the table of the house on May 17, 1940, be referred to the standing committee on railways and shipping, together with the following items in the estimates:
US, Maritime Freight Rates Act; V/G, Maritime Freight Rates Act; 1/58, Canadian National (West Indies) Steamships Limited, capital advances; }59, Canadian National Railway Company; 1/60, Prince Edward Island car ferry and terminals.


[Stage Direction]
Motion agreed to.


William Lyon Mackenzie King: Mr. Speaker, with respect to matters having to do with the Department of National Defence I should like to follow the practice of having my colleagues of that department make any announcements that have to be made in connection with that branch of the public service. However, there is one announcement which I feel will touch so deeply the hearts of the public of Canada that on this occasion I might, I think, depart from that rule and myself make the statement which it is necessary to make in the house.
I am greatly distressed to have to announce that, while engaged in the pursuance of hazardous duties off the mouth of the Gironde river near Bordeaux, France, His Majesty's Canadian ship Fraser was lost in a collision. One hundred and fifteen of the gallant crew have been rescued. I regret to have to say that forty-five are either dead or missing. The next of kin have already been informed.
His Majesty's Canadian ship Fraser has been on active service since the commencement of the war. At a few hours' notice she speeded, in company with another vessel of His Majesty's Canadian navy, from Vancouver to the Nova Scotian coast, via the Panama canal. Since then she has seen arduous
Loss of H.M.C.8. Fraser

service both off the coasts of Nova Scotia and in the Caribbean. Recently she has been on duty in European waters with sister ships.
There are four destroyers of the Fraser type in the Royal Canadian navy. Formerly known as H.M.S. Crescent, she was launched on September 29, 1931, and was acquired by Canada in 1937. Her displacement was 1,355 tons, and she was built at the Viekers-Armstrong works, England.
The commanding officer of the Fraser was Commander Wallace B. Creery, R.C.N. I understand the commanding officer's life has been spared.
At the present time, for reasons of naval ' secrecy, nothing more can be divulged of the operations of His Majesty's Canadian units operating in overseas waters.
I have just this minute received the following communication from the admiralty in London:
Please convey to officers and men of the Royal Canadian Navy their lordships' sympathies in loss of H.M.C.S. Fraser.
Their lordships wish to take this opportunity to express their thanks to all ranks and ratings of the Royal Canadian Navy for splendid contribution they are making to the work of his majesty's fleet in common cause.
Mr. Speaker, I should like to add on behalf of all hon. members of this house an expression of sympathy equally deep with the officers and men of the royal Canadian navy in the loss of the ship Fraser, but even more to express the very deep sympathy of this House of Commons to the relatives of the gallant men who have been lost in their country's service in the manner that I have been obliged to describe.


Richard Burpee Hanson: I am sure we all join with the Prime Minister (Mr. Mackenzie King) in the expression of sympathy with the next of kin and loved ones of those who have been lost in this sad event. It is the sort of thing that Canada and Canadians may expect to happen at this time. May it be a challenge to every one of us to support our people at the front, our gallant lads in the navy, in the air and in the army. I am sure that their example and devotion and the sacrifice they make for Canada and the empire will not be forgotten.


Major James William Coldwell: I just wish to say very briefly that with the sentiments expressed by the Prime Minister and the Leader of the Opposition the group with which I am associated are in hearty accord. We too extend our deepest sympathy to those who are bereaved.


John Horne Blackmore: It hardly needs to be said that our group is in most sincere accord with the sentiments which

have already been expressed. It must be impressed upon us all that we are at the beginning of a long, long list which will have to be recorded of those about whom it will later be said, as it was said of the heroes of the past: "Their name liveth for evermore."



BRITISH CHILDREN


Richard Burpee Hanson: I should like to announce to this house that the loyal city of Fredericton, in which I have resided for forty years, which I have served as mayor, and whose citizens have been so good to me in days gone by, has announced through its mayor that it will bear the full expense of hospitalization of all evacuated children who may be placed in Fredericton homes.
I make the announcement in the hope that other cities and municipalities in Canada will follow this example.


William Lyon Mackenzie King: May I ask my hon. friend when he returns, as I understand he does at the end of the week, to his native city, to extend to the mayor of Fredericton, an expression of our appreciation of the action the city has taken; and also to say that by taking the action it has, the city of Fredericton has set an example which we feel sure will be followed throughout Canada.



PRIVATE BILLS


[Stage Direction]
Bill No. 62 to incorporate Sisters Servants of Mary Immaculate.-Mr. Lapointe (Lot-biniere).
Bill No. 63 for the relief of Margaret Somerville Sickinger.-Mr. Hill.
Bill No. 64 for the relief of Romain Cleophas Moreau.-Mr. Macdonald (Brantford City).
Bill No. 65 for the relief of Dorothy Florence Donn Martin.-Mr. Graydon.
Bill No. 66 for the relief of Phoebe Doris Edge Pott.-Mr. Graydon.
Bill No. 67 for the relief of Filomena Grego Sauro.-Mr. Bercovitch.


[Stage Direction]
On the orders of the day:
Richard Burpee Hanson: I should like to direct a question

The Budget-Mr. Reid
to the Minister of Transport, based upon a press report appearing in to-day's Ottawa Citizen. Is it true that the Canadian Broadcasting Corporation has lifted the ban on Trans-Radio news which was proposed to become effective from July 1? In view of his earlier statement made on June 6-page 557 of Hansard-will the minister give the house detailed information as to the proof or bona fides furnished by Trans-Radio news officials to the Canadian Broadcasting Corporation, particularly as to its ownership, and the authenticity of its reports dated from London?
I sent notice of this question to the minister earlier in the day and he has informed me that he has not the information at the moment. Of course it is quite satisfactory to me if he has to postpone his reply.


Clarence Decatur Howe: Perhaps I can give my hon. friend the information he desires. The board of governors of the Canadian Broadcasting Corporation met in Ottawa yesterday. Attending the meeting were representatives of the Canadian Press and of the privately-owned broadcasting stations. A general policy was evolved which will mean that within a reasonably short time -the shortest possible time-sponsored news on the air will be a thing of the past. There are details to be worked out; I have asked a man in whom I think all hon. members of this house have a good deal of confidence, Mr. Walter Thompson, to look into all sides of the question on my behalf and to bring in a report, which I think will finalize the matter and evolve a policy more satisfactory to listeners in Canada. Whether in the meantime the present news services will be allowed to function I am not sure. I rather think they will, although I have no definite knowledge. It would perhaps be a mistake, for a matter of two or three weeks, to make any radical change in the existing situation. But I think I can say that within the next month there will be a new policy for news on the air, which I shall announce as soon as I can, and which I think will be recognized by all as an improvement on the present situation.


Richard Burpee Hanson: Will the announcement be made in this house?


Clarence Decatur Howe: Sometimes these announcements get out before they reach me, but I assure my hon. friend that as soon as I receive it I will make the announcement in the house.


Richard Burpee Hanson: Any announcement of public policy on behalf of a government-owned institution should be made here first.


Clarence Decatur Howe: I may be scooped by my news service.



NATIONAL DEFENCE


[Stage Direction]
On the orders of the day:
Gordon Knapman Fraser: I should like to ask the Acting Minister of National Defence (Mr. Power) if anything is being done to fix special and reasonable rates for enlisted men and women travelling by train. I ask this question because last week-end men travelling from Ottawa to Peterborough on regular vouchers had to pay $5.50. The regular coach fare is $6.90, but there was a special excursion rate of $4.60, and I know that some of the men paid $5.50 and found out about the lower rate later. In other words soldiers had to pay 90 cents more than civilians. I honestly believe something should be done-


Georges Parent: Order.


Charles Gavan Power: I shall be glad to make inquiries. I cannot answer the question offhand.



THE BUDGET


[Stage Direction]
The house resumed from Thursday, June 27, consideration of the motion of Hon. J. L. Ralston (Minister of Finance) that Mr. Speaker do now leave the chair for the house to go into committee of ways and means.
Thomas Reid: In my first words this afternoon I should like to join in the regret that all must feel following the announcement by the Prime Minister (Mr. Mackenzie King) of the loss of one of our Canadian destroyers, the Fraser. Those of us from British Columbia have taken perhaps more interest than other hon. members in this destroyer, because, if I am not mistaken, this destroyer was first welcomed to Canada at the port of New Westminster, and I believe most of the personnel come from British Columbia. We are inclined to be more conscious of the other branches of the service and to forget at times that great, silent service, the navy. Some of the boys returned at Christmas time on leave, and the stories they told of their work in the north Atlantic were very thrilling indeed. They spent many days at sea; some had their fingers and toes frozen; many times they encountered a temperature of 40 degrees below zero, with a howling gale. So I cannot but grieve this afternoon at the loss of this destroyer.
With other members on the government side I have refrained from making speeches
The Budget-Mr. Reid

during this session because of the serious war situation in which we find ourselves. I would not make that statement, Mr. Speaker, but for the fact that an impression has been gained in many parts of the country that those of us who do not speak are not doing our duty here as members of parliament. Each of us has been extremely active since coming here, but realizing the war situation, we have refrained from making speeches which otherwise might have been made.
There are one or two matters, however, upon which I should like to dwell this afternoon, but in so doing will endeavour to be brief. In my first words I should like to congratulate the Minister of Finance (Mr. Ralston) upon his splendid presentation of the .war budget. At the same time I want to extend to the minister every good wish in the new position he is to assume very shortly, because we all realize the onerous and heavy responsibilities which fall upon the man holding the important position of Minister of National Defence at this time.
It is not my intention to deal at any great length with the various ramifications of the budget. It was generally well received by the people of Canada; in fact, I think they expected it to go much further than it did, and I believe they were prepared to bear even greater burdens gladly. I should like to make one comment, however, in connection with any future borrowings. The minister pointed out that he expected a total expenditure this year of well over a billion dollars and that the estimated revenue would be something like $750,000,000, leaving an estimated deficit of between $550,000,000 and $600,000,000. At a time like this I do not believe the government should pay any greater interest on loans than the one and a half per cent which is paid by the banks of Canada. As a matter of fact, I believe that thousands of our citizens would gladly lend their money to the government at this time without interest, fully realizing and knowing that if we fail now, nothing else matters. I believe some explanation is due the house-and I hope it will be given before this debate is ended-with regard to the interest paid on some past loans. In May, 1939, we borrowed $95,000,000 at one and a half per cent. Later in the same year we borrowed $200,000,000 at two per cent. In February of this year we raised $250,000,000 at three and a quarter per cent, and I understand that the greater part of that loan was taken up by the financial institutions of the country. Then we have the war savings certificates, on which the rate is three per cent. I am going to urge upon the Minister of Finance, whoever he may be, and upon the government, that in 'Mr. Reid.]
any future borrowings during these trying times we pay no more than allowed by the banks, namely, one and a half per cent.
I am not going into the question of finance generally, although I might very well do so. Sometimes, however, when the leader of the Social Credit party (Mr. Blackmore) holds forth with regard to changes in our monetary system which will have to take place, I hear some hon. members laugh, while others call out "funny money." In my opinion the world is changing, and many of us will have to give up our old ideas. To those who laugh so loudly I would direct this question: How many members here could rise in their places and explain the present monetary system?


Charles Edward Johnston: There is
the first good Liberal I have heard in this house.


Thomas Reid: The other evening the leader
of the opposition (Mr. Hanson) and some other hon. members were speaking of the increasing cost of government, and something was said about the bureaucracy which exists in Canada at the present time. I do not want to be misinterpreted, in what I am about to say, because I am all for the civil service merit system; but unconsciously we have built up a bureaucracy which has become almost, if not entirely, our master. Why, Mr. Speaker, I could name government departments here in Ottawa with which no minister can interfere. They have been left on their own too long. That is what ruined France; it is, I believe, injuring Great Britain very seriously, and unless we control this evil now I am afraid it may strangle us also.
I am afraid I do not quite agree with the Minister of Finance with regard to the tax on motor cars. Personally I should like to see them banned entirely for the duration of the war and our factories turned over to war work. Be that as it may, however, the minister pointed out that the graduated tax on motor cars w'as imposed not so much for the purpose of revenue as with the intention of keeping Canadian dollars in this country. I am glad the government is taking that view at last, because I am thinking of the farmers in Canada, particularly in British Columbia, who for many long years have been subjected to the importation of fruits and vegetables for which we are spending millions of dollars yearly, although we grow them in abundance in this country. We have potatoes, turnips, onions, tomatoes and like vegetables in abundance here; and yet, Mr. Speaker, last year we sent across the border to the United States over $4,500,000 for commodities which are

The Budget-Mr. Reid
grown in abundance by our farmers, commodities for which they can scarcely find a market.
I am an advocate of free trade.


John Ritchie MacNicol: I am surprised to hear that.


Thomas Reid: But when I see the hold the industrialists have in Canada, and when I see the protection given to them, I believe that in fairness to the farmer the same kind of protection should be given to him. It should be either free trade for all or protection for all.


Alfred Johnson Brooks: You voted for the United States agreement?


Thomas Reid: Then, we send half a million [DOT]Canadian dollars across the line to buy strawberries grown in the United States, and yet no better strawberries are grown anywhere on the north American continent than are grown in British Columbia.


Mark Cecil Senn: Except in Ontario.


Thomas Reid: In 1938, according to the
Canada Year Book, we had an adverse balance of well over $13,000,000 in connection with agricultural products. I am reminding the Minister of Finance and the government that if from now on the policy is going to be one of preserving Canadian dollars, then I say, let us go the whole way and give the farmers the protection they need-protection which the industrialists already have. I say that because the farmers are, and for many years have been, placed in an invidious position, because they have to sell on a low priced market and buy in a highly protected market.


William John Ward: How can we protect the
wheat grower?


Thomas Reid: I will deal with that later.
When I read in Hansard statistics prepared by economists with regard to price levels, incomes and salaries, and when I hear speeches made and statistics quoted by hon. members in an endeavour to make it appear that the farmers and those on relief are not doing too badly, I am reminded of an historic statement in the British House of Commons by Mr. Baldwin when he said to Mr. Snowden, "First there are lies; second, there are damned lies, and third, there are statistics." My statement may sound harsh, but I will say that one can take statistics and prove practically anything from them. But we cannot improve the lot of the workers or the farmers by any such citation of figures.
I was interested, and I have no doubt most hon. members were interested in the radio address delivered a short time ago by Mr. Bruce Hutchison, correspondent of the Vancouver Sun. In that radio address he pointed out the great change in respect of trade which has come over the north American continent, and made special reference to the new economic scheme suggested by President Roosevelt. To my mind Canada must find new markets, if she is to survive the blow of the loss of her European market. The markets in Europe are lost now, and perhaps will be lost for some time to come, if not for ever. I suggest to hon. members that conditions are changing so fast that we might well forget all past arguments in respect of tariffs. I am doubtful if we can do all that will be necessary to be done, and at the same time allow business to go on in its own usual way. All notions of money and of spending are going fast, if indeed they are not already gone. At this session we have budgeted for well over a billion dollars, and it was only a short time ago that in the short space of an hour and a half the United States government passed votes aggregating four billions of dollars.
Hon. members may be interested in some particulars respecting our trade. I shall not deal extensively with this point; but when one realizes that two countries, the United States and Great Britain, took over 78 per cent of all Canadian exports, that those same two countries furnished 7fi per cent of all Canadian imports, and that our exports to the continent of Europe, exclusive of Russia, comprising
190,000,000 people, was just over $32,000,000, and our imports from the same sources were about $24,500,000, we are forced to wonder if we are treating Great Britain fairly. We have not in the past, but I trust that during the war we will improve that situation, so far as trade is concerned. While we sold goods to the value of $423,191,091 to the United States, our imports from that country were valued at $487,279,507. On the other hand, while we sold to Great Britain goods to the value of $409,411,682, our imports were valued at only $145,050,000.
I am sometimes surprised at the attitude of many of our industrialists. Even during the present war some of them have been complaining privately to me that Great Britain has been making engines which could very well be made in Canada. When I am approached like this, I ask them this question: If we sell Great Britain our wheat and many other products, how is she going to pay us for those goods if we do not buy from her? I have mentioned these facts particularly so that I might bring to the attention of hon. members the fact that Europe has been cut off, so far as the factor of markets is concerned, and that with the loss of those markets
The Budget-Mr. Reid

we had better give serious consideration to the proposal of the President of the United States to set up an economic customs union consisting of the entire Americas.
I wish now to deal briefly with a local matter, namely, the serious situation affecting the fishermen of the Pacific coast. I suppose all hon. members from British Columbia have received telegrams and perhaps telephone calls from fishermen in British Columbia pointing out the serious conditions confronting them in connection with the matter of arriving at a price which will enable them to carry on. They have, called attention particularly to the price of sockeye salmon offered by packers or canners.
So that the problem might better be understood, for the benefit of hon. members may I point out that there are five varieties of salmon, and that the highest priced variety is known as the sockeye or red salmon, the market for which is found principally in Great Britain. At the beginning of every fishing season fishermen and packers get together to arrive at prices. This year they have met, but have not arrived at an agreement because the cannerj'men are this year offering a price almost 30 per cent less than has been offered in previous years. They are saying, "Well, we do not know what the market will be. Great Britain is not eager to take our sockeye salmon." The result is that they are offering the fishermen in some instances 13 cents to 14 cents less per fish than was offered in 1939. This is serious enough, but when one considers that the cost of nets and gear has gone up 30 per cent in some instances, he will understand the plight of the fishermen. At the moment these men are refusing' to go out to the fishing grounds until this matter is settled. The British Columbia members have been negotiating with the Minister of Fisheries (Mr. Michaud) in an endeavour to have him take some action, but so far nothing has been done. Our argument to the minister is that precedents have been created, and something can and should be done.
We do not complain when the fishermen in the maritime provinces receive over half a million dollars. We are not against the government guaranteeing the price of apples or the price of pork. We are not adverse to the government guaranteeing the price of wheat to the farmers. But we ask for equal treatment. When the fishermen of British Columbia, numbering nearly 9,000 this year, ask that something be done, they are told that nothing can be done. We are informed that it is a matter for the cabinet to decide. This is the reason why I bring this matter to the attention of the house this afternoon. Time is short because the fishing season opens on
[Mr Reid.]
June 30. Is the government going to stand by and see between eight and nine thousand families deprived of their living? All this is likely to cause more unrest on the coast.
This food will be required later, if not immediately, at least in the near future. We are being urged to produce more food. I contend that the government should take note of this dispute and at least offer a guaranteed price so that these men can carry on their fishing operations.
One word on the war situation. The response of the people of Canada to our war effort has been simply wonderful. We have a perfect example of the unity that exists between Great Britain and ourselves in the way in which Canadian homes have been offered to British children. Some time ago the leader of the opposition referred to immigration and pointed out the number of people who had come to Canada from the continent of Europe. I was looking over the figures the other day, and it may interest the house to know that in 1871, 92 per cent of the population of Canada were of British and French stock. The last census of 1931 shows a drop in this percentage to 80 per cent. In other words, in 1871 there were in this dominion only some 302,000 persons who had come from the continent of Europe or other countries, whereas in 1931 there were in this country 2,000,000 persons who were not of British or French stock.
It may well be that many of the British children who are sent here will remain. I hope it does not happen, but if Hitler makes an onslaught on the British isles it is possible that many parents might be killed. Even though that does not occur, there will be great benefits to Canada from this closer contact between Great Britain and ourselves, and we need more British stock.
I do not think the loyalty of any one should be judged by whether or not he gives a gift of money, and I shall not attempt to make such a judgment at this time. However, I think some praise should be given to those citizens of Canada, from the poorest to the wealthiest, who have given willingly, and, in some instances, most generously. There are those who have sent their fifty cents and upwards, which reminds me of the parable of the widow's mite. In proportion they gave more than many who gave in abundance. I think the gift of 8100,000 to this country by the lieutenant-governor of British Columbia should give a lead to many other wealthy Canadians. In this connection I have nothing to say about the great city of Toronto. The mayor of that city set out to collect a million dollars, and I believe all he was able to get was $18,000.

The Budget-Mr. Reid


John Ritchie MacNicol: That is most unfair. No city in Canada is more generous than Toronto.


Thomas Reid: I should like now to say something about the splendid work being done by the women of this country. On Thursday morning it was my privilege to attend the Capitol theatre to witness a picture put out by the motion picture bureau of the dominion government. After seeing that picture, one could not help but feel impressed and elated by the work being done by our women folk. The women from one end of Canada to the other are busily engaged in many endeavours and I think worthy note should be taken of what they are doing. They are showing a splendid example to the rest of the country.
I come now to the civilian defence units which have been set up in many parts. It is my opinion that when these units were first started they were not well received by the government. Speaking for at least part of British Columbia, I can say that the people there had two motives in mind when setting up these civilian defence units, particularly in the lower Fraser valley and other parts of the province. The first was a desire to do something about the possible unrest which was evident in certain quarters. It was said here that there was no danger, but those of us who live in British Columbia know what is going on. We have been greatly perturbed over the possibilities of what might happen in the future.
The Minister of Justice (Mr. Lapointe) has stated repeatedly that there has been no sabotage in Canada. That has been true so far, but that does not mean that there will not be attempts at sabotage. I think we would do well to utilize these civilian defence units. My opinion is that they should not be left to operate simply as civilian units; they should be tied up in some way with our military operations. Perhaps they could be drafted into the militia units. We should take advantage of this willingness to protect the life and property of our country. I trust the government will take serious note of this and give official recognition to these units.
I do not intend to mention the many vulnerable points of British Columbia because they should not be made public on the floor of the house. But we are greatly perturbed. I trust the Minister of Justice and the government will give consideration to the representations which are being made by the attorney general of British Columbia. I urge upon the government also to have additional naval units placed on the Pacific coast. No one can tell at what moment there may be other nations arrayed against us. We have our groups of nationals in that province in great numbers,
and if other countries should turn against us, these with others might create a serious problem indeed.
I ask the government to do a little more for British Columbia. When members speak of the west they often think of it as stopping at the Rocky mountains. We have always to mention British Columbia as a separate province. But it should not be forgotten that we are the gateway to the Pacific. Frankly, those of us from British Columbia would like to see more protection given and much more done to prevent possible sabotage.
In conclusion, Mr. Speaker, as all well know, the situation is serious, but there is no reason for fear, let alone panic. If we gave way to that, we should only be playing into the hands of our ruthless enemy. Hitler's plans are, first, propaganda to create unrest and then fear, and then at a chosen moment to move in ruthlessly on the country he wishes to conquer. I advise hon. members who are interested to read Hermann Rash-ning's book, "Hitler Speaks," and then hon. members will realize that we must be prepared for any eventuality in Canada. Read of Hitler's plans and what he said in 1934 about what he would do to France, and you will see, Mr. Speaker, that his plans have been carried out exactly as predicted; and then read in this same book of Hitler's scheme with respect to the United States and Canada, and you will realize just why many of us are greatly perturbed over possible fifth column activities in this country. The present conflict springs from a pagan conception of some kind of new social order which is founded on might and cruelty, and which ignores the individual. Hitler has declared that he will obliterate religion from the face of the earth. Our civilization is founded upon the Christian conception of the brotherhood of man, the sacredness of human personality, and the sanctity of contractual relations. It is disgraceful to my mind that men in Canada have given utterance to the thought that they would prefer Hitler to this country.
Let us throw everything we have into the struggle now, and quickly, for we are fighting not only for democracy but for our very lives.


Major James William Coldwell: Mr. Speaker, my first word, too, will be one of congratulation to the Minister of Finance (Mr. Ralston) upon his presentation of the budget and the manner in which our national accounts were placed before the House of Commons. It was an exceedingly able piece of work.
I should also like to associate myself with very much of what the hon. member for New Westminster (Mr. Reid) has just said.
The Budget-Mr. Coldwell

I disagree with him in his commendation of the ten per cent exchange tax, which affects us in the west in an altogether different manner from that in which it affects the people of British Columbia and of some other parts of Canada. As was anticipated, the new taxation necessitated by the war is heavy, and our country is perhaps unfortunate in that many of the taxes which were instituted during the great war of 1914-18, and in subsequent years, still remained on our statute books when this war broke out. Consequently, in order to raise additional revenue to conduct the present war, new ways and means of raising money had to be devised. Luxury taxes and taxes of that description were imposed previously, and to-day we have had to turn to other forms of taxation which bear heavily upon many classes of our citizens.
I should like to point this out, too, that we frequently make comparisons between Great Britain and Canada to show the effect of certain of our taxes, but we forget that indirect taxation in Canada bears heavily upon our people, particularly upon those with low incomes.
I notice it is estimated in the present budget that customs, excise and sales taxes will yield some $415,000,000 out of the $650,000,000 expected to be raised by taxation; and the taxes which I have just mentioned, particularly the sales tax and such a tax as that on sugar, bear heavily upon those with low incomes. May I interject that the new tax on cigarette papers will be a hardship for many of the poorer members of our population who roll their own cigarettes.
We have in the present budget a wide extension of the income tax, to which no real objection can be taken so long as those in the higher brackets bear their fair proportion of that taxation.
But the new national defence tax is in reality a tax on wages, affecting even the most lowly of our wage-earners. In my opinion the exemptions of $600 for a single person and $1,200 for the married are too low, particularly when we remember, as I said before, that we collect heavy indirect taxation from our people. In considering wage taxes, salary taxes and the income tax, the criterion ought to be, it seems to me, not how much do we take but how much do we leave. Even in making a comparison between, we will say, the province of Ontario and Great Britain, we find that the amounts taken leave substantial incomes as the income increases, and the differences between the amounts left in Ontario are relatively more in the higher brackets than they are in Great Britain. I have, as a matter of fact, had worked out the amounts that remain after the income tax is IMr. Coldwell.]
deducted, and I have them before me although I shall not take time to read them this afternoon, but these figures substantiate the statement I have just made.
The increase in the income tax, when we add the national defence tax, is proportionately greater in the lower and lower-middle than in the higher-middle and higher brackets, if I may put it in that way. As I have said, the question is not so much the amount one takes as the amount that is left in order to maintain a reasonable and proper standard of living.	.
I am sorry that the government did not explore certain new avenues of taxation which are, I think, available to them. At least two sources of profitable revenue remain untouched by the dominion, and there may be others. In my opinion they ought to have been utilized before a wage tax was considered. I have often spoken of a capital gains tax-the increase in stock values and unearned increment. I remember, of course, that the Sirois report does not consider that to be a fruitful field for exploration, but I think it ought to be explored by our Department of Finance. The second is a dominion succession duty tax. I realize that the provinces have invaded this field of taxation, but there is no reason why we should not apply some form of dominion succession duty tax. The Sirois report in this connection points out that for the period 1926 to 1935 the yield of inheritance tax per capita in our sister dominion of Australia was 1-8 to 3-8 times as large as in Canada, and in New Zealand 2-1 to 5-2 times as large. That will be found at page 120 in volume 2 of the report. Australia is not as rich a country as Canada, and probably wealth there is if anything more evenly distributed than in Canada; and New Zealand, of course, according to a recent book published by the eminent British statistician Mr. Colin Clark, is the wealthiest country per capita in the world, although income is much more evenly distributed there. But it is safe to say that the wealth in both our sister dominions is at least not more unevenly distributed than in Canada; perhaps indeed the very reverse.
If our provincial governments published each year figures of estates passing at death, as the British and Australian and New Zealand governments do, we should be in a position to estimate with some accuracy what the possible yield of a dominion inheritance tax would be, but unfortunately no such figures exist in Canada. It seems safe to say, however, that on the basis of the New Zealand experience a dominion inheritance tax would produce a very large sum of money.
A further source of revenue might be an increased tax on the non-resident holders of

The Budget-Mr. Coldwell
Canadian securities. The present rate is five per cent. Why should it not be, let us say, twenty per cent? Again, I do not know how much revenue this would produce but I am confident that the return would be considerable. A further tax might be one on the returns from bonds, taken at the source. It seems to me that there is a discrepancy in our field of taxation at the moment. We are taxing incomes derived from industries and from profits. I am making no adverse criticism of that; in fact, I shall have something to say about it in due course. At the same time we have not explored the method of making the other form of capital investment bear its share of taxation, except of course through the income tax.
Then, too, we might ask our people, as they did in New Zealand, to contribute at this time their money in the form of interest-free loans for war purposes. The hon. member for New Westminster (Mr. Reid) spoke of loans at a very low rate of interest. I am in entire agreement with what he said, but I think we might go a step further. The Minister of Finance the other afternoon drew attention to a number of communications which he had received from relatively poor people virtually offering their all in the dominion's hour of need, and I think we have a right to expect that those who have large blocks of money might also be asked and perhaps, as in New Zealand, even compelled at this time to lend at least a portion of their wealth to the state without interest.
One of the most objectionable taxes in the budget, from our point of view, is the new war exchange tax, which was commended highly by one or two previous speakers. Let us not forget that that tax will work not only as a tax but in effect as additional tariff protection on certain classes of goods, and it will be felt by those who have to use certain imported commodities. Nearly all our families on the prairies are bound at certain times of the year to use imported vegetables and fruits, such as citrus fruits for which we can find no substitutes at certain seasons, and this tax will make it more difficult for them to obtain these products because of the increased price. Perhaps the prairie regions will suffer most in this regard, and it will be felt more by our farmers than probably any other group in the community, because they rely to such a large extent upon imported farm machinery of various kinds-imported farm machinery produced in some instances not economically in Canada but which our farmers require for their industry. I suggest to the government at this point that they might reconsider this tax and grant an exemption on farm machinery imported into Canada.
^Imports of agricultural implements from the United States in the calendar year 1939 amounted to 820,098,391. On that basis the war exchange tax imposes upon the farming community in a single year an additional
82,000,000 or so in taxation. Of all sections in the community, with the exception of the unemployed, the farmers are probably the least able to stand the extra burden of taxation. In my opinion the same result in the conservation of our exchange might have been brought about by the adoption of a rationing system rather than by the method of taxation. I would urge, too, that in relation to other commodities as well as farm implements we should see to it that our price control board keeps a tight hand on Canadian commodities of the same class or kind produced in Canada, so that no undue advantage will be taken by Canadian manufacturers of this particular tax in the budget, if it is maintained.
Now I come to what we regard as the most serious defect in the budget proposals, namely, the excess profits tax. Let me repeat that if we ask men to lay down their lives and to die, as we have learned this afternoon that young Canadians are doing, then we have a right to ask that Canadian industry shall forego all profits for at least the duration of the war. Under the budget proposals, industries which made large profits in the pre-war years, especially those engaged in war industries-


John Ritchie MacNicol: Is the hon. member referring to all excess profits?


Major James William Coldwell: I will deal with that in a moment. I say, under the budget proposals such industries will pay no excess profits tax. I have a list of companies with their 1939 capital and their returns, a list which I have carefully prepared, with the assistance of an able statistician, from the Financial Post survey of corporate securities. The list contains the names of thirty-three companies, most of them among the more than usually profitable Canadian companies. Their total profits available for dividends in 1939 were $146,191,262. On the basis of their 1939 earnings, only nine of them would have paid any excess profits tax under the old act, and only two would have paid excess profits tax of more than $100,000. The excess profits taxes of the whole lot put together would have taken just 1-5 per cent of their profits; in fact after paying both the increased corporation tax and the excess profits tax these companies would have had left about 79 per cent of their profits. I may add that only seven of the companies would have chosen plan A which has now been discontinued.
The Budget-Mr. Coldwell

Now we come to the new act. Under the new act, on the basis of 1939 earnings these companies taken together would pay, as in the former case, $28,757,156 in corporation income tax and $18,297,760 in excess profits tax. After paying both the corporation income tax and the excess profits tax they would still have available for distribution over two-thirds of their 1939 profits. It will be noted that our available financial reports cover very few mining companies, which are obviously in some cases among the most profitable of our Canadian companies. Unfortunately complete 1939 figures for these companies are not readily available, but it is safe to say that, if they were, the summary which I have given would have been even more startling.
Let me now give some further figures as to these thirty-three companies. The total capital in 1939 as computed under the Excess Profits Tax Act was $860,454,853. The total profits of the thirty-three companies represent a return of almost 17 per cent on this capital. The new excess profits tax applied to the 1939 earnings would leave a return of 11 per cent on the capital so computed. But there is a very wide gap between the lowest return and the highest, as I shall show in a moment. The total corporation income tax and excess profits tax of these thirty-three companies, on the basis proposed in the budget and assuming the 1939 earnings, would be, as I said, about $47,000,000. If we took everything over 5 per cent on the capital the proceeds of the tax would be about $103,000,000. Of course I am not forgetting that this would mean a substantial reduction in the amount we would subsequently collect in personal income taxes. But collection at the source, as we propose to collect the new defence exchange tax, would prevent evasion, and such an excess profits tax would mean a very considerable levelling off in income and doing away to some extent with inequalities. We might take advantage of the present war situation to bring about that desirable end.
I turn now to one or two of the companies for the purpose of indicating the excess profits tax on the new basis laid down in the budget.
Consolidated Mining and Smelting Company's profits amounted in 1939 to $9,339,586. The corporation income tax is $1,867,917. The excess profits tax on the new basis would be $933,959, making a total tax of $2,801,876, leaving $6,537,710, or, on the basis of capital as defined in our act, a profit of 33-6 per cent after the taxes are paid.
Canadian Industries Limited: profits $6,232,143, corporation income tax $1,246,429, excess profits $623,215. Total $1,869,644, leaving $4,362,499, or a return of 25-2 per cent on the capital as defined in our act.

I give a brief summary of two or three others. International Nickel on the same basis would have remaining a profit of 18-2 per cent on the basis of capital as defined in our act. Aluminium Limited, which because of the peculiar conditions in that industry over the last four years will pay the largest tax of any of these big more or less war industries, would have 11 -8 per cent left. Asbestos Corporation would have 16 per cent left.
Of course we consider that such profits ought not to be permitted during the course of the war, and that we should take all profits above a fair return on the capital invested and the risk taken. That would vary in various industries. The hon. member for Davenport (Mr. MacNicol) asked me a few minutes ago if I would take all profits. I believe that these industries can be classified according to risk experienced, and so on, and after having so classified them we would take all profits above the amount which we consider to be a fair return for the risk taken.
Because we feel that the new excess profits tax fails to tax the profits of profitable war industries, I am going to move an amendment to the. budget resolution, as follows:
That all the words after "that" in the said motion be struck out and the following substituted therefor:
This house regrets the failure of the government to impose a one hundred per cent tax on all profits in excess of a fixed return on capital invested.
This carries out the idea which I have endeavoured to place before the house.
I want also to say something about the other obligations that we have undertaken. In addition to financing Canada's own war effort we are undertaking, quite properly may I say, the financing of certain British purchases and operations in Canada. It is estimated that some two and a half billion dollars' worth of Canadian securities are held in Great Britain, and I am told that of these probably not more than one and a half billion dollars' worth are readily realizable. Dividend and interest payments on this sum, at four per cent, would amount to $60,000,000. I am not forgetting that repatriation of these securities would bring about several good results. If the government retained the securities it would extinguish an appreciable part of the dominion debt and the debt of the Canadian National Railways. It would make the dominion the owner of a large amount of certain provincial and municipal bonds, which incidentally might assist in bringing about the adoption of the recommendations contained in the Sirois report. It would make the government the chief owner and creditor of the Canadian Pacific Railway, and the owner of large interests in various other

The Budget[DOT]-Mr. Coldwell
British-controlled corporations. It would relieve the Canadian economy of a large annual burden of interest payments abroad.
I do not know how the government proposes to proceed in this regard, but it seems to me that these desirable benefits should be secured for the dominion if at all possible. On the other hand it would have another effect which would be bad. At present Great Britain's ability to buy our wheat and other products is due in large measure to the fact that we export large quantities of goods to her, and in this form she receives interest payments on her investments in this country, because thus she acquires a quantity of Canadian exchange. If she realizes upon these investments during the war and these securities are repatriated to Canada at the end of the war Great Britain will no longer have those funds available with which to buy our Canadian products. As I have indicated, the Canadian economy will be relieved of one burden, but the internal result may not be so happy. As one who lives in western Canada, where we are dependent almost solely on one great export commodity and one great customer, I am fearful of the result. We may have a dislocation of the Canadian economy as severe as the dislocation which resulted in many countries from the introduction of machinery. There may be a disastrous effect upon the economy of Canada, and particularly of western Canada, unless we are able and bold enough to take the necessary steps to meet the situation.
Yesterday I was glad to hear from the hon. member for Danforth (Mr. Harris) that the party which he represented was suggesting an import-export board. We have been urging that for years, but the proposal has always been frowned upon. I believe, however, that when this war is over, as the hon. member for New Westminster (Mr. Reid) said a moment ago, we shall find ourselves faced with an entirely new set of conditions which will require new policies; and I agree with the hon. member that the old idea of the flow of trade and interruption by tariffs will be just about as extinct as the dodo. We shall have to plan intelligently our exports and imports to meet the new conditions with which we shall be faced. Not the least of the difficulties we shall encounter will be that of improving our position in relation to Great Britain if we should lose that market on account of the repatriation of our bonds.
It seems to me therefore, that there is a clear case for immediate consideration of the planning of our social and economic structure so that we may withstand not only the stress of war but also the economic and social dislocations that will follow. Indeed,
we may be faced with the problem of a Europe self-contained, though poor, if-as I believe will be the case-we are victorious. I do not think there is any question of that; I scarcely needed to say "if". But if on the other hand-and of course this "if" is bigger- Hitler should succeed even in making a peace that might be advantageous to him, we might find ourselves confronted by a continental economy in Europe and have to consider ways and means of organizing our north American continental economy on this side of the Atlantic ocean.
These are some of the features of the budget that have appealed to us. There are many other matters which we might have discussed at some length. I have tried to deal with just a few of the points that seemed to me to be of major importance at this time; the other matters can be dealt with when we take up the various budget resolutions. Let me repeat, however, that we insist that in all these matters of taxation and collection of revenue there shall be equality of sacrifice. Last week we hesitated to give the government the wide powers which the house finally gave-and which we approved-because we wished first of all an undertaking that before human lives were conscripted some of these great corporations, to which I have referred this afternoon and a list of which I have before me though I did not read it, should be called upon to make at least an equivalent sacrifice. And in our opinion the budget has not ensured this.
These, then, are some of our criticisms. We commend the government for having endeavoured to adopt a pay-as-you-go policy, incidentally to a greater extent than I anticipated. I am glad to see such a large proportion of our war expenditures raised by taxation. I think it only right and proper that this generation should pay for the war which this generation permitted to fall upon the world. But, as I said earlier, if we must borrow money let us borrow it at the lowest possible rate of interest, or let us endeavour to obtain some of the money we need on loan without interest at all.
Yesterday in this house hon. members discussed the pressing problem of the great industry in which my own people are engaged, the wheat industry. Most hon. members refer to conditions in their own constituencies, and before I resume my seat I should like to say that in my opinion as soon as possible-and that ought to be at once-the government ought to tell the producers of that great commodity, upon which such a large portion of this country depends, exactly what the policy is going to be this year in relation to

The Budget-Mr. Caldwell

the marketing of wheat. We know perfectly well that there is a tremendous surplus unsold, on hand, in the country. But when the new crop is reaped, in all probability there will be a much larger surplus than we have ever known. That surplus may play an important part in the world when the war ends. Starving Europe, even semi-starving Britain, may be glad of a goodly portion of it. But it is neither just nor fair to expect the men and women who have produced this valuable commodity to carry the load in the meantime. To my mind the government should take over grain from the farmers at a price which will enable them to live. No one is asking for a profit, least of all the western farmer; he is asking for simply enough to enable him to continue on an even keel. Give him that, and he will be satisfied. Give him that, and he will continue to produce the commodity which may be of vital importance to this country and the world in days to come.
I repeat on behalf of the group with which I am associated that we are prepared to assist the country in every possible way to bring to a successful conclusion the great struggle in which we are engaged. But we urge-nay, we demand-that in this struggle no one shall be permitted to amass great wealth; that there shall be equality of sacrifice, and that all profits, at least for the duration of the war, over and above a fixed amount required to give a reasonable and proper return, shall be taken for the prosecution of the war and the benefit of Canada.


John Horne Blackmore: Mr. Towers:	The limit of the possibilities
depends on men and materials.
Q. -and where you have an abundance of men and materials you have no difficulty, under our present banking system, in putting forth the medium of exchange that is necessary to put the men and materials to work in defence of the realm?
Mr. Towers: That is right.
That statement has tremendous significance for us at this stage of our national life. May I quote from the Bank of Nova Scotia's Monthly Review of October 1939, entitled "Economics of War, No. 1":
Financial outlays are no more than an outward sign of the inner reality. The true measure of a country's ability to prepare for or to wage war is the degree to which it can enlarge and redirect its productive capacity to this end. So long as there are unused resources of labour and capital and so long as peace-time resqurees may be diverted to war purposes without reducing living standards below a minimum subsistence, it is feasible for a nation to increase its war-time capacity and to find the necessary financial means.
May I quote next from a man who is accepted by most thinkers as at least worthy of attention, Paul Einzig? From his book "Economic Warfare", published in 1940, I quote from pages 80-81:
While it may be open to argument whether in time of peace it is advisable to restrict production in general, in any circumstances, for the sake of preventing a credit inflation, there can be no question about the folly of attempting to hamper production in time of war by means of credit restriction measures.
May I stop there a moment? Credit restriction for primary producers has been in evidence from one coast of Canada even unto the other, and is now. In my constituency there are simply hundreds of farmers who cannot carry on their summer fallow operations because they cannot get credit. And yet these men are engaged in production. And Canada is at war! I quote further:
If the producers have not enough capital, they will have to be assisted by means of an adequate amount of credit, irrespective of the effect of such expansion upon the monetary situation. In any case, the extent to which credit expansion reacts upon the price level is apt to be overrated. In so far as the credit expansion leads to the creation of purchasing power without a corresponding creation of goods, it tends to cause a rise in commodity prices. If, however, the creation of additional purchasing power is either prevented or offset, then there is no reason why credit expansion in itself should lead to a rise in commodity prices.
I think the bearing of what I have said must be clear. There is no limit to the amount of credit expansion or money expansion which is possible to a state like Canada except its men and materials. The government must create, issue and circulate, debtrMr. Blackmore.]
free, such amounts of currency and credit as Canada's materials, equipment and manpower will justify. In other words, money can be created, issued and circulated to the point at which there becomes a scarcity of goods and services. Up to that point there will be no rise in prices-what we call inflation. The government must then manage that new money so as to prevent inflation and adverse exchange.
May I quote another passage. I must crave the indulgence of the house for quoting rather extensively. As matters stand, people in my group are looked upon as crackpots so to speak; people think we do not know. That is just the way Edison felt about Stanley; it is how the opponents of the development of steel ships felt; it is exactly the way people felt about chartism, and women's suffrage, as my colleague (Mr. Hansell reminds me. I can remember being called a crackpot and fool when I was in university because I argued in 1912 in favour of women's suffrage. Conditions being as they are, I have to quote the words of men who might be recognized as being wiser than myself. May I quote these words of the Right Hon. Reginald McKenna in a speech to his shareholders on January 30, 1936:
Additional currency, however, can now be furnished by the authorities, if they choose to exercise their powers without reference to the central bank's holding of gold. Thus the nineteenth century, which brought into general use a means of payment hitherto scarcely known outside London, brought also the machinery whereby it could be subjected to intelligent control.
Again, in the same speech:
We learnt that a shortage of money may be just as vicious in its effects as an excess, though deflation has still a touch of virtue about it in the minds of many people. Nevertheless it is becoming more and more widely recognized that greater productivity calls for an increased supply of money, for otherwise prices will fall, business will stagnate, and the growing productive capacity will be unused.
May I stop to comment briefly on that passage. Every measure in this budget is designed to decrease the amount of money in the people's hands, and consequently is certain to produce the ill effects which Mr. McKenna here points out.
Further on, Mr. McKenna says:
For money to be truly sound there must be enough of it to finance an ordinarily growing volume of trade, yet not so much as to give rise to an inflationary rise of prices.
With that statement I completely agree.
May I quote again from Mr. Towers, in the banking and commerce committee, words the truth of which I think very few people in Canada have come to realize. And before



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The Budget-Mr. Blackmore
I quote those words may I stop just a minute to pay a tribute to the efforts of at least two men who were members of the House of Commons last year. One of them is sitting in his seat, the hon. member for Vancouver-Burrard (Mr. McGeer), and the other is the hon. member for Rosthern (Mr. Tucker). I name these two gentlemen because they are Liberals. There are others in other groups whom I will not name, but these two men were responsible in very large measure for the vast amount of information which was elicited in the banking and commerce committee in clear and simple language so that he who ran might read. I believe that they did a service for the people of Canada the extent of which cannot perhaps be even dreamed of at the present time, and I wish to pay a deserved tribute to them. And now let me quote from the evidence of Mr. Towers:
Q. When a $1,000,000 worth of bonds is presented by the government to the bank, $1,000,000 of new money or the equivalent is created ?
Mr. Towers: Yes.
Q. It is a fact that a million dollars of new money is created?
Mr. Towers: That is right.
That will be found at page 238. Again:
Q. Now, as a matter of fact, to-day our gold is purchased by the Bank of Canada with notes which it issues . . . not redeemable in gold ... in effect using printing press money . . . to purchase gold?
Mr. Towers: That is the practice all over the world. .	.	.
That will be found at page 283.
These words completely support the most extreme views ever expressed by this group. Now, I ask the house this question: If the money can be created and is created, is there any conceivable reason why the government and the people of Canada should be in debt for that money, or pay interest on it? Is there any imaginable reason why we should be short of money provided we have goods and men?
I recall an experience of the last war, to which I referred in one of my speeches, when Canada created $26,000,000 of new money debt free and used it to defray government expenses. I pointed out that the interest saved on that $26,000,000 since the time of its creation amounts to over $1,000,000-I do not remember just how much. In the United States they used greenbacks debt free during the great civil war. Greenbacks were deliberately discredited by several means. If there was any fall in the price of greenbacks from causes other than manipulation, that fall occurred because the people of the United
States at that time did not have sufficient goods. There was a shortage of goods. It is worth knowing that through the greenbacks the people of the United States have been saved eleven billion dollars in interest alone.
I believe I have amply established to anyone who is realistic in his thinking about money that the government can procure, debt free, vast quantities of money the limit of the amount of which is the material and men in the country.
What shall the government do with the money once it is created? That is an extremely important question. To succeed, the money must be managed right. In the first place, the government can lend money at any rate of interest at which it chooses to lend it and for any length of time it chooses to allow. It can lend that money to any primary producer in Canada-farmer, fisherman, any primary producer at all. Our people are suffering acutely because they cannot get loans. In the light of what I have said it is absurd that they should be so suffering. By leaving them without the means of producing, we are sabotaging the country's war effort.
In addition to that, the government can lend money to secondary producers-shoe manufacturers, clothing manufacturers, flour manufacturers, any producers whose product it wishes the country to have or which it thinks the country is likely to need within a reasonable period of time. To do so, all it needs to do is to exercise the power to create currency or credit, the two powers referred to in the two quotations I have just read into Hansard, coming from the proceedings of the banking and commerce committee in the words of the questioner and of Mr. Towers. In the face of these facts, hon. members can imagine what condemnation will be heaped upon the heads of the members in this parliament, and of those constituting this government if anything happens as a result of which irreparable disaster befalls Canada.
Again, the dominion government can lend money for housing, not at the crippling rates now charged, prohibitive rates, but at exceedingly low rates of interest on long and generous terms, enabling the poor man to get money to build his house.
But people will say, "Oh, that will cause inflation." Now, it cannot cause inflation if the money when it is lent can be spent without raising prices. Is there a sufficient amount of lumber throughout the country to build houses in abundance? Is there a sufficient number of mills to replenish supplies of lumber? Are there adequate forests to provide raw materials for the mills? Are there other products and materials needed in the construe-
The Budget-Mr. Blackmore
[Stage Direction]
tion of homes for the people? The answer to each of these questions must be unequivocally yes. Then how can the money possibly cause inflation? Then again, the government can use this new money to pay fair prices, first, for all primary products. Last night we engaged in a most profitable discussion on wheat. There are from coast to coast in this country hundreds of thousands of men producing wheat and other thousands who are in charge of matters who see no hope at all with respect to the price of wheat. That absence of hope need not be. The government can create new money and with that pay whatever price for wheat it sees fit. It can pay a fair price for all other commodities, all meats, all animal products, all vegetables and fruits and fish, and every other primary product. The question will be asked: But will not that cause inflation? The answer is: Would it cause inflation if you could sell these products say to Japan and get the money from Japan and spend it? Manifestly not. Well, if you could spend Japanese money in Canada without causing a rise in prices, unquestionably you could spend Canadian .money without causing a rise in prices.
Furthermore the government can use such -created money to give a lowered price, a discounted price on secondary products. For [DOT]example if a pair of shoes is at present offered for sale by a retailer in Canada at $5, it having been determined that $5 is a fair price, there is no reason why the Canadian government cannot pay with created money SI of that $5 and allow the consumer to buy the article at $4, thus greatly increasing the amount of such goods that can be bought, consequently sold, consequently produced. Therefore the prosperity of the country would be increased. To the question, will it cause inflation, we reply, could you spend the money if it were United States money? The answer of course is yes. Why? Because you have plenty of goods and plenty of productive capacity to produce more goods and plenty of resources to support the productive capacity. That is the test of inflation. I shall in a moment read quotations to support what I say.
Thus the government can make sure that the price level in Canada is just whatever the government chooses it shall be. Hon. members in the debate last night on wheat pointed out that the price of goods, 147 articles, that the farmers in western Canada buy has risen until to-day the farmer is paying $1.34 for goods which in 1914 cost him SI. Manifestly there is a situation which must be made right. As we are to-day situated economically in the world, it is impossible for this government to

do anything to bring those prices down from $1.34 to $1. But if the government began to use the principle that I am outlining, which is one of the principles of social credit, the government could bring down those prices without injuring anyone.
Then again the government could use the new money to construct water conservation projects and irrigation works, to build roads, to carry on reforestation. I tremble to think of what might happen if Hitler should get past Great Britain and attack the sacred shores of Canada. Whereas in Germany they have great roads laid down adequate for the most speedy transportation of the most deadly weapons of modern warfare, we in Canada scarcely have a trans-Canada highway. How helpless we would be to defend our shores! Is there any reason why we could not build desirable roads? The only question is, have we the material, have we the men? The answer must be yes. Then if we have the materials and the men we surely can have the money; otherwise all these authorities whom I have already quoted are wrong; and common sense is wrong.
Again the government could use created money for training men, training its people. Hon. members tell us we need to have our youth trained; the hon. member for Davenport (Mr. MacNicol) has told us that. But about all we do is to wish piously that we knew where to get the money with which to do it. We all recognize that it ought to be done; we all recognize that we are in grave danger, that the existence of this country is threatened when we leave it undone. We say we have not the money, yet we have these declarations of eminent authorities to the effect that the amount of money a country can have depends only on its resources of materials and men. We could train people for military duty. The government could use such money to buy aeroplanes, tanks, armoured cars, munitions of war, anything it chose. During the last war, between 1914 and 1917, the dominion government created $26,000,000 and used it to pay off some debts of the railroads, as I recall. The creation of that $26,000,000 caused no trouble, nor would it to-day.
I come now to another matter which I think should be of interest to the Minister of Trade and Commerce (Mr. MacKinnon). I know he must be greatly worried about where we are going to sell our surplus products. People all over the country are worrying about it. That worry would be needless if the government were to exercise this power of creating money which their own governor of the Bank of Canada tells us they possess and implies

The Budget-Mr. Blackmore
that they could use! In the first place they could buy and preserve and store our surplus goods. They could buy the surplus wheat in western Canada and build storage facilities and store it therein, and entirely relieve themselves of anxiety with respect to our wheat surplus, at the same time building up a store which may be of tremendous value later on, in the vicissitudes which doubtless await us in the dark days ahead. The government could buy our surplus apples, dry them and store them; could buy our beans and peas and corn and other imperishable products. Conceivably they could even buy such perishable articles as fruits, and can them and store them.
But people say, would not that cause inflation? If Uruguay or the Argentine or Germany or England bought those goods, would we be able to spend the money in Canada? The answer is yes. Then you can spend Canadian money without causing a rise in prices. And inflation is a rise in prices. Again, the government could buy the products of our mines-zinc, copper, aluminum, any other product that it found there was need for, and could trade that for products such as oranges, which are produced outside the country. Even in countries where we cannot now sell wheat and the major products of our farms and industries, we could sell some products which we have. Thus the government could overcome the loss of markets by exercising this power of creating money by applying the principles of social credit.
I come now to another extremely important matter. There is not an hon. member of this house who is not eager to do everything he possibly can to help Britain. The hon. member for Dufferin-Simcoe (Mr. Rowe) the other night, as I recall it, suggested that we give Great Britain five million bushels of wheat. Under the system I advocate it would be possible to give Great Britain any quantity of any product that this country can produce, without its costing the people of this country one cent. The pressure upon British exchange, which to-day threatens to strangle her and is gravely impeding her war effort, could be removed by Canada. All that is necessary is that we put more people to work, use more of our resources and produce more of the required goods, using the goods and services as justification for creating the money, then buying the goods and services and giving them to any country we wish. The importance of this principle can scarcely be overestimated. But at present we are helplessly, and I might almost say inanely, wringing our hands and shrugging helpless shoulders and saying: We do not know how we can sell Britain our goods,
because we cannot buy British goods. Our ability to buy British goods has nothing whatever to do with our ability to let Britain have our goods, if we face the facts as they are.
There is another thing the government can do which will be extremely important in the winning of this war. At the present time people are suffering most painfully from small relief allowances. Inevitably prices are rising, notwithstanding the vigilant-I almost said noble-efforts of the government to prevent it. But as prices rise, relief allowances are being cut down instead of being increased. Anyone can see that a situation is being created which is going to be painful in the highest degree, a situation which we have no right to allow to exist if there is any way of avoiding it, and I say there is a way. In addition we can supplement wage rates. As prices tend to rise, men are going to become restless with their -meagre wages and will threaten to strike and perhaps will strike. There is no reason why the government cannot supplement wage rates, rendering the people better able to buy the goods we can produce so abundantly. The government can increase the pensions it now pays, both in the size of the pension and in the extent of their application. The government can increase other allowances to people throughout the country.
Once agaih I must deal with the question of whether or not this will cause inflation. What is inflation? It is a rise in price which results from having more money in circulation than there are goods in markets to buy. That is the only cause of inflation about which we need concern ourselves. The truth of what I say has been indicated by some of the quotations I have already given. To-day there is no gold behind the Canadian dollar. Has that made any difference to any one of us? Not the slightest. Then evidently it is not gold that gives our money value. What does? Well, it is largely our need for the money. Inflation results from a shortage of goods. This can be proved by reference to Germany, where the famous inflation took place. It can be proved by reference to any of the unfortunate monetary experiences which the wiseacres of finance trot out to-day in order to scare people. In every instance there was a shortage of goods. The shortage in Germany in 1921, 1922 and 1923, when inflation took place, was simply appalling; and that shortage of goods and services was the cause of the German inflation. I read a passage from Paul Einzig that applies here. Let me read another quotation, this time from page 1531 of Hansard for March 3, 1939. This was a little conversation between myself and the
The Budget-Mr. Blackmore
[Stage Direction]
former Minister of Finance, Hon.. C. A. Dunning. I made this remark:
The minute you get more money in circulation, let me repeat, than enough to do the work of distributing goods and services which are abroad in a country to be distributed, then you have inflation, and not a minute before.
Mr. Dunning: That is correct.
Now I should like to read from the latest address by Right Hon. Reginald McKenna to his shareholders.
Georges Parent: I must call the hon. gentleman's attention to the fact that his time has expired.


Some hon. MEMBERS:: Go on.


James Layton Ralston: There is no objection to the hon. gentleman's going on.


Georges Parent: By unanimous consent.


John Horne Blackmore: Thank you. I was under the impression that I had a little longer. I appreciate the indulgence of hon. members. This quotation, coming as this man's most recent pronouncement to his shareholders, I take to be epoch-making and fraught with the gravest significance to us. These are his words:
Inflation, if it comes, will be due to the growth of consumption, civil and military together, beyond our capacity to produce. The military demand must be satisfied, and in the long run, if no other means can be found to bring the total demand for goods within the limit of production, inflation, with its accompaniment of rising prices, sets in as an automatic cheek on civilian consumption.
But I have shown that in Canada, because of our tremendous productive power, it is almost impossible to get our consumption beyond our ability to produce. Consequently talk of inflation in Canada is idle in the light of existing realities and in the light of the modern conceptions of men best qualified to understand economic matters. Here is another quotation from the same speech:
But the means of restraint, if not of prevention, are at hand. The government has made a great advance in recent years in the management of monetary conditions.
With full powers at its command and wisely used, it can determine the degree, if any, of inflation that will be permitted.
When we gave the government complete control of everything the other day, I say we gave them complete power to prevent inflation, no matter how much money is in circulation in the country. Now, can Canada stand so much money? I have answered that question. Surely she can. The only question remaining is whether she can stand so much goods. The Searle index, which hon. members have heard quoted in this house many times, is made up on the basis of 147 items which

have been selected by the Searle Grain company. These are 147 items bought by the farmers in western Canada. The other day I consulted an authority in Ottawa who told me that of those 147 items only eight came from outside this country. The warehouses, stores and factories of Canada are literally bulging with the other 139. While the resources from which to manufacture more such goods are practically limitless. I think hon. members will be startled, as I was, when they learn how many woollen mills we have in Canada. I received this information just recently from the hon. member for Waterloo South (Mr. Homuth). I have the list here somewhere. According to these figures we have 214 woollen mills in this country. Who can imagine that we cannot produce all the clothing our people can use? An hon. members says we have only 3,000 sheep. Well, Mr. Speaker, budgets such as this and management of this country such as this government is exercising are preventing the people from increasing the sheep population, and we are thereby running the risk of inflation. We can easily increase our sheep population. Then we have forty-four cotton mills and sixty-five silk and rayon mills.
There are certain remedies against inflation which a government can apply. The first of these is generous production. During these last years the men who have had charge of our education have not led us to think of inflation correctly. If you increase production, you decrease the possibility of inflation, because you lower prices. Anyone can realize that. So, if we want to prevent inflation, let us generously increase our production throughout the land. We can store substantial supplies of commodities such as wheat, beef, pork, beans and other commodities, and every bit of those stores is a guarantee against inflation. We can give price discounts to bring prices down instead of up, thereby decreasing the possibility of inflation. Then, we can ration; other nations have had to do that. If we ration any commodity likely to become scarce, we shall prevent pressure from being applied on that commodity, such as sugar, or any other, the price of which may increase through scarcity.
Taxation, upon which this budget is built, does the following things which lead towards inflation: It limits and discourages production. It limits and discourages consumption. Where consumption falls off, production must fall off, because it cannot sell its product. Taxation raises prices, and directly leads to inflation. This causes labour troubles, as a result of applications for increases in wages. It impairs the vitality of the people. It centralizes purchasing power in fewer hands, so that when

The Budget-Mr. Hazen
the money is spent it is spent for more or less specialized commodities such as cars, radios, fur coats of high quality, and the like, and there is a tendency to raise the prices of those commodities. All of these induce inflation.
Taxation, therefore, tends to adverse exchange; for the higher prices rise, the less possible it is for us to sell our goods to our neighbour, and therefore the less chance we have of having a favourable trade balance. Consequently I maintain that this budget is working directly towards inflation and adverse exchange.
Borrowing, the other principle upon which the budget is based, weakens the confidence of the people, engenders anxiety, defers taxation, destroys the morale of the people, makes the soldiers fight the war and then come home and pay for it. That is one of the most monstrous injustices conceivable.
And now, as I conclude, let me say: There is too much of a tendency for Canada to look down. Let Canada look up. We shall not be poorer at the end of this war. There is no reason why we should be poorer. Our productive power is increasing on every hand; our scientific knowledge is increasing. All we lack is a sound financial system.
We are not going to be broken by this war; let us keep that in mind. In due time we shall change our present system for one which will enable us to produce as we can. We are not going to be broken in this war, I repeat and, under God, we are not going to lose. There is a way out; there must be a way out. The future for Canada is glorious. We can, under God, defend Britain, recover Europe and lead the world to a new understanding which could free that world from the causes of war. It can be done. All we need do is discover the underlying principle upon which the new and glorious order is based.


Douglas King Hazen: Mr. Speaker, I was of opinion when I first entered the house, an opinion which has been strengthened during the eventful days that have passed, that this is no time for us to indulge either in platitudes or in recriminations about the achievements or the mistakes of the government; nor is it the time for us to play party politics, but it is our duty as Canadians to unite and in our own interests do everything within our power to bring the war in which we are now engaged, and in which we have suffered great reverses, to a victorious conclusion.
It is my opinion, and I believe the opinion of most of us, that it is the duty of the government to cooperate with and to assist in every possible way the government of 95826-79
Great Britain and the government of that part of France which proposes to continue the war until the last gun is fired.
It is the duty of the government also to make plans and preparations to defend this country in the event of its being invaded.
I believe practically all members of the house, irrespective of politics, are in agreement on those two policies, and it is not my intention to discuss them in detail this afternoon.
I would say, however, that in my opinion the plans and preparations to defend Canada should be made and should be carried out with all possible speed. Those plans should be based on the possibility that this country will be invaded within three months' time. I do not say that Canada is going to be invaded in that time; I do not know, nor does any other person know what may happen. But the government should be prepared to meet every eventuality. It should set a time limit for the completion of its preparations, and should gear up industry and mobilize manpower to meet requirements so as to come within that time limit.
The government has been given what amounts practically to dictatorial powers under the mobilization measure passed a short time ago. It is now up to the government to put those powers into operation, so far as it is necessary to do so, in order to defend Canada from invasion. Responsibility for our defence rests with the government. No government in our history has had to shoulder such heavy responsibilities, and the people of the dominion look to it, not without some feelings of uneasiness, for greater effort and for more action. They want to see results. They want to see the preparations for the defence of this country completed before it is too late.
Towards the end of 1916, when the existing machinery of the then British government appeared inadequate to deal with the task ahead of it, and when Serbia was overwhelmed, Lloyd George made his famous "too late" speech. "Too late" he said, " in moving here; too late in arriving there; too late in coming to this decision; too late in starting that enterprise; too late in preparing. In this way the footsteps of the allied forces have been dogged by the mocking spectre of too late. And unless we quicken our movements damnation will fall on the sacred cause for which so much gallant blood has flowed."
The Prime Minister of Canada (Mr. Mackenzie King) may well ponder those words. They are not altogether inapplicable to what has happened in Canada in the last few months, since war was declared. Unless we quicken the movement of the machinery of government, damnation and defeat will be our lot.

The Budget-Mr. Hazen

In his budget speech the Minister of Finance (Mr. Ralston) has proposed the most drastic taxation for the current year the people of Canada have ever been called upon to bear; taxation which it is estimated will produce a revenue of $760,000,000. The additional taxes will cause a certain amount of hardship in many homes. In my opinion the increased income tax will not bear equally on all Canadians. Those in the lower brackets will have the greatest sacrifice to make. These taxes will result also in a certain amount of unemployment among certain classes of people. Just how much unemployment they will create it is of course impossible to tell. They will result also in a certain reduced purchasing power and in the lowering of our standards of living.
Most of us will have to curtail. Most of us have found it pretty hard as things have been during recent years to pay our household expenses, to educate our children, to meet the interest on the mortgages on our home, to pay excessive municipal taxes on income and real estate and to pay our insurance policies; in short, to keep our heads above water financially.
I do not wish to be understood as complaining or finding serious fault with the budget brought down by the Minister of Finance. We must make these financial sacrifices and other sacrifices which will be much greater. W e must make them with good spirit and with the knowledge, as the minister said, that every time we pay our tax we know we are dealing a smashing blow at Hitler.
Money must be raised to carry on the war, and the war must be carried on until Hitler and the evils he represents are eliminated from this earth. Victory at all costs is preferable to defeat, when all will be lost.
If the income tax is found to bear unfairly upon certain classes, that inequality can be corrected when the next war budget is brought down. I think we must face the fact that there will be further war budgets, that there will be higher taxes and that greater sacrifices will have to be made. There will be more government control and more regimentation. We must face the situation. We must realize also that the ideals of a more abundant life with higher standards of living, with more luxuries and with greater ease must be set aside. In their stead we must have new ideals of service, of work, of thrift and of sacrifice; we must face a harder, simpler and a tougher way of life.
I have referred to the importance of this government cooperating in every possible way with the governments of Great Britain and that part of France which proposes to continue

to carry on the war. I have referred also to the importance of making immediate plans and preparations to defend this country in case it is invaded. But there is one thing more that this government must do. It must provide efficient leadership in these critical times if the confidence of the people is to be maintained and victory achieved.
The people of this country look to this government for such leadership. They look to it for vigorous and courageous action; they look to it for outspoken and plain speech. It may be all very well in times of peace for a government to say that it is the servant of the people, although I always thought that was only a half truth, but in times of war the government of a country must be the leader of the people in the literal sense of the word. It must take a firm grasp on the situation and it must tell the Canadian people what they are to do and see that its orders and directions are carried out. Most of our people are only too anxious to be told what to do and how they can be of the greatest assistance in bringing this war to a successful conclusion.
In my opinion greater emphasis should be placed upon the glory of war, upon the glory and virtue of courage, upon the glory and virtue of duty, upon the glory and virtue of tenacity and upon the glory and virtue of sacrifice. To all men upon this earth death cometh sooner or later. How can they do better than to face the dangers they are called upon to face in this war in the defence of their families and in the defence of freedom, and in order to conquer brute force, tyranny and enslavement? In my opinion there should be more bands, more martial music, more parades and more flag-flying. Our soldiers should not be allowed to depart in the dark as if they were under a cloud.
In my judgment the time has come when this government should cease to be a party government. In the minds of the people a party government is associated with party politics, with political favouritism and political patronage. The carrying on of a war is not the kind of job that a party government should undertake; it is too big. If confidence is to be maintained, if the utmost effort is to be put forth, we should have a government in which all political parties are represented.
The leader of the opposition (Mr. Hanson) asked on the floor of this house that a national government be formed; but a few days ago, in reply to that request, the Prime Minister (Mr. Mackenzie King) said that a party which had 183 members out of a total membership of 245 might pretty well claim to be a national government in the truest sense of the word. He overlooked the fact

Subversive Activities
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that although the elections were held only a few months ago, since then events of the greatest importance have happened. The war situation has completely changed; the map of Europe has been almost completely changed, and we are living in a different and far more perilous time. However much I regret the decision, the decision was his, and the responsibility rests upon his shoulders.
What else did he say at that time? He said that when he took additional gentlemen into his government to strengthen it, "one of the first qualifications which I shall require of them is loyalty to myself, and not a disposition to stab the leader of the party in the breast when he is trying to serve his country to the best of his ability in a time of war". When the Prime Minister said that he did not want to take into his government any gentleman who would stab him in the breast, I know that he was speaking figuratively and that he did not want to be stabbed politically. But when he made that statement, Mr. Speaker, it seemed to me that he had uppermost in his mind political considerations, and not those considerations which are of most vital importance to Canada at this time of crisis.
This, Mr. Speaker, is a time for iron sacrifice of body, will and soul, and the people of this country, in the knowledge that we strove for _ peace and that we fight for the right, are prepared to make these sacrifices, but they look to the government for more energetic leadership and greater results.


John Ritchie MacNicol: (Davenport): Mr. Speaker, because of the defeatist propaganda being so ardently spread by the nazis, and respread in the United States, whence it rolls over the border into Canada, it is not my intention to discuss the taxation proposals of the budget, but I will confine my remarks to discussing two propositions to help Canada prosecute the war: (a) a method by which the government can find from thirty to sixty million dollars of new money for use in the production of munitions; and (b) a method of sending back to Germany propaganda in the only language they can understand-war materials, shells, bombs, tanks, guns and munitions made out of good Canadian nickelized steel.
As I cannot proceed with the discussion of either one of these propositions in the few minutes remaining before six o'clock, Mr. Speaker, I move the adjournment of the debate.
Motion agreed to and debate adjourned.
On motion of Mr. Ralston the house adjourned at 5.55 p.m. until Tuesday, July 2.
Tuesday, July 2, 1940