DEFENCE OF CANADA REGULATIONS

[Stage Direction]
Second report of special committee to consider and review the defence of Canada regulations.-Mr. Ilsley.


[Stage Direction]
Bill No. 6S, for the relief of Kathleen Irene Mae Stephens Morrissey.-Mr. Macdonald (Brantford City).
Bill No. 69, for the relief of Dorothea Frances Poyser MacDermid.-Mr. Macdonald Bill No. 70, for the relief of of Sheila Alice (Brantford City).
Dolly Young Dodge.-Mr. Factor.
Bill No. 71, for the relief of Margaret Louise MacDonald Russell.-Mr. Hill.
Bill No. 72, for the relief of Edward James Holt.-Mr. Factor.
On division.


[Stage Direction]
On the orders of the day:
Hon. H. A. BRUCE (Parkdale):: I should like to direct a question to the Minister of Justice (Mr. Lapointe) based upon an editorial prominently displayed on the front page of the weekly journal Le Jour, in its issue of June 29. Le Jour is edited by Jean Charles Harvey, probably the most widely known of French Canadian journalists and a man who is universally respected. To save time I shall give only the English translation:
Sunday evening the German radio, in a shortwave broadcast directed especially to French Canada, informed Quebec that Hitler offered it full and complete independence. We have only to rebel against Great Britain, and then we shall have our Laurentia. There will be a customs union with nazi Europe; and it was announced that our first gauleiter would be Adrien Arcand.	.
This is a damning charge against this man, and if we had blood in our veins instead of turnip juice our little fuehrer would not be facing such legal procedure as he is at the moment; he would be up before a military court.	.
Has he not time and again talked of standing so and so against a wall, when he became dictator? The writer of these lines, for one, has no illusions about the fate that would await him if the suave Adrien succeeded in a blitzkrieg here.
I should like to ask the Minister of Justice four questions, of which I have given him notice. First, has he seen the editorial minted?
95826-79}
Passports and Visas

Second, has he made inquiries with regard to the alleged broadcast and has he any information to give the house in connection therewith? Third, has he information that Adrien Arcand has made threats to shoot French-Canadian leaders loyal to the British connection if his plans to become fuehrer under the auspices of Hitler succeeded? Fourth, in view of the close connection between Arcand and the Hitler regime, as revealed by this broadcast, does the minister deem the measures taken to place Arcand under restraint to be adequate?


Right Hon. ERNEST LAPOINTE (Minister of Justice):: I am sorry my hon. friend's notice of these questions came to me only as I was coming to the chamber. I have not read the editorial, nor have I heard of this broadcast. Of course I am going to investigate, but I may say that I have heard of the threats made by the gentleman mentioned, because I was the principal person who was threatened all the time. Perhaps it may suffice to add that the internment of Arcand and the others associated with him does not mean that this is the only penalty they are *going to incur. They are interned in order that we may know that they are safely in custody, that they cannot get out on bail or because of any technicality. They are being held to await any further proceedings or prosecutions to which they may be liable -under the criminal code or any other statute, find I can assure my hon. friend that the matter is being fully considered at this time.



PASSPORTS AND VISAS


[Stage Direction]
On the orders of the day:
Mr. ANGUS MacINNIS (Vancouver East):: Mr. Speaker, I should like to direct a question to the Prime Minister (Mr. Mackenzie King). British Columbia papers arriving in Ottawa this past week-end, and letters from persons intending to visit the United States, indicate that there is fear of considerable delay in the obtaining of passports. Could the Prime Minister make a statement as to what arrangements are being made to facilitate the issuing of passports, and to obviate undue delays?


Right Hon. W. L. MACKENZIE KING (Prime Minister):: Mr. Speaker, two or three questions have been asked with respect to passports, and I have in my hand answers to most of them, including the one just asked by the hon. member for Vancouver East (Mr. Maclnnis).
On June 26 the hon. member for Kootenay "West (Mr. Esling) inquired as ito what steps
fMr. Bruce.]
might be taken to facilitate the issue of passport visas in south-eastern British Columbia. I am glad to be able to inform the hon. member that the United States authorities have decided to establish a consular representative at Trail, to facilitate the granting of visas to residents of Eastern British Columbia.
The hon. member for Yukon (Mr. Black) asked concerning the issue of passport visas to persons wishing to travel by boat from the Yukon to other parts of Canada. In reply I would say that unfortunately the situation in the Yukon is somewhat different from that prevailing in other parts of Canada. The situation has been brought to the attention of United States authorities. All I can say at the moment is that we hope a ruling may shortly be obtained which will facilitate the moving of passengers from the Yukon to British Columbia.
In reply to the question of the hon. member for Vancouver East, a question which might be extended to apply to other localities, I would say that the problem of opening additional passport offices has been very much under consideration. A branch office was opened at Windsor on June 29 under the sharge of the assistant passport officer. There is every desire to meet the convenience of the public, but it will be recalled that the final decision on the part of the United States authorities to impose passport and visa requirements was not communicated to us until a fortnight ago. It is essential, in order to avoid fraud and mistakes, that the work of issuing passports be under the supervision of an experienced staff.
It might be pointed out that with air mail, an application mailed from Vancouver, for example, to-day, will be in the passport office in Ottawa to-morrow. The question of the feasibility and desirability of establishing additional temporary branch offices has been receiving consideration, and I hope shortly to be in a position to announce a definite decision. I am afraid that to-day I cannot go farther than that.


Mr. HOMUTH:: Would it be convenient to open passport offices in each provincial capital? I suggest that because the work here is going to be tremendously heavy.


William Lyon Mackenzie King: I shall be glad to discuss that matter with the officials of the passport office.


Hon. R. B. HANSON (Leader of the Opposition):: There is a situation at the border between New Brunswick and Maine which requires immediate attention. Two thousand persons in the towns of St. Stephen and Milltown, New Brunswick, are clamouring

National Defence
for passports, and there is not even an application form in that part of the country. I had about five hundred application forms sent down by express, but even then it will be some days before those passports are issued. I have made an appeal to the passport officer and to the Prime Minister's office to send a special officer to that point. I realize it is necessary to have an experienced officer, but surely there must be some such person who could be sent down to that point, where, as I have said, two thousand persons are being held up in their daily intercourse with the neighbouring towns ' of Calais and Milltown, Maine. Action is imperative, and while I do not wish to bother the minister about it I have called the matter to the attention of his department. I hope he will have something done at that point.


William Lyon Mackenzie King: I saw the hon. member's letter, and I know the Under-Secretary of State for External Affairs is making every effort to meet the request made therein. Of course questions in connection with the issue of passports are coming to us from every side. They are reaching us from one end of the continent to the other, and it has been very difficult to get the necessary forms and general equipment in readiness as rapidly as we might have wished.



BRITISH CHILDREN


[Stage Direction]
On the orders of the day:
Mr. A. R. ADAMSON (York West):: I should like to address a question to the Minister of Justice (Mr. Lapointe): In view of his statement to the house on June 27 with regard to "Calling Canada," what if any action has been taken; or does he propose to take action, and if so under what act or regulation? I am sorry I had not an opportunity to give my right hon. friend notice of the question before the house met.


Ernest Lapointe: This inquiry comes just
after my having received a telegram signed by a lady and two gentlemen, saying:
You said that you were going to investigate "Calling Canada." Here is the number of our room at the Chateau Laurier. Please investigate.
It is not my purpose to investigate those highly estimable ladies and gentlemen. But what I said was that I would submit the advertisement in question to my officers, in order to ascertain whether it comes under some of the regulations respecting the Defence of Canada; that is all.


Richard Burpee Hanson: Be careful that you do not make martyrs of them.


Ernest Lapointe: I won't.



NATIONAL DEFENCE


[Stage Direction]
On the orders of the day:
Mr. C. E. JOHNSTON (Bow River):: Mr. Speaker, I have a question which I believe might be directed to the Minister of Munitions and Supply (Mr. Howe). I received a telegram from the vice-president of district 18, United Mine Workers of America. They say government contracts have been let for war buildings in the Calgary area in which the original specifications called for mechanical firemen for coal consumption. The contract required that mechanical firemen be installed. Since then I understand specifications for the contract have been changed, and the order now is to instal machines for gas instead of coal consumption. The United Mine Workers of America are very much concerned, and properly so, because of the effect it will have in the mining areas of Alberta, particularly around Drumheller, if the new installations require gas instead of coal. Will the minister please tell the house what has been done, and whether or not the specifications in this particular have been changed?


Hon. C. D. HOWE (Minister of Munitions and Supply):: The work in question was ordered by the Department of Munitions and Supply on the specifications of the Department of National Defence for Air, in compliance with the usual practice. I have no knowledge as to these particular specifications. In any event it seems to me that as, by either system, local products are being used, little criticism can be made. It then becomes a matter of the judgment of the Department of National Defence for Air as to which is the more efficient installation.



RATES PAYABLE BY ENLISTED MEN AND WOMEN TRAVELLING BY TRAIN

[Stage Direction]
On the orders of the day:
Hon. C. G. POWER (Minister of National Defence for Air):: On Friday last the hon.
member for Peterborough West (Mr. Fraser) asked if anything is being done "to fix special and reasonable rates for enlisted men and women travelling by train." The reply furnished by the officer of the department is as follows:
Personnel of the Canadian Active Service Force may obtain through their commanding officers special forms which will entitle them to.
Royal Canadian Air Force

obtain round trip tickets on the railways for the price of a one-way fare. Special week-end rates, when in effect, are available to soldiers as well as civilian travellers, and may be obtained upon application.



ROYAL CANADIAN AIR FORCE


Charles Gavan Power: About a week ago the hon. member for Kootenay West (Mr. Esling) asked for some information with respect to recruiting in the air force. I have here a statement explaining the procedure with respect to recruiting, and I am prepared either to read it or to ask permission that it be placed on Hansard.


Some hon. MEMBERS:: Read it.


Charles Gavan Power: Very well; I shall do so.
I should like to take this opportunity to give a brief account of the present position of recruiting for the Royal Canadian Air Force. As the house knows, the requirements of the Royal Canadian Air Force for recruits can be divided broadly into two classes. First, there are the air crews, that is, those who actually will fly either as pilots, air gunners or observers, and, second, there is the maintenance personnel, both trained and untrained, using the word "maintenance" in its broadest sense as including all those whose duties are necessary to the operation of active service squadrons or training establishments. Both of these groups require training, the extent of which depends upon the qualifications necessary to perform the task to which they will be assigned. The problem of recruiting is, therefore, in large part a training problem and the rate at which recruiting can properly proceed is conditioned by the rate at which the capacity of existing training facilities can be enlarged and extended. It is obvious that recruits ought not to be called up and withdrawn from their civil occupations until we are in a position to train them to perform their duties in accordance with the plans that have been made. It is simply not possible to call them all up at once.
Nevertheless, the house will recall that, in conformity with our determination to accelerate our training effort in every way, we determined some time ago to enlist immediately 5,000 recruits who otherwise would not have been called up until some future date. I am happy to report that these enlistments have been proceeding at the rate of about
1,000	per week-a rate which, under the circumstances, must be regarded as satisfactory. .Some idea of the amount of work involved

can be gained from the fact that since September 15 last over 115,000 men have requested and obtained information from us relative to enlistment in the Royal Canadian Air Force. This is in addition to a great many informal inquiries of which no record is kept. Of course, not all who receive papers complete them and actually offer their services, but a very large number have done so and over 26,000 have passed the medical examination and been trade tested. Of these over 13,000 officers and men have been already enlisted and, as I have said, the balance are being called up as rapidly as circumstances permit. Of the 13,000 who have not been enlisted, 1,433 have made application to be trained as crew men; 7,962 desire to be trained tradesmen, while 4,000 are unskilled. With respect to the 4,000 who are unskilled, they may at any time join any other force or unit of the expeditionary forces. However, we would like to keep on the strength those men who provide good material for air or ground crews. A reserve of 1,400 is not too large for our requirements of air crew men. As a matter of fact, it is a rather low reserve to have, considering the number of future pilots, gunners and observers who will be needed very shortly for training.
So far as the selection of individual recruits is concerned, this is determined by priority of application except to the extent that there may be a special need for those with special qualifications. In the nature of things some trades are needed in greater numbers than others and thus it often happens that of two candidates volunteering at the same time, one will be called before the other. This is sometimes rather hard for the individual to understand, but the house, I am sure, will realize why it must be so. The procedure on application for enlistment is that every applicant is interviewed personally with a view to ascertaining in a general way whether he posseses the educational and other qualifications necessary. Once this is done, the applicant is assisted in filling out an application form and advised as to how he should obtain certain necessary documents, such as proof of age and education. Arrangements are then made for the applicant to present these documents and be medically examined. Once these requirements are met there is nothing further to be done until we are in a position to take him on our strength for training and he is called up accordingly.
It must be pointed out that by submitting his application and being medically examined, a recruit in no sense commits himself or prevents himself from enlisting in some other branch of the service. Until actually called

The Budget-Mr. Hanson (
to report for duty, those who have offered their services are perfectly free to withdraw their applications,-


Richard Burpee Hanson: They do
not want to do that; they want to go into the air force.


Charles Gavan Power: I quite realize that, but the
request of the hon. member for Kootenay West (Mr. Esling), was that these men be released. I have just stated that in so far as the unskilled men are concerned, there is no objection on our part to their being released. In so far as the others are concerned, we would prefer to have them wait until we are ready to call them up. But even then we have no strings on them in any way. Until actually called to report for duty, those who have offered their services are perfectly free to withdraw their application, and in all cases in which we think it unlikely their services will be required for some time, our officers try to say so frankly in order to avoid any subsequent misunderstanding or disappointment. Nevertheless, when recruiting is proceeding so rapidly and on such a large scale, individual cases of misunderstanding and disappointment are bound to arise. I should like the house to believe that we are doing everything we can to reduce such incidents to a minimum.
One of the commonest misunderstandings has arisen because of the belief that many of those who served in the Royal Air Force in the last war could simply and easily be trained to serve again. This whole problem of the use that can be made of ex-service pilots and observers is naturally one to which we have given the most careful consideration, and I am happy to be able to say that appropriate employment in the Royal Canadian Air Force has been found for over 250 officers who saw service in the air force during the last war. Nevertheless, I am afraid we must accept the view that so far as actual service in the air is concerned, this war, like the last, is a young man's war. The spirit in many cases is as eager and willing as ever, and is one of which we all must feel proud, but, as is the case with all of us, the intervening years have weakened the flesh. Except for those exservice men who may be described as fully qualified commercial pilots-and the number of those available is, unfortunately, small-I am afraid we must find places for most of them that do not involve the physical and nervous strain incidental to flying high-powered modern aircraft under service conditions. Such places can and will be found for a great many in administrative positions, and for these positions those who served as officers in the air force during the last war are
York-Sunbury)
naturally given a preference. Here again it is not possible to take every one at once, but more openings are constantly occurring as our establishments increase in number.
I trust the foregoing information will assist the house to understand that we are trying to carry on recruiting and enlistment for the Royal Canadian Air Force as rapidly as possible and, at the same time, with the maximum of courtesy and consideration for the many individuals whose patriotic desire to help has led them to offer their services. We have recruiting centres in the principal cities throughout the country and, in addition, mobile recruiting units intended to serve those in the more remote areas. The officers in charge of these activities have been most carefully selected with an eye to their special qualifications for the arduous and exacting duties they have to perform. We are keenly aware of the special qualities our young men possess and that fit them peculiarly to serve to advantage in our air forces, and we are determined to do everything in our power to make sure that these special qualities are employed to the fullest possible extent.


Mr. DUPUIS:: Is there anything in the regulations to prevent a woman from enlisting in the Royal Canadian Air Force?


Charles Gavan Power: I should think so, yes.



THE BUDGET


[Stage Direction]
The house resumed from Friday, June 28, 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, and the amendment thereto of Mr. Coldwell.
Richard Burpee Hanson: Mr. Speaker, I am greatly indebted to my colleague, the hon. member for Davenport (Mr. MacNicol), for having given way to me this afternoon. I know he had, as always, a most distinguished contribution to make to this debate, and I trust that an opportunity will be given him at a later stage in these proceedings to deliver the message which he had for us this afternoon. Again I desire to thank him for his courtesy.
When I heard the Minister of Finance (Mr. Ralston) deliver his annual budget statement on June 24 I confess that I did so with very .mixed feelings. I realized then, as I do now, and as I am sure we all do, that this country is really at war. I have from the very beginning of this titanic struggle realized and visualized a war of long duration. I do not
!248	COMMONS
The Budget-Mr. Hanson (York-Sunbury)
claim any superior vision, neither have I any special information, but having read all the relevant material on the subject which I could obtain, and having pondered deeply the whole position, especially since the failure of Munich, I came to the conclusion that this war, like the great war of 1914-18, would be of long duration, and that as a result a longterm point of view with reference to finance was the proper one to take.
In addition I have always held the opinion that Canada, as an integral part of the British empire, as one of the allies and a de jure as well as a de facto belligerent, should mobilize and use her man-power and her material resources in such a way as to give the maximum of effort to the allied cause. In holding this opinion I believe I am in accord with the views of all true loyal British subjects in this dominion, and in that regard I find my views also in accord with those which the minister expressed in his budget statement of the 24th of June.
I am aware, of course, that there are those in this country who do not share these views in their entirety. I am, however, inclined to think that those holding views at variance with my own in this regard have materially altered their own point of view, and this has been brought about by the force and trend of events as they have developed during the past six or seven weeks.
In one respect only do we differ in any substantial degree, and that is with respect to the method of marshalling our man-power for service overseas. Here again the trend of events has intervened and in a degree altered our position. It may well be that because of the cessation of fighting in the continental theatre of war, man-power overseas is not so pressing a problem as at first appeared. But because it may not be so yet, I suggest that our duty to assist with mechanical equipment such as planes, tanks and guns, with munitions and with foodstuffs and material supplies, is all the more pressing. In other words we should be utilizing our every resource to assist the mother country with all those material things of which she is in such dire need at the present critical juncture.
There is, too, the problem of the defence of Canada. On the 21st of June this parliament passed the National Resources Mobilization Act, which in addition to the legislation already on the statute books gives to the government of this country the most dictatorial powers ever conferred by this parliament on any executive, so that there is no longer any excuse on the part of the government for refusal or neglect to do anything and everything humanly possible to defend

this country and to bring the maximum of support and assistance to the mother country. Apart from the question of national leadership, the only consideration remaining to round out the whole orbit of defence and assistance lies in the realm of finance.
It is axiomatic to say that the right arm of a nation in time of war is its man-power and the necessary and essential equipment thereof for war purposes.
It follows without doubt that the next most important element in marshalling the fighting strength of the country for any and every purpose is finance. Our problem at this time is to marshal our financial resources in the wisest and best manner possible so as to achieve the maximum of results, and if possible at the same time preserve our corporate existence, so that after the struggle is over and after victory has crowned our efforts we may proceed not only to bind up the wounds of the nation but also to rebuild what may be a shattered structure.
This problem cannot be achieved in one budget, but the government, and especially the Minister of Finance, should have as long a vision as possible and chart out a course for the nation, looking not only to the immediate necessities for the day and hour but also to the time when we shall, if we continue to exist as a nation, have to prepare for the future or after-war period.
I quite agree with the minister that we must pay for the present peril. It will not matter much what becomes of our national wealth if we lose this war, but I do suggest that we do not approach in any defeatist spirit the consideration of the financial problems now confronting us. Rather should we approach their consideration on the theory that we shall win this war, as we must, and I shall discuss the problem in that spirit and with the hope that I may make some contribution of a constructive character. One thing is certain-the Canadian people will not withhold from the government the money necessary to win this war.
There may be differences of opinion, honest differences, as to how the money shall be raised, but I am as certain as I ever was of anything in my whole life that the Canadian people will give of their treasure as gladly and as wholeheartedly as our gallant fellow-citizens gave their lives in the last great struggle and as I believe the present generation are prepared to give theirs for the defence of their loved ones, their homes, their country, this Canada of ours, and the motherland in this struggle.
I was not privileged to be a member of this house in September last when the Minister of

The Budget-Mr. Hanson (York-Sunbury)
National Revenue (Mr. Usley) at that time delivered his financial proposals, but I read and have re-read his statement with great care. In that speech he indicated that the government proposed:
1. A policy of pay-as-you-go, as far as possible and practicable;
2. A policy of borrowing, preferably on short-term obligations.
3.	Inflation was definitely taboo.
Generally speaking, I am in agreement with
the principles enunciated. I am perhaps not so pronounced in my views against inflation as I -was some years ago. I believe that a reasonably limited amount of inflation will, cn a given occasion, help to start the wheels of industry and the interchange of currency. That may sound like heterodoxy to some of my sound-money and more orthodox friends, but the difficulty is to know what is a reasonable limitation. If such a limitation is exceeded, the result may be disastrous. One immediate result of unlimited inflation is a rise in prices. This occurs always before a rise in wages, and as prices increase, wages lag behind. A vicious circle is established and sooner or later deflation, even collapse, may come.
So that I am not chiding the minister for not having utilized a limited degree of inflation. Its exclusion, however, leaves us, according to the tenets of the minister, only two sources from which we may obtain the necessary funds to carry on our war effort, namely, taxation and borrowing. And these are the two methods which the minister has invoked. Let us examine the government's proposals.
It seems to me that with respect to the taxation proposals the minister has proceeded for the most part, and speaking generally, upon lines which heretofore have been generally accepted and have proved useful for the purpose to be accomplished. There is no new radical departure from accepted principles of taxation, with some certain rather unimportant exceptions. This shows caution, and from that standpoint is to be commended. Generally speaking, it seems to me that our taxation proposals at this time should be based upon two principles: (1) Ability to pay; and (2) equality of sacrifice.
Let us deal first with ability to pay. The minister for the most part has utilized this principle as far as is practicable. His whole hypothesis as to quantum appears to me to be based upon the theory that the national income for the calendar year 1939 approximated $3,800,000,000 and for the fiscal year 1940-41 will approximate S4,500,000,000.	I
do not know upon what scientific and mathematical data the minister bases his calculation, but I very gravely doubt whether the national income in 1939 approached $3,800,000,000, and if I am correct in that doubt, then I feel very certain that our national income for 1940-41 will fall far short of $4,500,000,000.
I say this for various reasons. While Canada is in a substantial degree an industrial country, and many of us have been striving for years to increase her industrial activities and thus increase the size of her payroll, yet primarily Canada is an agricultural country, and the sum total of the value of her agricultural products exceeds in sum total the value of her mining, fishing and industrial production. It that be so, and with a very large wheat carryover and a large wheat crop in immediate prospect, and no market in sight beyond the domestic requirements of Canada and those of Britain, it would appear, to me at all events, that any large immediate cash return such as could be justifiably included in the category of national income is rather remote, and a substantial allowance on that account will have to be made from this estimate of $4,500,000,000 of national income.
While this wheat situation is the largest of the marketing problems, it is by no means the only one. What about bacon? I understand that a substantial surplus is being piled up each week and that after October first the surplus will grow to enormous proportions. It has even been suggested to me that the price of hogs will fall as low as five cents. I do not wish to be considered an alarmist, but I do at all events believe in being realistic, and I have been obliged all my life to face facts as they are, not as I would wish them to be. This bacon situation sits very securely on the government's own doorstep. The much-vaunted Canada-United States trade agreement and the operations under it on the part of certain importers are directly responsible for the situation now confronting the Canadian hog producer. He is bound to lose money, and next year unless conditions are remedied he will not produce this commodity.
Then there is the apple crop, the situation in regard to which is well known. Just recently we have been told that we cannot find a market for our canned salmon and our canned lobsters. And what about the New Brunswick potato crop! There is a market for seed potatoes in Cuba, but just at present that market is more or less cornered by the activities of the minister of lands and mines of New Brunswick, who, by some means unknown to me, apparently has obtained control of that market for himself. There is opportunity, however, for the government to do something in regard to this matter in Cuba, in Central
1250	COMMONS
The Budget-Mr. Hanson (York-Sunbury)
America, and in South America, and I urge the Minister of Trade and Commerce (Mr. MacKinnon) to get busy at once with respect to this matter.
All these considerations lead me to conclude that the national income will not approach the figure named by the minister, notwithstanding huge government spending on war effort. That, I submit, is not true national income. It is rather the reverse, and I shall have something to say about it later on. My own view is that it will not exceed four billions, and if so the results from the new taxation proposals will not yield as much in new money for the treasury as the minister anticipates, and we shall not be able to implement the pledge of "pay as you go" to the degree indicated.
I should like to point out to the house and the country certain things with respect to the national income and its effect on the standard of living in Canada. Assuming that our national income is $3,800,000,000 and will go to $4,000,000,000 in 1941, and assuming that the total dominion outlay, including both peace and war expenditures, amounts to $1,200,000,000, provincial and municipal expenditure aggregate about $600,000,000, and we have therefore a great spending programme of $1,800,000,000. Now, on the basis of $4,000,000,000 national income this is 45 per cent of the total national income being spent for public purposes. This leaves us just $2,200,000,000 or about $200 per capita for every man, woman and child in Canada with which to buy food, clothing and household goods, to pay rent, medical and similar services and all the other things human beings require. I suggest to the house and the minister that this represents a very low standard of living. It cannot be helped by further soaking the rich, or by any other unorthodox finance. The only way it can be helped is for the government to cut down its ordinary expenditure and by provincial governments and municipalities all determining to take less money from the taxpayers. This must be done. Raising the national income by governmental expenditure will help, but it will be a long time before it seeps through to business and comes back in some degree in the form of taxation. The only fertile field for immediate income is to be found in the provincial arena and in the municipalities. Certainly there must be no increase in the levy by either authority.
As I view it, there are two difficulties in the government's position. One is that the budget is based, as the government's financial policy has been based for some years, on the assumption that the volume of business can be stimulated by government expenditures and

that this can be very largely covered by the resulting increased taxation. The other difficulty I have already alluded to, namely, the government has not yet by any means been active in reducing non-wrar expenditure.
With respect to the government's first difficulty based on its past financial policy, having regard to its own failure to undertake large war expenditures at an earlier date, it now finds itself faced with the necessity of undertaking a programme of this character just prior to bringing down the budget. The result has been that the budget announcement will have a very serious effect on ordinary business before the stimulating effect of war expenditures is felt, but even their accepted theory of public expenditures to "prime the pump" requires that the expenditures should be made first and the resulting increase of possible taxation obtained later. For all effective purposes, the government has undertaken to obtain the taxation first and make the stimulating expenditures later, but I suggest that it will take months for war expenditures to filter down through the business structure, while the heavy taxation announced in the budget has led a great proportion of the population to take immediate steps for reducing expenditures. This is the only opportunity left to this government to do anything at all effective to relieve the situation. It occurs to me that even political expediency should dictate a revision of policy in this respect. Many new thousands of direct taxpayers created by the budget, as well as all those older taxpayers to whom their income tax was not a matter of vital importance, are now thoroughly alive to the fact, long concealed from or ignored by them, that the people pay for governmental expenditures.
Let me reaffirm that the people will not object to paying for the war, but every one of them who sees a single case of an unnecessary employee, or a wasteful expenditure for non-war purposes, or even an expenditure which could be postponed, is certain to feel vigorous resentment. At the moment I have in mind the failure of the government to halt the work on the Montreal terminal. It did halt construction work on certain public buildings, such as new postal stations in Quebec and Toronto, the supreme court building in Ottawa, and others of a similar kind, but the Montreal terminal seems to be sacrosanct. It will cost this country $12,000,000 in war time and it may even run to $15,000,000, money which can ill be afforded at this time. To me its continuation at this time is a shocking thing.

The Budget

Mr. Hanson (York-Sunbury)
There are four good features in this budget:
1.	Pay as you go, so far as possible.
2.	Restrictions upon civilian buying, as indicated by the huge taxes on luxury motor cars.
3.	Diversion of dollars away from the United States.
4.	Avoidance of inflation.
These principles incorporated in the budget indicate, to me at all events, that the minister in these aspects has been soundly advised by the two very able men associated with him. But to say that this budget represents national sacrifice, or that there is equality of sacrifice, I suggest to him is far from the truth. There is not one single new tax which is designed to bear, however lightly, on the entire population. There is nothing comparable to the match tax imposed during the last war-we have returned to that position, of course-or to the sugar tax, which was imposed as a revenue measure but designed to be a national sacrifice paid by everyone in .a time of extreme economic warfare. Per contra, there are no nuisance taxes, for which I think we should all be grateful. However, national sacrifice, as I interpret the term, means sacrifice by all the people of the nation according to their respective abilities to make and sustain sacrifices. In fact all the national sacrifice that is made under this budget is concentrated upon a mere handful of the population, not on the whole population, as it should be.
What is the position? According to a chart prepared and published in the "National Revenue Review" for May, 1940, under the caption "Income Tax and Those Who Pay It," there were for the period 1938-39 individual taxpayers totalling 264,804 who paid a total of 846,937,205. I have tabulated the different classes, as follows:
			Number	Total
Income	paying	paidUnder \	12,000	
119,346	$1,269,724$ 2,000	to	$ 3,000	
63,572	1,324,663$ 3,000	to	$ 4,000	
34,392	1,462,000S 4,000	to	$ 5,000	
15,902	1,296,625$ 5,000	to	$ 6,000	
8,627	1.234,400$ 6,000	to	$ 7,000. .. .	
5,563	1.260,057$ 7,000	to	$ 8.000	
3,674	1,144,597$ 8.000	to	$ 9,000	
2.612	1,107,188$ 9,000	to	$10.000	. . . . 1,986	1.059,919$10,000	to	$15,000	
4,687	4,247,516$15,000	to	$20.000	. .. . 1,775	3.210,835$20,000	to	$25.000	
816	2,551,849$25,000	to	$30.000	
469	2.132,006$30,000	to	$35,000	
353	2,156.943$35,000	to	$40.000	
234	1.732,270$40,000	to	$45,000	
182	1,656.133$45,000	to	$50,000	.... 157	1,662,512
Those in receipt of taxable income of over '$50,000 numbered only 457, or -17 of one per cent of the total number of taxpayers, but contributed $17,289,365, an average of $37,882 each, or 36-17 per cent of the total collected.
On the other hand those in the class under $2,000 represent 45 per cent of the total taxpayers, and they contributed 2-66 per cent of the total amount paid by individuals. I am sorry to have wearied the house with these figures, but I think they ought to be put on record for the purpose of comparison with what these people will pay under this budget. Now under this budget all the sacrificial taxation is being concentrated upon a handful of people in the lower middle bracket. A total of about 22,000 individual taxpayers in the brackets between $6,000 and $50,000 are being asked to contribute next year a total of over $50,000,000 in addition to the sum of $22,254,000 or thereabouts which they are now paying. And this takes no account of their contributions under the national defence tax, which of course will be substantial. Thus these
22,000	odd taxpayers will pay nearly four times what they are now paying. Is there anywhere else in this budget any sacrifice comparable with the tax imposed upon this comparatively small element in our population?
These people will pay; make no mistake about that. They will of course have to adjust themselves to new conditions of life to meet these new burdens laid upon them, while the great mass of the people will be able to pursue their normal manner of living with little or no interruption. These people are not complaining, and I am not complaining on their behalf; I am just pointing out what I believe to be the true position.
I suggest further to the minister that this budget falls hardest upon those already hardest hit by the war. With respect to those who are actually benefiting in their standard of living from the war and war expenditures, the budget makes little demand, except through the corporation tax. I would have wished that the government had placed some imposts which would have had a psychological effect upon our people, making them realize more and more that Canada is at war. That is what I meant when on June 17 and again the next day I asked the Prime Minister to declare a state of national emergency in Canada. A sacrificial tax, which would affect even the humblest in Canada, would have had a tremendous effect in awakening our people. Others realize the necessity for such an awakening. Only two Sundays ago a great ecclesiastical personage in Canada sent out a letter to be read in all the churches under his charge, and it opened with these pregnant words:
At long last Canadians have been awakened to the imminent dangers which threaten our own country no less than Great Britain.
That is the sort of thing I mean.
1252	COMMONS
The Budget-Mr. Hanson (York-Sunbury)
It is not my specific duty to suggest detailed measures. Rather should I indicate principles which I think should be followed; but I cannot refrain from inquiring why some additional impost was not placed on spirituous liquors. It was done under the last budget in England. If I were consulting my own views and principles alone-and I advance this suggestion with a feeling of temerity-I would do away with the sale and consumption of spirituous liquors for the duration of the war as a purely economic measure. The drink bill of this country is enormous, at least $200,000,000 per annum, if not more. I realize, however, that this may not be feasible, for reasons upon which I shall not enlarge.
Why was not a tax of say one cent a gallon placed on all gasoline sold in Canada? They have such a federal tax in the United States, and, mark you, that tax was imposed in addition to, not in substitution for, a similar state tax theretofore imposed in every state of the union, and as a peace-time measure. I suggest to the minister that such a tax was fully expected in this country. Why should there not have been a further elimination of exemptions under the sales tax, in order to raise more money? When I was at home over the weekend a wholesale grocer called me up and expressed great surprise that there had not been some further elimination of these exemptions. I asked what he had in mind and he mentioned condensed milk, on which not a cent of sales tax is collected, and of which huge quantities are sold in this country. I know the answer will be that this would come out of the farmers, but I do not believe it would. I believe the consumer would pay it just as he pays the tax in every other instance.
I now desire to refer briefly to the excess profits tax, which I think will prove to be an important revenue producer. I think the minister has acted wisely in eliminating option A as provided for in last year's act. At best that was merely a skeleton act. I made some examination of it for a client last October and in fact came to Ottawa for the purpose of interviewing the authorities and obtaining a clarification of certain points in relation thereto. To my surprise I was informed that study subsequent to the enactment had convinced the officers that the tax was inequitable and indeed unworkable, and I came away with the distinct impression that a wholly new act would be evolved this session. It was a classic example of hasty, ill-digested legislation. In effect the minister admitted this in his statement. He said one main feature which appeared to be undesirable was the right of the taxpayer to choose between two IMr. R. B. Hanson.]
options; that it had been found that many old firms would pay little or no tax while new firms in business since the war, or those operating in a depressed industry, or undergoing rapid expansion, would be subject to unwarranted discrimination. I agree with that analysis of the situation. Therefore, I understand, a new measure is to be submitted _ It is agreed that it will be much more drastic-I understand that after I left the house on Friday afternoon my friends to the left moved an amendment expressing want of confidence-in the government because this tax had not been made one hundred per cent. I had not intended to deal with that aspect of the matter; no doubt the minister will reply to that. But I should like to point out to the house and to the country that the situation here is not nearly comparable with the situation in the United Kingdom, because in England they have no corporation income tax; and a large sum of money will be paid under this tax, yoked up with the corporation income tax.
While we accept the principle of conscription of wealth in war time, it must be kept in mind that in times of peace excessive income and profit taxes and excessive succession duty on estates may work great injury to the state; that is if we are to maintain the capitalist system. It is no crime to accumulate a moderate degree of wealth. The accumulation of a large amount of wealth in Canada at least is exceptional, and in no sense proves the rule. I venture to suggest that most of us sitting in this house have striven as hard as we could to accumulate capital; and I venture further to say that most of the accumulated capital in this country has been attained by the exercise of the old-fashioned virtue of thrift, a virtue which all too many people have ceased to practise. Do not, then, in peace time penalize too severely those who practise this virtue. In war time it affords a reservoir from which the government may and will under this budget draw huge sums of money for the country's war effort. In peace time thrifty savings must be put back into business, which in turn will employ labour, utilize materials and supplies and employ more of our people. If not invested directly in industry it must be invested in securities, which largely represent industry.
I had not intended to go into the various ramifications of the new measure, but it is an intricate matter and one which I think hon. members should endeavour to understand, as I should like to understand it myself; therefore I think some reference should be made to the details. Like the September act, which has now passed into

The Budget-Mr. Hanson ( York-Sunbury)
oblivion, the new act takes a base period as a starting point, and this base period is the average of the net profits before deducting regular income tax-am I right there?-for company years ending in the years 1936, 1937, 1938 and 1939. All profits in excess of this four year average are subject to the new excess profits tax.
Taxable income is to be determined under the provisions of the Income War Tax Act. Deduction of the regular rate of corporation income tax, 18 per cent for unconsolidated returns and 20 per cent for consolidated returns, is permitted before calculating the annual tax under the excess profits tax. The amount by which the current year's taxable income, before regular income taxes, exceeds the four year average income tax is subject to excess profits tax at the new rate of 75 cents. I hope I have correctly stated the effect of the proposals.
There is another provision in this new tax bill, however, which in effect makes the minimum corporation income tax rate 30 per cent for unconsolidated returns or 32 per cent for consolidated returns. Under the new income tax act a minimum of 12 per cent is payable, in addition to the regular 18 per cent or 20 per cent rate, in cases where this amount would be larger than the excess profits tax computed at 75 per cent, and the amount by which the year's profits exceed those of the base period. That, of course, is a very heavy impost, as the minister knows better than I do.
No alteration is made in the provision whereby ten per cent of the cost of capital expenditure computed in the year 1940 may be amortized against taxable income over a period of three years, and I congratulate the minister on having left this concession in the law. I note, too, that the excess profits tax will not apply on income received by Canadian companies from subsidiaries or other investments in Canada. This, of course, guards against duplication. I am wondering if it is clear that this provision applies in respect [DOT]of income received by a Canadian company operating a subsidiary in the United States, or does it only apply to subsidiaries in Canada? I am hopeful that the minister will give some consideration to that point, and make it clear.
I am curious as to the reference to a board of referees, which the minister suggested would be appointed, and for which the resolution provides to assist in carrying out the provisions of the proposed measure "fairly and realistically," as he stated. Just what are to be the real functions of this board? Is it to be a court of appeal? If so,
then great care should be exercised in the selection of the personnel. Above all, political consideration must be strictly taboo, and only men of the highest integrity and judicial ability should even be considered. I warn the minister that his selection will be watched with great anxiety, because an arbitrary board could easily make or break any concern coming under its jurisdiction.
Then, in respect to gold mining: The minister made more than a gesture to the gold mining and oil producing industries. It is, of course, wholly desirable that any new ventures should be encouraged, but I would not think it desirable or in the public interest that proven ventures should be given special consideration. I have in mind the type of man who makes a lucky strike, and then because he is being taxed pretty heavily leaves the country. They must, without question, be treated liberally with respect to depletion and depreciation. It is being borne in mind, too, that our gold production is a most important item in our exports and helps mightily to maintain our trade position, and also our exchange position, but it must also be borne in mind that gold as a commodity for sale and export has come into its own to a greater degree than any other Canadian commodity. There is a tremendous unearned increment there, and this industry must, and I have no doubt will, bear its just share of the national burden, especially in war time. The difficulty has been, and I presume now is, to arrive at a wise and just conclusion as to the incidence of the taxes to be imposed. I know some of the difficulties of the past. I know, too, that every ounce of gold taken is just that much exhaustion of our estate, but providence has been reasonably kind to Canada in this regard, and we are indeed fortunate in having this huge reservoir upon which to draw in this hour of peril.
Then, with respect to the national defence tax. in theory this tax is a supplement to the graduated income tax. It will bring in an army of new taxpayers and to that extent it is all to the good, because I have found that any one who has to pay a particular tax for the first time becomes interested in the application of the tax moneys. This new war tax will help to impress upon the new taxpayer that he is in this war. The results from the tax, S20.000.000, for the balance of this fiscal year, and $35,000,000 estimated for 1941, are substantial and will be a welcome addition to our war effort.
While this is all true, yet may I remind the country that this sacrificial taxation is in a degree coming from the same source as that from which the increased income taxes
1254	COMMONS
The Budget-Mr. Hanson (York-Sunbury)
are coming-in this case salaried or the wageearning classes, many of whom will be already found in the lowest income brackets. These will be obliged to pay both taxes. I am not objecting. I now desire to call attention to the situation with respect to the method of collection-at the source. I agree that the minister has taken the most practicable course; any other procedure would have resulted in great expense to the treasury and there would have been some loss. At the same time this has shown that he appreciates the fact that this tax will add another burden to executives and business generally. To offset this he proposes to make provision toward reimbursing employers for expenses so incurred.
So far, so good; but may I be permitted to make a suggestion to the minister. For years I have heard complaints-sometimes bitter complaints-that business enterprises have to make altogether too many returns to governmental departments. All this costs time and money and is frequently a source of irritation. Some people, you know, thrive on statistics. Is it not possible that with this new duty cast upon the accounting departments of firms and corporations some attempt can be made to reduce the volume of statistics and returns which they are now obliged to make? I know that statistics are important, but they never fed any one, and we are apt to allow bureaucrats to demand much more than is requisite and necessary. Some amelioration in this regard may be reasonably expected in war time.
I think, Mr. Speaker, I should make some reference to the new war exchange tax. Its primary importance is to conserve exchange. I have no means of judging as to whether it will be a revenue producer or not. I am prepared to accept the minister's estimate of $65,000,000 in the first full year, of which $50,000,000 will be collected in the present fiscal year. It does not apply to empire countries and will be subject to drawback for export, as in the case of customs duties. Cases of hardship will arise because of its imposition. I hope the minister has given full consideration to this aspect, and that he will see, if he has the necessary power, that such injustices as may arise and be properly established are corrected. Here again great care will have to be exercised.
I have in mind persons, firms, or corporations which sell United States made heavy goods, such as caterpillar tractors or other such equipment, of a class or kind not made in Canada, ordered for contractors having contracts with this government for the clearing of airport sites under a firm contract on a laid down duty paid price in the maritime provinces. It is quite clear from the
fMr. R. B. Hanson.]
new section 88-A (1) of the Special War Revenue Act, read in conjunction with section 13 of the resolution, that all such goods must pay this extra tax and that it will apply on all goods imported or taken out of warehouse for consumption on or after June 25, 1940, and on all goods previously imported for which no entry for consumption was made before that day.
Now, the case I want to put to the minister is this:	What about goods in transit,
ordered in good faith, on a firm contract on a duty free basis laid down in Canada prior to the budget? It seems to me that some consideration at least should be given to importers who find themselves in this position. These machines cost a lot of money, they are usually sold at a laid down price at the point where the contractor takes delivery, that is to say, duty paid in Canada. Are these dealers to be penalized?


Mr. RALSTON:: Is my hon. friend referring to the same class of article?


Richard Burpee Hanson: Yes. I
suggest the minister give very serious and sympathetic consideration to their position. But I am bound to say that balancing the disadvantages that may arise against the advantages which will accrue in respect to conservation of exchange, I am of opinion that the tax is justified. In fact, I would have gone somewhat farther.
In order to conserve our exchange position, that is, if it is deemed desirable and in the public interest to preserve the pegged rate at its present position, and having regard to the large adverse balance of trade which is steadliy mounting against us in respect to non-empire countries, principally the United States, we must either restrict our imports or impose new imposts as suggested. I would think that consideration might be given to taking even more drastic action looking toward the total exclusion of certain luxury imports, that is if our hands are free to do so. It is one of the things they have had to do in England and we might well follow their example. We could save a lot of exchange if such a course were adopted, and at the same time do no violence to a decent standard of living. I commend this suggestion to the minister. He has, however, elected to adopt a middle course, I assume on the theory of revenue requirements.
But while he has done that, do not imagine that this tax will not operate as an additional protective duty. It is bound to have that effect no matter what the minister may say as to measures which he may take under the war-time prices and trade board. Increased prices will follow because, under the theory

The Budget-Mr. Hanson (York-Sunbury)
of a protective tariff, the consumer in the final analysis pays the duty. All the minister can do is to see that there is no unjustified increase in prices. I commend this matter to the attention of my free trade friends in this house, if there are any left after following this government for five years.
I am in agreement with the principle of taxing high-priced motor cars. With respect to these luxury taxes on automobiles there is a proviso which will be found on page 8 of the ways and means resolutions to the effect that if a new and unused automobile is in the hands of a dealer on June 25 and not delivered to another purchaser, the tax shall be paid by such dealer when such automobile is delivered. This means that any new and unsold car in the hands of a dealer must bear these increased taxes. I suggest that that is neither fair nor equitable, and that the tax contemplated by this proviso should not be imposed. I have no special information, but I feel certain that as the public anticipated this new taxation on automobiles the situation has been discounted largely and that not many new cars were in the hands of dealers when the budget speech was delivered. The loss of revenue which would be sustained if this item were dropped would not be large.
May I remind the minister that years ago when Sir Henry Drayton was minister of finance a similar tax was placed on automobiles left in the hands of dealers when the budget of that time was introduced. The tax collected amounted to several hundred thousand dollars, and after the change of government in 1021 a campaign was carried on here in Ottawa and a lobby established in this house, as vigorous and intense as any I have ever known, with the result that years afterwards the government of the day, then led by the present Prime Minister, succumbed to the importunities of an organization here in Ottawa and rebated the tax with interest. I suggest to the minister that he does not, even in war time, want to get into a similar position. If he does, I have no doubt that no matter what the political stripe of the administration may be, the result will be a repetition of the experience we had years ago when the government of the day succumbed to the importunities of a powerful lobby.
Finally, there is a matter to which I desire to draw the attention of the house and the country; I refer to retrenchment in the ordinary public services of the country as distinguished from war services. I have already expressed the view on more than one occasion during this session that with this country at war the Canadian people will gladly yield all
the money the government may require to defend Canada successfully and to aid our mother country. Of that there is no doubt. The measure of their contribution will be the measure of their ability to pay. They will even expect wasteful expenditure-all war is wasteful-but they will frown upon any and every expenditure not absolutely necessary in the ordinary operations of the country. The estimates before the house indicate that the government has made a substantial move in that direction. In the September 1939 budget, total expenditures aggregated approximately $651 million, not including two items of capitalized defence expenditures and further losses of $27 million on wheat. The total expenditures for last year are now estimated at $681 million. I would assume that with the close of the fiscal year now three months past this figure is reasonably correct. This figure is broken down in the minister's statement. It should be noted that due to increased taxation during the year the revenues were $46 million greater, but we had an actual deficit of $118 million and our net debt rose accordingly. This was without reference to war expenditures.
For 1940-41 the estimated expenditure is $448 million as compared with $525 million estimated for the past fiscal year, an apparent reduction of $77 million. But I am afraid that this is not a true picture. The saving is more apparent than real. Because of war activity a certain amount of expenditure, which in peace time would be charged to ordinary expenditures, is now being paid out of war appropriations. In his press interview in May last, when bringing down the estimates for 1940-41, the minister did not even pretend that the entire $77 million would be net saving. This was because of the necessity of switching certain peace-time services and administrative charges to war account, both in personnel and services; but the minister did make it clear that there would be a holiday in ordinary public works. That is to date the most important indication of the government's intention to save something in the ordinary expenditure.
The minister indicated that the expenditures under the main estimates last year amounted roughly to $400 million. Of this $260 million represented what was regarded as absolutely uncontrollable expenditure. By that is meant war pensions, old age pensions, subsidies to the provinces, interest and what I would term statutory obligations. This left only $140 million, out of which savings might be made, and of this amount $80 million was for salaries and wages, leaving $60 million covered by the main estimates which might be subjected to reductions. Then the minister stated
1256	COMMONS
The Budget

Mr. Hanson (York-Sunbury)
in effect that nothing could be saved out of the $80 million reserved for salaries and wages, apart from discharging government employees. I am not recommending wholesale dismissal of salaried government employees. There have been dismissals of wage earners and temporary employees, but I would recommend limited reductions in personnel without the public service being imperilled. What I do earnestly recommend, however, is that when vacancies occur by death, resignation and superannuation, such vacancies be not filled unless it is absolutely imperative in the public interest. This can and should be done, and all and sundry should be given notice to govern themselves accordingly. It has been done before. It was done between 1930 and 1935 when literally thousands of positions were left vacant with a resulting saving of hundreds of thousands of dollars. It can be done again, and it should be done again.
Furthermore, the minister should see to it that no new personnel is taken on. The other night I referred to the position of Mr. Brockington, the very talented lawyer who was brought down here recently from Winnipeg under an arrangement by which, as I am informed, he was to become the historian of Canada's war effort. He was to be paid $9,000 annual salary and $12 per day living allowance. Now it would no doubt be a splendid thing to have Canada's war effort recorded from day to day provided it was done impartially, truthfully and accurately. But history is not usually written up from day to day. It is recorded in the immortal pages of time; a true history is never written until time has rendered a true perspective. This expenditure is wholly unnecessary at this time, especially at the expense of a tax-ridden people.	I believe that Mr. Brockington's services are not being utilized in any degree for the purpose indicated, and I hear he is most unhappy about it. Be that as it may, I allege that the creation of the position was unnecessary and at this time is a waste of public money. Furthermore, Mr. Brockington's brilliant and talented services are being utilized in writing propaganda purely and solely to bolster up the shattered prestige of this government. I do not say he is the Prime Minister's ghost writer, but his services approach that description, and I do protest against this type of wasteful public expenditure.
I could refer to instances of the creation of jobs to take care of defeated candidates.
I protest against this sort of thing. Let us have an end of it. I mention no names, but ;he names are well known.


Mr. MARTIN:: They are not all Liberals.
! Mr. It. B. Hanson.]


Richard Burpee Hanson: That does not help it any. It is the principle I am contending for, and the hon. gentleman should sustain me. In fact, the action of the government in this regard seems to be naked and unashamed. If the government will not stop this sort of thing, a rapidly awakened public opinion will make itself heard.
The minister closed his lengthy remarks by paying a well-deserved tribute to the Canadian people. I have already done so on more than one occasion. I know, as he knows, the stock from which they sprang. Comprising in the main the offspring of two great races, cognizant of the gravity of the occasion, they will rise to the challenge and, like our kindred in Britain, they will give their blood, their treasure, their all; but they will impose this condition, that this government give the highest type of leadership, and if this government will not give the necessary and vital leadership required, then the people of Canada will demand a new government, a really national government.
In conclusion, Mr. Speaker, I desire to make this statement. In ordinary peace times this debate would go on perhaps for weeks. But these are not peace times. The Minister of Finance has become, if he has not already taken over the duties of the office, the Minister of National Defence, and I have asked myself this question: Why should the Minister of Finance, who is to become the Minister of National Defence, be compelled to stay in this chamber and listen to a large number of speeches, some of them relevant and some of them irrelevant? And so, Mr. Speaker, to expedite the business of the country, to expedite particularly our war effort, to expedite the minister's plans with respect to the defence of Canada and especially of our Atlantic shore line, I suggest to the house, I suggest to the government and their followers, and I make a special appeal to my friends in the far corner, that we let this budget pass and release the minister to administer his new office of Minister of National Defence. Let the new Minister of Finance, whoever he is to be, or the very competent, shall I say, Minister of National Revenue (Mr. Ilsley) pilot the financial resolutions through committee and let us get along with the war. I am prepared to help him, but I want to make just one proviso, and that is that when we are in committee on the resolutions hon. members who have prepared speeches and who want to make themselves heard or who want through this medium to talk to their constituents, should be given the opportunity and very wide

The Budget-Mr. Abbott
latitude to make their statements in the committee. I make this offer, I make this appeal in the interests of Canada's war effort, which I am prepared to back up and help support with all the power at my command. Whatever little ability I have I want to place it at the disposal of the government, not to help this government survive as a party government, but to help Canada win this war.


Mr. ABBOTT:: Mr. Speaker-


Richard Burpee Hanson: Is the minister prepared to make a statement before the hon. member proceeds?


James Layton Ralston: If the hon. member for St. Antoine-Westmount will permit me, I want to say to my hon. friend the leader of the opposition (Mr. Hanson) and to the house that in regard to opportunity being given for discussion in committee of any matters which ordinarily would be discussed on the budget itself, the government is perfectly satisfied to give the undertaking that such opportunity will be given. It is a matter, of course, for the house to decide, but hon. members may be assured that if it is desired to make their statements on the budget in committee they will not be precluded by the budget itself being disposed of without prolonged debate.


Angus MacInnis: We are all involved in this, Mr. Speaker, and you cannot deal with the matter unless we have the opportunity-


Mr. SPEAKER:: I understood that the
Minister of Finance was making a statement in reply to the question asked by the hon. leader of the opposition with regard to an opportunity being given to hon. members to make their statements in committee. The hon. member for St. Antoine-Westmount (Mr. Abbott) now has the floor.


Douglas Charles Abbott: Mr. Speaker, this is almost the first occasion on which I have had the honour of addressing this house. That it is not the first is due to the fact that my hon. friend the leader of the opposition (Mr. Hanson) asked for an explanation of one or two private bills standing in my name. In view of his concluding remarks I am almost discouraged from rising now; nevertheless having steeled myself to do so, I shall proceed notwithstanding what he has said.
I have observed that it is customary for a new member, speaking for the first time, to make some reference to the constituency which he represents, and I propose very briefly to discharge that pleasant duty.
The constituency of St. Antoine-Westmount is one of the larger Montreal constituencies.
Predominantly residential, it includes all the city of Westmount, part of St. Antoine ward, part of the old St. Andrews ward and a little bit of St. George's ward. Such outstanding landmarks as the Forum and Bonaventure station are included within its limits.
The leader of the opposition has mentioned that the increase in the graduated personal income tax bears very heavily on the lower and medium brackets. I think it is fair to say, Mr. Speaker, that there are perhaps as many people in my constituency, who will be directly affected by these increases, as in any other constituency in Canada. The Minister of Finance (Mr. Ralston) made his budget speech a week ago to-day. The country has had notice of these increases, and I am glad to say that since that time I have not heard of a single objection to the increases on the part of my constituents. Their attitude is best expressed in the words of one of them, the Minister of Finance himself, when he said that these increased burdens would be loyally accepted and paid as a small price to pay for the preservation of our liberties.
On this question of my constituency, Mr. Speaker, perhaps I can give hon. members some idea of the intellectual qualities of its residents when I say that I have five electors who are members of this house, two of them ministers of the crown. I have not compiled any statistics on the senatorial representation, but I think it is fair to say that St. Antoine-Westmount has contributed its fair share, in numbers at any rate, to the public life of Canada.
I propose to-day to discuss some features of the excess profits tax, with particular reference to the criticism of that tax voiced in the house the other day by the hon. member for Rosetown-Biggar (Mr. Coldwell). I am sorry that he is not here this afternoon. I spoke to him this morning and he told me he had to attend a meeting of the special committee on the defence of Canada regulations. In the course of his remarks the other day he stated that some corporations were paying no excess profits tax. That, of course, Mr. Speaker, is clearly incorrect, since under the resolution every corporation, whether it makes excess profits or not, will pay a minimum excess profits tax of 12 per cent on its total earnings.
After he had given a considerable number of figures and percentages, with which I propose to deal in a few minutes, the hon. member went on to say, as reported at page 1232 of Hansard:
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 capita] invested and the
The Budget-Mr. Abbott

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.
That, Mr. Speaker, is indefinite. Speaking in the debate on the National Resources Mobilization Act on June 18, the hon. member for Rosetown-Biggar spoke of the British excess profits tax. On page 873 of Hansard he is reported as having said:
... we have a right to ask that the government at the same time assure these young people that the excess profits tax will be instituted as iu Great Britain, and will be one hundred per cent. And we ask that prior to giving our support to this bill.
May I say that, as has been pointed out by my hon. friend the leader of the opposition, the proposed excess profits tax, taken in conjunction with the corporation income tax, is more onerous than the tax under the English act. As many hon. members know, and as the leader of the opposition has already indicated, there is no corporation income tax as such in England. There, a corporation deducts tax at the standard rate, but the individual shareholder is entitled to take credit for that deduction in his own return, so that in effect there is no double tax, as there is in Canada, on corporation earnings.
' I propose this afternoon to compare briefly the provisions of the two taxing acts, in Great Britain and under the proposed act which is now being discussed.
Under both these acts, as has already been indicated, excess profits are treated as being profits in excess of an average or standard rate. Under the English act, for the purpose of establishing that average rate the taxpayer has one of four options. He can take his earnings for 1935, or he can take his earnings for 1936, or he can take the average of his earnings for 1935 and 1937, or the average of his earnings for 1936 and 1937. That applies of course to companies which have been operating during that period. I may say in passing that similar provisions exist under both acts for a board of referees to establish the standard or average profit for new companies and companies which have been operating under depressed conditions.
Under the Canadian act the taxpayer has no such option. His average or standard profit is established by taking the average profit of the four years 1936, 1937, 1938 and 1939, and all companies pay a minimum corporation tax of 18 per cent in the case of a straight return and 20 per cent in the case

of a consolidated return, plus a minimum excess profits tax of 12 per cent on all earnings whether they are over and above that average or standard rate or not.
Perhaps I could illustrate that position best by one or two examples. Take a company for instance with earnings in 1940 of $100,000. If that amount is equal to or less than the average or standard earnings of that company for the four preceding years, in Canada, such a company would pay a tax of $30,000, that is to say, 18 per cent income tax and 12 per cent excess profits tax, assuming it did not file its return on a consolidated basis. In England a company making the same profit of $100,000 with an average or standard profit, on one of those options I mentioned, of $100,000, would pay no tax at all.
Take a second case of the same company earning $100,000 in 1940, whose average earnings during the relevant period were $75,000. In that case, under the definition in both the English act and the Canadian act the excess profit would be $25,000. That company in Canada would pay a tax of $33,375. In England it would pay a tax of only $25,000; in other words, 100 per cent of the excess profit of $25,000.
As will be seen, it all depends on where you start paying your tax, and obviously a company which pays no excess profits tax on, say three-fourths of its income, and in the case of England, pays no tax at all, on three-fourths of its income, is better off than a company which pays 18 per cent on all its income and an excess profits tax of 75 per cent on the remaining quarter.
It seems to me that if the hon. member for Rosetown-Biggar is satisfied with the provisions of the British act, he should be more than satisfied with the provisions of the proposed Canadian act taken in conjunction with the corporation income tax under the Income War Tax Act.
In his speech last Friday the hon. member for Rosetown-Biggar referred to a list of thirty-three Canadian companies which, he said, had been prepared by himself and someone to whom he referred as an able statistician. He gave the house a great many figures, percentages, estimates of earnings and so on of these thirty-three companies, including an estimate of what those companies would pay on their 1940 income assuming that that income were the same as it was in 1939. My hon. friend was good enough to furnish me with a copy of the statement to which he referred, and I was able to see how he had arrived at those calculations.

The Budget-Mr. Abbott
May I say, Mr. Speaker, that the figures which the hon. member for Rosetown-Biggar gave to this house on Friday as being the estimated tax which those companies would pay in 1940 based on their 1939 income, were incorrect, and the estimate of the tax which he made is substantially lower than the tax that those companies would pay on the basis referred to. They are incorrect for two reasons. First, that my hon. friend computed his tax on the basis of net earnings available for dividends, which of course was the amount after deducting provision for income tax. Obviously that is wrong, because in the case of a percentage tax you do not deduct the amount of your tax before you calculate how much you have to pay. They were wrong for a second reason, that in .the case of twenty-eight of the thirty-three companies he computed his minimum excess profits tax at 10 per cent and not 12 per cent as provided under the resolution. I am going to deal briefly with the five specific cases to which the hon. member referred.
With regard to Consolidated Smelters, he estimated his tax on $9,339.586, which was the net amount shown by that company as available for dividends. It had made provision of $2,280,000 for tax, which must be added to that figure of $9,339,586, so that the correct figure should be $11,619,586. If we use that figure, the total corporation income tax plus excess profits tax at the minimum rate amounts to $3,718,267 instead of $2,801,876 as given by my hon. friend, or a [DOT]difference of $916,391.
The second company with which the hon. member dealt specifically was Canadian Industries Limited. Again by the same process he underestimated the tax by $579,457.
The third was International Nickel, the big one of the five. International Nickel had included in its accounts $7,296,986 for income tax. Figuring again on the same basis, my hon. friend underestimated the tax payable by International Nickel by the amount of $3,071,984.
The fourth was Asbestos Corporation; this is the small one as far as earnings are concerned. Figuring that on the same basis, we find the underestimate is $101,796.
Aluminium Limited is the only one of those which my hon. friend selected which would in all probability be taxed on the higher basis, that is 75 per cent of excess profits. His statement did not enable me to see exactly what four years he used as a basis for his average, but I think they must have been 1936, 1937, 1938 and 1939." On that basis he underestimated the amount of tax payable by that company by $878,162.
I did not attempt to calculate the amount of the underestimate with respect to the other twenty-eight companies, but on these five my friend underestimated the tax which would be payable by them by $5,547,590, or in other words an average of something over a million dollars per company. If the same ratio continued with respect to the other twenty-eight, he would have underestimated by about $33,000,000, or pretty close to the amount which the Minister of Finance estimated will be produced by the national defence levy.
It is a considerable time since I had lectures in logic, but as I remember, the soundness of the conclusions reached depends on the soundness of the premises on which those conclusions are based; if the premises are false, the conclusions are false. I suggest that that reasoning might be applied to the conclusions reached by the hon. member for Rosetown-Biggar with respect to the excess profits tax.
One last point. My hon. friend mentioned that he had not overlooked the fact that these corporation profits, or what was left of them after the deduction of the corporation income tax and the excess profits tax, would be subject to taxation in the hands of the shareholders who received them. I am glad he did not entirely overlook that point, because, as hon. members know, that income, or rather what is left of it, is subject to tax a second time in the hands of the shareholder who receives it, a third time by the different provinces, with the exception of New Brunswick and Nova Scotia, and a fourth time in the case of a shareholder residing in my own city of Montreal, by that city. And for good measure those same corporation profits are subject to corporation profits tax in many of the provinces with respect to the profits earned in those provinces. In the case of Ontario and Quebec the rate is five per cent.
In the course of his address the other day the Minister of Finance used the word " fantastic " as applied to a possible combination of federal, provincial and municipal taxes on the same income. That seems to me a very apt word. I have little sympathy with the view expressed by hon. members in the other corner that the taxes to be imposed on industry and on corporation earnings under this budget are inadequate.
I have already taken rather more time than I had intended-


Some hon. MEMBERS:: Go on.


Douglas Charles Abbott: I had some comments or rather suggestions to make in connection with the administration sections, but in view of what the leader of the opposition said I have no doubt an opportunity will be accorded to
The Budget-Mrs. Nielsen

put these forward in the committee stage, so I conclude by thanking you, Mr. Speaker, and hon. members for the patient and courteous attention which has been given to my remarks.
Mrs. DORISE W. NIELSEN (North Battle-ford) : As a new member of this house I have during these last weeks listened with a great deal of interest, and I may also say patience, to the debates which have taken place. As a new member I have of course very much to learn. As the representative of an agricultural riding where not only the farmers who have been long established but also those who have newly attempted to carve homes for themselves out of the wilderness of the north all find themselves in great distress, it has been my primary duty to attempt to place before this house a fair picture of conditions in my constituency. I have had a great deal of consideration from the Minister of Labour (Mr. McLarty), and he has promised an investigation into the particular conditions which I have outlined. During the weeks since I came here I have learned a great deal, not only in this house. I have visited some of the great cities of the east, and I have come to the conclusion that the problems which face our western farmers are more or less the same problems which face the working people in the cities of the east.
I have watched the legislation introduced in this house. I must confess that when I came here I had hopes that the great crisis facing the nation would force this government to bring in constructive and progressive legislation really in the best interests of, and to the benefit of the people of Canada. The budget debate follows very closely on the heels of the bill to conscript man-power and property. In my opinion, Mr. Speaker, it proves that bill false. We were led to understand that the bill conscripting man-power and property would conscript the great reserves of wealth within the borders of this country, to be used in the prosecution of the war. Now that the budget has been brought down, we realize that the great masses of the working people of Canada, out of their scanty earnings and low wages, will have to provide the enormous amount of money for our war effort.
I can no longer remain silent and support this government. My hon. friends to my right have opposed some legislation which has been introduced in this house; yet they have constantly affirmed their support of this government. I cannot do that. I do not,
I will not support this government. After a careful appraisal of the policy of this government I find that if I am to remain loyal to the people who sent me here, it is impossible

for me to support either this budget or the legislation which has been introduced by the government, and I am prepared to tell the people why that is so. I know that anyone who dares to disagree with the policy of the government is accused of being disloyal and an enemy of Canada; but, as time goes on, I become more convinced that in the days to come those who support this government will be judged to be the real enemies of the Canadian people. As I see it, if I remained silent I should be disloyal to those whom I represent.
During this session this government has passed legislation to subjugate the Canadian people and force them into both political and economic bondage. To a large extent we have lost our political liberty through the defence of Canada regulations, and now in the proposed budget we face social and economic disaster. The worst of it is that all this is proposed under the guise of patriotism. As everyone knows, our press is more or less controlled by the same powers that control the great financial institutions, the corporations and the monopolies of this country. The press has led the people to-believe that this budget calls for national sacrifice. They say it is an emergency budget to save Canada, to save the world, and that it will bring about equality of sacrifice. We are told that we need some $700,000,000 for the war and further sums for other expenses, making a grand total of about a billion and a half dollars. If the conscription bill had been what it purported to be, there would have been no necessity for this increased taxation, which will so greatly harass and burden those in the lower income brackets. There is wealth in this country, sufficient not only for the prosecution of this war to even a greater extent than we are now prosecuting it, but also to rehabilitate our people.
To-day, Mr. Speaker, we are facing two great crises. We have a war crisis and we have a domestic crisis. If anyone says that a domestic crisis does not exist, I can only say it is because they do not wish to see it. There are none so blind as those who will not see. When we say that the war crisis is the only crisis which matters, we are absolutely failing the Canadian people. Provision could have been made to meet both these crises if the government had not been the mouthpiece of the great financial interests of this country, as it always has been. Government spokesmen have told the people that the incomes of the wealthy are to be taxed so that they wll help bear the cost of the war. That hides the real truth from the people. It is possible for the great monopolies, the great

The Budget-Mrs. Nielsen
industrial corporations, to increase their [DOT]capital by millions of dollars without paying any tax except on a very small portion which they may set aside for certain purposes. They can increase their capital and set aside enormous amounts for reinvestment without ever coming under the taxation laws of this dominion. They have certain surpluses of capital which, under our laws, may be exempt from immediate taxation. That is where any government, working in the true interests of the Canadian people, should have looked for reserves with which to finance not only this war but also a rehabilitation scheme for the people still in distress in this country.
The minister has acknowledged that even with the increased taxation proposed he will not have sufficient money to prosecute the war, and he says that we must meet the rest *of our obligations by borrowing. Where will he turn? Of course he will go to these vast reserves of capital which, instead of being loaned to the government, should be conscripted. It amounts to this: During the last great economic crisis these reserves of capital were already in existence, but at that time it was not profitable to lend them for the rehabilitation of our people. In this war crisis to-day, however, it is profitable not to have this great wealth conscripted but rather to loan it to the people of Canada for the prosecution of the war. That is so because the people who loan this money are the same people who will have the advantage of possessing huge sums of money with which to go ahead with new industries for the production of munitions and so on. Now it is profitable for them to show their patriotism and loan their money. But it is not the kind of patriotism that is being demanded of them by means of conscription, as it should be. The working people are asked to give their sons. *Our working men will go into the factories. As time goes on they will find that their wages will become more meagre and the real value of their money will be decreased.
The situation to-day is the same as it was in 1914. Then the people thought the greater part of the war burden was to be borne by the wealthy, but in 1918 the people found that they themselves had borne the brunt of the sacrifice, not only through the giving up of their sons but also through the piling up of debt. The farmers of our country will go on with their unremitting toil, and what guarantee have they that in the years to come they will be able to establish for themselves even a decent standard of living? These things are all part of the domestic crisis which we as a responsible body cannot and must not neglect. The Canadian
people are going to be told what is their patriotic duty. During the last war we made sixty new millionaires in Canada, and we sacrificed 60,000 men. That meant roughly the lives of a thousand men for every new millionaire created; and during that period the debt of the people increased. In 1914 our per capita debt amounted to $42.64, while at the end of the war period, after we had created sixty new millionaires, the per capita debt had increased to $266.37.
As far as I can see, the same sort of thing will go on during this war. No one can say at the present time how many new millionaires we are going to create, but from the legislation which has been passed by this house already, I feel sure that we shall continue to increase the number of wealthy people in this dominion and add a further burden of debt to the shoulders of the working people during the years to come. That is not what we understood by the conscription bill which has just been passed. It is not the kind of legislation which we, as representatives of the people, should allow to pass through this House of Commons. The borrowing of vast sums of money will create unadulterated inflation at the expense of the Canadian people. The great interests will not suffer enormously through these coming years. Roughly $700,000,000 will be taken out of the purchasing power of the people, and at the same time the shackles of debt will be tied round the Canadian people, like millstones round their necks, to make of them slaves into the future. And children who are not yet bom will be among them. Not only will it affect the people who are to-day destitute and barely managing to live, but it will affect hundreds, yes, thousands of the middle-class people who will lose their scanty savings, and be forced down to a degree of poverty unnecessary and unneedful in a country of great wealth such as this.
After all, for what reason are the youth of Canada being conscripted? The government says it is for home service. That is true enough. What are they to protect at home? Besides the homes of their own people it is their duty to protect the great corporations, the banks and the factories-all those organizations which in the past have cared so little for the youth of Canada that during the late crisis they refused to lend their money, let alone have their money conscripted, for the rehabilitation of our people.
The most patriotic procedure for the government to take would be to go to these vast reserves of capital which, if unmolested, will be used for reinvestment, and from this money finance not only the prosecution of this war but a rehabilitation scheme for our people.
The Budget-Mrs. Nielsen

many, there has been a decrease of $17,016,794. Everything which would encourage our people and give them an opportunity to become selfsupporting and perhaps be in a position to make a further contribution to this war effort is being cut down by the government.
I cannot find words strong enough to condemn this budget. As I said before, I hope the people of this country, realizing that there is no necessity for this added burden which is being placed upon them, will raise their voices unitedly in protest.


Mr. DANIEL McIVOR (Fort William):: Mr. Speaker, I count it a great honour to be allowed to follow the lone, yet happy and brilliant lady member of this house. I think you will agree with me when I say that there should be more of her kind in this house, provided that increase in numbers would not cause some of us to lose our seats. We each look upon this budget from our own background. We consider it from our own educational point of view and the course that we follow in our everyday life. We heard the farmer refer to the budget as giving him the needed protection he required for his home and loved ones; he saw in it an opportunity for a stable market. The business man looks upon this budget as having a steadying influence; behind the scenes he sees a government which stands for the maintenance of traditions and the payment of just debts. A mother considers this budget in the light of the protection it provides for her home and loved ones. A lawyer looks at it from the point of view of the law; he is thinking of the sacred trust to which he obligated himself before he received his gown. Your Honour knows perfectly well what I mean. The doctor looks at this budget through the eyes of a man hungry for a really healthy nation; he knows that there is disease in the body politic and he hopes to find a way of killing that disease. Those clerical gentlemen who are members of this house, those men who have studied the queen of sciences, look at this budget from another point of view; they want to know upon what foundation it rests. As we gave an attentive hearing to the Minister of Finance (Mr. Ralston) when he proclaimed his budget, we realized that it rested upon the foundation of truth.
I want to congratulate the government-
I have no doubt the former Minister of National Defence had a hand in it-upon the action they took to increase the pay cheques of our soldiers from $1.10 to $1.30 a day. He entered the trenches during the last war as a private, and I have no doubt he was able to recall the smell of the gas which sent him 
home a weaker man. No matter who may disagree with me, I contend that the poorest paid men in the British empire are those who risk their lives for $1.30 a day to protect the welfare of their country. Those who served in the last war were able to save very little. When they came home, some of us had to do our best to find them jobs at twenty-five cents an hour. I must say that in many instances I failed to find even a job of that sort. That was one of the things which constrained me to permit my name to be submitted to the electorate of the finest constituency in the Dominion of Canada.
As I listened to the minister introducing his budget, he looked to me a real minister, as he is, but just now I mean a minister in the sense of a clergyman. He stood up in his place in the house and obviously was convinced that he had something to say. He was not ashamed of it. He felt that it was the truth which the vast audience that filled this house and the galleries needed to know. And he delivered his message in such a way that we all realized he was in earnest and spoke with conviction.
As I heard his opening remarks, which we call the introduction, there arose a spirit of expectancy. He rises and tells the house why he stands in his place and delivers his message. Here are his own words: "The Hun is hammering at the gate."
Could we not almost hear the big hammer as the minister's words echoed through the house? We were almost within sound of the Hun with his mechanized warfare, with his record of cruelty and cussedness all along the line, leaving a trail of broken hearts, broken homes and broken souls. The minister certainly introduced his subject in splendid style, and we were all ready to listen.
Then he makes his plea. He asks for money.
1 know some ministers who hate to ask their people for money, but I have never stood in any pulpit yet and felt ashamed to ask for money for a worthy cause-and no one has a right to be ashamed or to come before the public with an apologetic air when he is asking for money for a worthy cause. I think the minister showed his real sincerity as he asked for money.
Then he went on to present his subject in splendid form, and as he proceeded with arguments that were logical we were convinced that he would get what he was asking for, and that when the collection plates came in they would be loaded. When he was making his plea for a collection he used concrete examples, which are a splendid argument. He told us of one war veteran who gave him the best

The Budget-Mr. Mclvor
he had, which was a collection of old coins, and I suppose that war veteran had handled them over and over again, and loved them and talked about them often. Then he told us of another soldier who was a caretaker in an armoury and gave freely twenty dollars a month. Then the minister said:
With such examples to challenge and inspire us, I cannot believe that any man in Canada will complain about his burden, or by greed, panic or selfish fear, betray his Canadian citizenship in the hour of Canada's need.
Britain is giving her blood, her treasure, her all.
We too will give our best to help make up this budget.
As the minister sat down, I noticed that very few members were reading newspapers, which would have struck me as an act of sacrilege at such a time. I noticed, too, that very few members were sleeping-and it is a mark of a great preacher to keep his congregation awake.
There are some things which the budget suggests to me, Mr. Speaker. Of course, one sees through the eyes of one's constituents. I can see an opportunity for developing at the head of the lakes a great iron ore industry. It is standing there inviting those who have the ability and the cash to come along and develop it. I think the government should pay a bounty of one or two dollars a ton on iron ore in the same manner that subventions on coal were granted to help Saskatchewan and Alberta. I will also mention now, as there are to be no supplementary estimates, that there is a dire need to keep our harbour open at the head of the lakes. Dredging that should have been done two years ago and last year was not done because the government wanted to cut down expenditures. The channel must be kept open for shipping, and if there are any accidents to ships coming in or going out, the government will be liable to some extent.
At the head of the lakes we have also a splendid shipbuilding yard, with two ships almost ready to launch and another with her keel laid. We have grain elevators, the largest and best filled that one can find anywhere. We have pulp and paper industries, and a great shipping centre. We have there the Canadian Car and Foundry company, which built the first Hurricane fighter that was built in Canada, and it stood the tests all the way through.
The minister in making his budget proposals certainly showed himself to be no respecter of persons because he made everybody pay who was earning anything worth 95826-80
while. We admit that the budget is hard on the bachelors; but this is leap year, Mr. Speaker, and notable bachelors will always be able to find somebody to help them out with their exemption, even if it costs something more.
I can see a sign of the times in this budget because it brings a leveling down. I have no trouble in convincing myself that when this war is fought and won, there will have to be a considerable change in our economic system so that every able-bodied man in Canada will have something worth while to do to earn his bread and keep a cosy corner of his own.	i
I ask myself, what is the cause of all this war? The lawyer would say, broken laws and broken treaties. The business man would say, hunger for trade. The doctor would say, disease and sickness in the life of the nation. But a minister of the gospel accustomed to call a spade a spade would say that the cause was disobedience of the laws of God and disregard of the brotherhood of man. The old law emphasizes "thou shalt not". "Thou shalt not kill." "Thou shalt not steal." Another commandment is: "Remember the Sabbath day to keep it holy." Perhaps the cause of the war is that we have been leaving God out of our plans and out of our thinking. We need to examine the fundamentals again, and times like these certainly cause us to think. The other day I was reading the old book of Ezekiel, and I was convinced that when men and women place their trust in God and go out and keep their powder dry, they will win, and win in the right way.
Not long ago our great king, not only the king of Great Britain but the king of Canada, called in all the churches of the commonwealth for a day of prayer, and I do not think since Easter have our churches been as well filled as they were on that day. I wonder how many men and women and how many ministers looked for an answer to their prayers that day. But when the British army was hemmed in at Dunkerque there came the announcement across the seas that it was nothing short of a miracle that the British army got out so well.
When I consider the purpose of our custom of observing the Sabbath day, that is, for worship and rest and the upbuilding of body and mind, and then when I reflect how too frequently that day is spent, I suggest that we need to rethink along another line the matter of Sabbath observance. We in Canada have a habit which has cost us about $180,000,000 this past year. I have yet to hear an hon. member in any quarter of this

The Budget-Mr. Mclvor

chamber lift his voice in protest against the wasting of that money. Admittedly I would rather see a man take a drink than have him sit on one side of the fence and act on the other. I know that once I took a little drop of cognac, real brandy. I had a bad throat once and the doctor said, "You should have a good gargle." All the other gargles failed, so I resorted to the cognac and gargled it, and I nearly choked.


Mr. MacNICOL:: Did the hon. member
spit it out?


Daniel (Dan) McIvor: The doctor said, "You
allowed a little drop of it to trickle down, and that did the trick." In that traffic we spend $180,000,000 a year. Why do hon. members not dare to protest against the drink traffic? I can tell you, Mr. Speaker. We are scared of losing the votes of the supporters of beer parlours. I am scared too, but not into silence.
Let me close upon a more hopeful note, a note of confidence in the morale of our country and the courage of our soldiers. I may be pardoned for reading an extract from a letter which I received from a young lad, an acquaintance of mine who is now in the air force. The men of that force may or may not be better than others, but I know them to be great lads. This is the extract:
The war news looks bad, but it looks as if it is up to the air force and the navy now, and that is where we shine. As long as our leaders stand up and show real common sense I am not a bit afraid of what the air force will do. There is nothing here but the will to fight, and I know that the boys will do their part.
That indicates the character and calibre of our air force; they will give a good account of themselves and chase the Hun and his leader back again ere long into that railway coach.
As I think of these youths, of Canada and its educational institutions, of our citizens who strive for the benefit of mankind, of the welcome extended by the press to news of the churches and reports of all good movements; as I see the Christian home and the old Bible restored to their honoured place, with the Bible used as a guide to life, not for superstitious reading; as I think of our Christian manhood and womanhood more steadfast than before in its trust in God, I cherish the hope of a glorious commonwealth greater than anything this world has ever known, in which God will be first and every good thing will have its rightful place.
At six o'clock the house took recess.

After Recess
The house resumed at eight o'clock.



PRIVATE BILLS


[Stage Direction]
Mr. J. H. BLACKMORE (Lethbridge) moved the second reading of Bill No. 26, to incorporate the Alberta Provincial Bank.
He said:	There are several reasons why
this house should proceed forthwith to give this bill second reading and refer it to the banking and commerce committee. Among the reasons which might be mentioned are, first, that the premier and cabinet of one of the provinces of this dominion have petitioned that this bill be enacted. This is a most unusual event in the history of Canada. Again, the government at present in power in Alberta is there definitely for the welfare of the common man. It set out with a proposal to give a dividend of $25 a month, however absurd that might seem. It set out also to give a fair price for primary and secondary products. Obviously both these proposals are in the interest of the common man. I feel, then, that I am justified in saying that the government is there primarily in the interest of the common people of the province. Again, that government has managed the affairs of Alberta unusually well. There has been no increase in the provincial debt since the Social Credit government took office. According to the best information I am able to obtain, Alberta is the only province in the dominion in which that is true.
There has been a constant effort on the part of the present Alberta government to be realistic. It has endeavoured first of all to adjust debts so that they might eventually be paid. The principle which it has espoused and so energetically followed has come to be recognized pretty well all over the dominion to-day, namely, that debt should be adjusted to the ability of debtors to pay. The same is accepted as being true of interest. Everyone realizes to-day that it is utterly absurd to hold men to an interest rate of seven or eight per cent when money is being obtained at a rate of three-quarters of one per cent. The Alberta government has consistently striven to reduce the interest rate to a point at which it is possible to pay it, and then it has endeavoured to pay that rate honestly and without fail. It has been unable to meet all its obligations when they came due, with the result that there has been default, but there was no blame to be attached to the Social Credit government for that default. A

Alberta Provincial Bank
situation, had been built up for years which was completely impossible for them and which would have been impossible for any government of any name that could have been elected in Alberta.
The government since it was elected has given the province sound management. It has saved a good deal of money for the people of Alberta. It has collected taxes well. It has increased the revenue of the province. For example, the oil returns of the province have increased $732,000 a year. The revenue from automobile licences has increased $760,000. The income from petroleum and natural gas rentals and royalties has increased $786,000. Liquor sales have yielded $930,000 more. There have been great savings to taxpayers on the insurance of government cars and government buildings, the total savings in three years being $111,104.74. They have organized a central purchasing board through which all the purchases of the government are made. Through that central purchasing board they hope to be able to save $400,000 a year. Between July 1, 1939, and February, 1940, they saved $260,000. In addition to these considerations, they have paid their interest promptly; they have paid off millions of dollars of the savings certificates which were hanging about their necks like a millstone when the government took office; in a general way they have done a good job of housekeeping in the province, building fine roads, improving the health of the people greatly, encouraging industry, endeavouring to refund the debt of the province, and in every other way that they found available they have managed the province well.
I should like to read a quotation from a letter which I believe will be of interest. The Alberta government from the time they took office tried to refund the debt by every means which was possible to them, but they were unable to have a refund of that debt.
One of the firms with which they were working was the Municipal Bond Company of Los Angeles. Mr. Harold B. Reed, representative of that organization, wrote to Mr. Low, the provincial treasurer, on March 4, 1940, a letter in which appeared these words:
I presume that by this time you and your colleagues are in full swing of the fight to return your government to power and I am convinced that you will make a good account of yourselves. From the situation as I know it, you can be proud of the accomplishments which you have made in the matter of the finances of the province-
I break off there to ask if hon. members suppose this man knew what he was talking about. He had access to all the provincial records; he examined with great care the 95826-804
financial position of the province, because he was counting on undertaking, with his associates, the refunding of the Alberta debt of over $160,000,000. It was very likely that he knew what he was talking about; his words, therefore, should carry more than ordinary weight:
-and despite criticisms to the contrary, you have the strength which comes from the knowledge of having done well a difficult job. Even though the debt readjustment may still be a matter of uncompleted business, nevertheless I think it has been conducted in such a manner that it should be relatively easy of final accomplishment once the elections are over and the Rowell report is issued.
Those words carry tremendous weight; they indicate that this man was completely satisfied after his investigation. It may be asked what bearing this has on the passage of this bill. I say it has important bearing, because it indicates the sort of men who are in charge of the affairs of Alberta, who have asked this government to give them a bank with which they can proceed with the rehabilitation of the province according to the principles in which they believe.
Alberta is in a very difficult position; another reason why this matter should be given consideration. It has a heavy debt. It is a province of primary producers, in the main, and therefore subject to serious fluctuations in the prices of primary products. The tariff incidence is particularly heavy on the three central western provinces, and the freight rate is especially onerous to the people of Alberta. As they say, the freight rates "get them going and coming." Their land settlement problem is grave, because land settlement was carried on under the direction of the dominion government. As a result, large numbers of people were allowed to settle in areas that were too dry for settlement, that part of the province which falls within the Palliser triangle. There was a great deal of scattering out of the people, giving the province a heavy administrative task with respect to roads and other social services; Alberta has, for example, to care for ninety thousand miles of road. An extremely difficult situation awaits any government in that province.
All the provinces are in trouble now; everyone realizes that. The Rowell commission was appointed to investigate conditions as between the provinces and the dominion, manifestly because the dominion realized that there existed a grievous problem and a grave situation. The dominion itself is in serious trouble. How we are all going to get out of the trouble no one would even dare forecast at the present time. It behooves us, therefore, to give earnest attention to the
Alberta Provincial Bank
[Stage Direction]
proposals of any group of thoughtful, careful people in this dominion. Fdr a good many years Alberta has been eager to be selfsupporting, to relieve the dominion of the burden and to stand on its own feet. Surely any group of people having that attitude ought to be given all the assistance they can safely be given.
The people of Alberta ask for this bank. Can we in reason deny their request? I believe every one in this house at the present time realizes that there must be a change in our economic system. I believe I have heard more men express that idea in this house in the last week or so than in any previous two years since I have been here. What form is this change to take? We cannot agree on it. Many hon. members do not agree with the people of Alberta; yet I do not think any hon. member would be so reckless as to say that he positively knew the people of Alberta to be wrong. They may be right. If they are right, if they have the right solution, then surely hon. members want to know it. If they have not the solution, then I am sure all hon. members wish to give them every opportunity to go forward and prove to themselves that they have not. Then they will be satisfied, and so will the rest of the people of Canada.
The proposed bank is safe. All the rules and restrictions which apply to the conduct of the ordinary bank will apply to the proposed bank for Alberta. Thus all the guarantees will be there to safeguard the deposits of the people; all the guarantees will be there to safeguard the people of the dominion against inflation and other abuses to which banks might be addicted. The bank is to be publicly owned. The shareholders are to be the people of Alberta, through their government; the directors are the members of the cabinet of that province as it may be constituted at any given moment. Therefore it is an ideal publicly owned bank. It is not to go beyond Alberta in its operations; therefore it is strictly an Alberta bank. Anything that happens to it or because of it will affect the people of Alberta and nobody else, at least directly.
Paul Joseph James Martin: How will it compare with the Ontario savings scheme?


Mr. BLACKMORE:: I think it would be better to have that discussion in the committee, where we shall be prepared to answer all questions. I am afraid we would take up too much time if we carried on that discussion here.
Inflation will be rendered impossible because of the fact that there are abundant goods in Alberta, it being one of the richest provinces 
in the dominion. The currency issue possible is strictly limited by the banking laws of Canada, which also strictly limit the credit issue. Some may be afraid that Alberta will borrow from the bank. The province is going without borrowing and is committed to the policy of refraining from increasing the provincial debt. Therefore I think I can safely say that the government of Alberta will not try to borrow from this bank. I repeat that the credit issue is limited, so there can be no possibility of inflation.
Finally, the bank is to exist only until 1944. Surely no serious damage can be done, either to the people of Alberta or to the people of the dominion, in such a short time. Some may feel that probably serious damage could be done; but let us bear in mind that the people of Alberta are alive and alert. They exercise influence on their government, just as do the people in any other province of this dominion. It is a foregone conclusion that they are not going to tolerate any foolish behaviour on the part of their government, no matter what that government may be. Anyone who has been in Alberta will know that, and of course anyone who has not been there will not know it.
Some may object to public funds being used for the $500,000. But let me recall the fact that the present provincial administration in Alberta has saved the province $500,000 over and over and over again. Therefore there need be no anxiety on the part of anybody in Alberta because of the fact that his money is going to be used for that $500,000.
In Alberta there is a central purchasing agency which, as I said a few moments ago, is saving $400,000 a year. At the rate it was going in February it undoubtedly will do that. That alone will supply the money which is to be used from the public fund. A moment ago I mentioned the great savings effected from liquor management.
Another aspect of the matter worthy of our attention is that the people of Alberta need banicing facilities. The number of banks in the western provinces which have closed in the last few years would, I believe, surprise hon. members. Between December 31, 1929, and July 31, 1935, there were ninety-two bank branches closed in Alberta.


Mr. ROSS (St. Paul's):: Banks or branches?


John Horne Blackmore: Bank branches. In Manitoba forty-nine were closed, and in Saskatchewan, 160. Between December 31, 1929, and December 31, 1939, there were closed in Alberta 130 branch banks; in Manitoba, seventy-five, and in Saskatchewan 222.

Alberta Provincial Bank
Let us remember that people need banking facilities. If our present chartered banks are unable to give the facilities so vital to the economic welfare of our people, surely some government agency, somewhere, must take steps to deal with that situation. Alberta has taken such steps. In order to provide banking facilities, the Alberta government has established treasury branches which, to a surprising degree, have been successful. They have decreased unemployment and increased business. The Alberta government bank is designed to aid the treasury branches in accomplishing their good work.
There is a further matter bearing on an Alberta bank which I suggest is worthy of the attention of the house. In 1938 the Hon. Charles A. Dunning rose in his place in the house and in the hearing of many hon. members now present offered to give Alberta a bank. Hon. members will find his offer at page 1861 of Hansard for March 30, 1938.


An hon. MEMBER:: Read it.


John Horne Blackmore: I do not think it would be well for me to take the time of the house to read it; but it is there for anyone to read. In effect he said that if we would follow the rules contained in the banking laws of Canada, we could establish a bank in Alberta, and that he would gladly help to give us a charter. The proposed bank does follow the rules-every one of them.
Another matter of importance is this: The Prime Minister of Canada (Mr. Mackenzie King) promised he would keep his hands off Alberta. I believe when he made the promise he intended to keep it. This is one instance in which he can give Alberta somewhat of a free rein. The Conservative party, under the Right Hon. R. B. Bennett, were favourably disposed towards Alberta. On several occasions that great statesman signified his sympathy for Alberta, and did what he could to assist her. For a long time in Canada the Cooperative Commonwealth Federation have advocated a publicly owned bank. Under those circumstances I would expect this bank to commend itself to them.
So that in the discussion of this bill we shall not have to use all the time allotted to the discussion of private bills, may I say in closing that all the details any member may wish to have can be obtained before the banking and commerce committee, to which this bill should be referred. Before that committee we shall have responsible ministers of the crown from Alberta who will be ready to answer any questions any hon. member may wish to ask, and who will be prepared completely to satisfy whosoever may desire to go into that committee. That is the type of committee to which this house sends difficult tasks for careful consideration.
Inasmuch as there are on the order paper other bills awaiting discussion, and as there is not a great deal of time for the consideration of private bills, I shall close my observations by asking that hon. members permit this bill to be turned over to the banking and commerce committee for careful examination and consideration.


James Layton Ralston: Mr. Speaker, I have listened with interest to the observations of my hon. friend, and I should like immediately to deal with what he has mentioned last, namely, his reference to what was said by my predecessor in office, the Hon. Mr. Dunning. From what Mr. Dunning said on that occasion I shall read two extracts, the first of which is as follows:
I suggest that in all seriousness, and I shall do the best I can to facilitate the formation of such an institution, within the four corners of this Canadian bank act.
The second extract is as follows:
True, they will have to come to this parliament for a charter, and I shall tell them here and now that if the social erediters of Alberta comply with that statute with which all other Canadian chartered banks have had to comply, and with which they must comply to-day, I for one shall be pleased to do all I can to facilitate the passage through this house of a bill granting a charter to a social credit chartered bank.
I am afraid that in the measure before the house the hon. member has not brought himself within the terms of the assurance given at that time by the Hon. Mr. Dunning. It does not come "within the four corners" of the Bank Act, nor does it "comply with that statute." I do not wish to take the time of the house at any length, because I propose to indicate that the government feels that at this time this bill should not have second reading, but it would be prepared to propose, in amendment, that the bill be not now read a second time, but that the subject matter thereof be referred to the select standing committee on banking and commerce, for consideration and report.
The outstanding feature of the bill-and I may say there are several unusual features in it-is that, entirely at variance with the provisions of the Bank Act, which provides for the election of directors by the shareholders, and the consequent election of a president, it purports in effect to make this parliament the rubber stamp of the premier for the time being of Alberta, in this way, that parliament shall now state, if the measure receives support in the other place, that, "The
Alberta Provincial Bank

members of the executive council referred to in section 1 of this act, shall be the directors of the bank." The members of the executive 'Council are of course chosen by the lieutenant-governor on the advice of the premier.
Section 1 reads:
Those persons who are for the time being members of the executive council of the province of Alberta are incorporated under the name of "The Alberta Provincial Bank" hereinafter called "the bank".
May I point out that this section does not come within the terms of the Bank Act. The Bank Act provides for individuals, whose names are placed before parliament as incorporators and whose responsibilities and banking experience can be ascertained, being incorporated after due examination by the house and by the committee. This bill provides, in effect, that at the will of the premier of Alberta, no matter who that may be, those whom he recommends to the lieutenant-governor as members of his executive council, automatically are to be the incorporators and shareholders of this bank. This is a considerable departure from the provisions of the Bank Act. Without being facetious at all, one might just as well consider the incorporation here and now of the board of trustees of any church or the committee of any club or the officers of any society, who may for the time being happen to be in office, as the incorporators and directors of a bank, and these directors would change automatically whenever the trustees, or committee men or officers change. I am quite satisfied that the house will realize that there is at least grave doubt as to whether that procedure is the procedure called for and contemplated by the provisions of the Bank Act.
It seems to me that that is the outstanding feature of this bill and the one which ought to be considered carefully before the bill is given second reading. It is an anomaly, it is unusual, it is unique in the history of banking legislation to have parliament place its seal of approval upon a body of men as organizers, incorporators and operators of a bank, simply because they happen for the time being to be holding a particular office, no matter how high that office may be. It seems to me that that feature should be enough to indicate to the house why this bill should not be given second reading at this time, but that the subject matter should be carefully examined by the banking and commerce committee.
As hon. members will have noticed, section 7 of the bill indicates quite clearly that this bank is not to be a bank "within the
four corners" of the Bank Act, to use Mr. Dunning's words, but is to be a bank in respect of which a great many of the sections of the Bank Act are not to apply. Without dealing at any length with these exceptions, may I just mention one or two. Section 14, from which this bank is to be excepted, prohibits the issue of bank notes until the approval of the treasury board has been obtained. That section is out. Section 15 requires that a certificate shall be procured from the treasury board with regard to the amounts to be paid in with regard to the incorporation and organization of the bank and the list of unpaid liabilities. This section also provides that the treasury board certificate is not to be granted unless the treasury board is satisfied that the requirements of the Bank Act and of the special act of incorporation with regard to the organization and incorporation have .been complied with, and that the expenses of incorporation and organization are reasonable. This section also is not to apply.
Section 16 provides that if the treasury board certificate is not granted within one year, all the powers of the bank shall cease. It is provided by this bill that these sections are not to apply to the bank which it is proposed to incorporate. Section 20 of the Bank Act sets out the minimum qualifications of a director. A director must be the sole owner in his own right of shares of the bank on which $3,000 has been paid up, when the paid-up capital of the bank is one million dollars or less. He must be the sole owner of shares of the bank on which $4,000 has been paid, when the paid-up capital of the bank is over one million and does not exceed three million dollars. A director must have stock to the value of $5,000, when the paid-up capital stock of the bank exceeds three million dollars. That section is not to apply to the proposed bank. Section 23 of the Bank Act reads:
The directors, as soon'as may he after their election, shall proceed to elect, by ballot, from their number a president and one or more vicepresidents.
The directors may also elect by ballot one of their number to be chairman of the board and one to be honorary president.
But that section is not to apply to this bank. Instead of that this bill provides that the lieutenant-governor in council may appoint one of the directors the president and another the vice-president of the board of directors of the bank. He may also fix the quorum of directors for the purpose of a directors' meeting. I do not think I need trouble the house at greater length with regard to the other provisions of the Bank Act which are
IMr. Ralston]

Alberta Provincial Bank
excluded in their application to this particular bill. I know my hon. friend will not regard me as treating this matter lightly if I do not go exhaustively into the details of the bill now, but I do submit that because of the first feature I have mentioned, namely, the proposal that we shall here and now incorporate whoever happens to be selected from time to time by the premier of Alberta for the lieutenant-governor as his executive council to be the directors of this bank, and that the lieutenant-governor in council is to be given the power to elect the president and other officers of the bank, this matter is one which ought to be considered seriously by the banking and commerce committee.
We are not asking the house at this stage to refuse further consideration in connection with the bill, but rather asking to have the subject matter of the bill discussed before the appropriate committee. May I point out that several rather grave constitutional questions are involved. There is the question whether the dominion parliament can make a banker out of the lieutenant-governor in council of the province. That I submit is a serious question. There is also the question whether parliament can compel the lieutenant-governor in council to undertake the business of banking, which is what is proposed to be done here. For these and other reasons which I could give, I trust that the hon. member will accept the amendment which I propose to move. I move:
That the bill be not now read a second time, but that the subject matter thereof be referred to the select standing committee on banking and commerce for consideration and report.


Richard Burpee Hanson: Mr. Speaker, I have only a few words to say about the amendment and the motion now before the house. I am not going to oppose the amendment, but I suggest to the minister that his course is not a courageous one. Either there is a need for this bank, or there is no need. There is a principle involved that should receive the consideration of the government and this bill should go through the house or it should not go through. I shall not make any observations at this time as to the contents of the measure beyond saying that if you eliminate the provisions of twenty or twenty-five sections of the Bank Act from this charter, you are not going to have a bank, you are simply going to have a department of the provincial government of Alberta. I think the minister should have discussed the principle involved in this measure rather than have it go to the banking and commerce committee where it may be buried in oblivion and never return to this house. That is likely to be the fate of this bill.
The government, through the minister, should have a policy with respect to applications for bank charters, whether made by the province of Alberta or by any other group of individuals. I well remember when my friend, the late Hon. J. A. Robb, was Minister of Finance and an application was made by a group of gentlemen from my own province for a charter for a bank to be called the Eastern Bank of Canada. The very first consideration which, if I remember correctly, Mr. Robb took into account in connection with that application was the question of the necessity for a new bank in eastern Canada. He questioned very closely, not the bona fides of the applicants, but the necessity for establishing a new banking institution down there having regard to the services that were being performed by the old-established chartered banks in that part of the country. I think he would have refused the application if I had not made a personal appeal to him myself on behalf of the incorporators, who were not particularly friendly to me, by the way, on the ground, first, that they believed there was the necessity for a new chartered bank and, second, that they were quite capable of underwriting the whole initial $500,000, or whatever the initial paid-up capital was to be. On that basis the charter was granted, but it never became effective because unfortunately the chief promoter died quite suddenly and that ended the scheme.
With regard to this bill I have no objection, as I said at the opening of my remarks, to having it referred to the banking and commerce committee, but I warn my hon. friends to the left that it will be the burying place for this bill. We can see requiescat in *pace written on it right now-R.I.P.-it will never emerge from that committee, and certainly it never should in its present form. I will say that, and I will content myself with that.


Mr. G. H. ROSS (Calgary East):: Mr. Speaker, since I represent an Alberta constituency and feel strongly that it would not be in the interest of Alberta to pass this bill, I think I should set forth some of my reasons for opposing it.
In the first place I challenge the statement of the hon. member for Lethbridge (Mr. Blackmore), the leader of the Social Credit group, that such a bill as this had the approval of the former Minister of Finance, Mr. Dunning.
The object of this bill is to create a bank. The capital stock of the projected bank is to be issued to and vested in the provincial treasurer of Alberta in his official capacity, and shall be held by him and his successors in office on behalf and for the use of the
Alberta Provincial Bank

province. The directors are to be those persons who are, for the time being, members of the executive council of Alberta. Therefore the charter is being applied for by the corporate body known as the province of Alberta. It is to be a provincial bank pure and simple. The stock is to be owned by the bank and the directors are to be members of the executive council of the province. Mr. Dunning never offered in this house to assist in the creation of a bank owned and operated by a corporate body known as the province of Alberta. What he did was to offer to assist a group of Social Creditors should they wish to incorporate a bank and comply with the provisions of the Bank Act. Let me read his words, from Hansard of 1938, page 1861:
My suggestion is that inasmuch as the Social Credit movement boasts considerable strength in one province of the dominion, and from that point of view at least, the provincial point of view, is a movement of major dimensions, those who believe-
Mark these words:
-that the banking system can be employed to put into effect the Social Credit theory and that the banking system has unlimited privileges such as have been outlined by my hon. friends, have within the four corners of the Canadian Bank Act the opportunity of their lives. All they have to do is, of themselves-
Not the province, but the Social Crediters who wish to put their theories into effect.
-to form one of these institutions which we call a Canadian chartered bank. The procedure is all set out in the law. True, they will have to come to this parliament for a charter, and I shall tell them here and now that if the Social Crediters of Alberta-
Not the corporate province of Alberta, but the Social Crediters.

comply with that statute with which all other Canadian banks have to comply and with which they must comply to-day, I for one shall be pleased to do all I can to facilitate the passage through this house of a bill granting a charter to a Social Credit chartered bank. In that way my hon. friends would have, under their own control, all of the privileges, and it is my duty to point out also that they would have all the responsibilities of a Canadian chartered bank.
Later on be says, at page 1862:
Any group of citizens in Canada may come together for the purposes outlined in the Bank Act of Canada.
Any group of citizens, not a corporation.
I am suggesting to my hon. friends that they are a group of citizens in Canada; that those in Alberta who adhere to their theories are citizens of Canada, and that as citizens of Canada believing in the Social Credit doctrine they can see to it that only those who believe in that doctrine may have any control or say in the chartered bank they may form.

So that it was an offer made not to a corporate body, the province, but to a group of Social Crediters of the province; and I have no doubt that if a group of Social Crediters applied to-day for a bank charter, complied with the provisions of the Bank Act and put up their own money, the application would receive the sympathetic consideration of the house. But to-day these men want to put their hands into the treasury of Alberta and use the money of the province to finance and carry on this institution. Mr. Dunning never offered to assist any such proposition.
Banking differs from other businesses in that bankers handle money for other people on a very large scale. As the money is being handled for others on a very large scale, an additional duty is imposed upon this house when an application comes before it, to see to it that the persons who are to be entrusted with the handling of the money are persons who are qualified and who will probably make a success of banking. In the past successful public enterprises of this type have been organized quite differently. A separate corporation would be set up with a board of directors who were familiar with the business to be transacted by the corporation. The directors would be selected because of their sound business judgment and because they would be likely to make a success of the business to be undertaken. They were usually appointed for fixed periods and were subject to supervision by the government that granted them incorporation. The Hydro-Electric Power Commission of Ontario and other successful corporations were organized in that way.
But in the proposal before us the experience of ages is cast to the winds. The directors of the proposed bank are to be those persons who are for the time being members of the executive council of Alberta. Even the president is to be chosen from among them. None of them is a banker, and none has had any experience or training in business that would qualify him to be a director or manager of such an institution. There is no provision for continuity of policy or management. The government may change two or three times in the course of a year. If it does, the board of directors of this bank changes two or three times in the course of a year. Each board will have its own ideas as to how a bank should be run. Much experimenting will be done with the depositors' money. Hard-earned savings will be frittered away in carrying out foolish experiments. Are we going to be parties to such recklessness? Furthermore, they do not want to apply to this bank

Alberta Provincial Bank
section 30 of the Bank Act which provides for the removal of directors for maladministration or other just cause.
Let us examine a little more closely the record of the first directors of this projected bank. Their past record should be of assistance in determining whether they are fit and proper persons to manage such an institution.
To secure election in 1935, Mr. Aberhart, the present premier of the province, promised a dividend of $25 a month to each and every adult in Alberta. He also promised interest-free production loans of $1,500 to each producer. Some of the people were bold enough to inquire of him where he was going to get the money to operate this bank and where he proposed to get the money to make these loans. He told them in all sincerity that he was going to do it with a fountain pen and entries in books which he would keep for this purpose. All he asked was eighteen months time within which, presumably, to train the fountain pen.
After their election the first step towards reaching their goal was to indulge in a covenant-signing crusade. The covenant signers were asked to turn over each year one-half of their crops to the government to help pay for this $25 a month dividend.


Charles Edward Johnston: Where does the hon. gentleman expect to go when he dies?


An hon. MEMBER:: Alberta.


George Henry Ross: Several signed
the covenant, but rumour has it that they first transferred their property to their wives. Then they took good care to see that their wives did not sign. The covenant-signing campaign collapsed after costing the province $10,000. By this time the farmers of Alberta had begun to realize that dividends did not depend on fountain pens and book entries but that they had something to do with the farmers' crops.
Then came a prosperity certificate proposal, a certificate intended to take the place of money, a scheme devised to get credit into the hands of the consumers. They managed to get rid of much of this spurious money among the public. It is to be noted, however, that none of the members of the government had sufficient faith in the scheme to accept any part of their pay in this spurious money; they required when they were paid to be paid in the coin of the realm. After thousands of dollars were spent on prosperity certificates, the scheme was dropped.
The Aberhart government then imported two experts from England:	Powell at $12
a day and a bonus of $4,000; the other expert, Byrne, was given a ten-year contract at $6,000 a year. These men conceived it to be their duty to make a frontal attack on the banks. The idea was to control the banks by placing them under the domination of a social credit board, the members of whom knew nothing whatever about banking. They ignored the fact that banks come under federal jurisdiction. The necessary legislation was enacted by the province of Alberta, but it was duly vetoed by the dominion government.
Having failed in their attack on the banks, they opened up a number of treasury branches throughout the province. At last they visioned their utopia where the fountain pen would play its full part. These treasury houses are still being extended from time to time. The more houses they open, the more money they lose. Already they have cost the province more than a million dollars.
Mr. Aberhart and the other members of the executive council have for years been proclaiming that banking is a racket, that credit can be extended indefinitely by making bookkeeping entries with a fountain pen, and that the issue of unlimited credit is the key to prosperity. His government have defaulted in $12,000,000 of Alberta bonds and $6,000,000 of provincial savings certificates. They have arbitrarily repudiated one-half of the interest rate payable on Alberta's debts. And these defaults and repudiations were not dictated by necessity; they were done deliberately and gloried in as representing real statesmanship.
The hon. member for Lethbridge (Mr. Blackmore} in the course of his remarks complained that many branches of banks throughout Alberta were being closed. Can any one wonder at the banks closing their branches under such circumstances?


John Horne Blackmore: Mr. Speaker, would [DOT]the hon. member permit a question? Did he notice that far more banks closed in Alberta before the Social Credit government went into power than closed afterwards?


Mr. JAQUES:: And what about Saskatchewan?


George Henry Ross: The interest cut was held illegal by the judicial committee of the privy council, but the government is now defying the courts by hiding behind the immunity which a government enjoys of not being suable without its consent.
(Expiry of hour for public and private bills.)

The Budget-Mr. Quelch



THE BUDGET


[Stage Direction]
The house resumed 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, and the amendment thereto of Mr. Coldwell.
Mr. VICTOR QUELCH (Acadia):: This afternoon, just before the leader of the opposition (Mr. Hanson) took his seat he made a plea to hon. members in this corner to restrict their discussion of this budget. I would suggest that the leader of the opposition would have been in a better position to make that appeal if he had lived up to it himself and if the hon. member for Danforth (Mr. Harris) had already done so. I make that statement because the leader of the opposition and the hon. member for Danforth have monopolized in their discussion of this motion over five hours of the time of the house. Therefore it is hardly being logical or consistent to ask us at this time to limit our contributions to the debate.
In discussing the budget it is necessary to keep in mind that it is a war budget, and that in time of war the major objective becomes that of winning the war and defeating the enemy. All the resources of the nation must be organized to that end. This means that great sacrifices will have to be endured. It therefore behooves the government to see to it that those sacrifices are imposed upon the people in the most equitable way possible. It is absolutely essential that during the war we maintain a high morale among the people in order to build up the will to win. Such a spirit is usually built up over a number of years. It is not usually prevalent among a people that have been ground down by poverty, misery and want, unless it can be shown that that condition exists as a result of the nation being deprived of a fair share of the resources of the earth. In such case of course the people will be willing to fight to change that condition.
But that is not the position of Canada. We have almost unlimited resources. In spite of that we have had a great deal of poverty, misery and unemployment in this country during the past ten years. Can a people who have been in this unhappy plight be enthusiastic about fighting for a continuation of such a condition? Unfortunately that is the only course which has been or is presenting itself to many people since the declaration of war. Despite this handicap, a high morale and a fine esprit de corps would prevail among 
the Canadian people if there were strong leadership; but unfortunately that has been sorely lacking in Canada during the past six years. If under strong leadership immediate evidence were forthcoming that we were putting forth our maximum effort and at the same time insisting upon the greatest equality of service and sacrifice, I believe that confidence could quickly be restored in this nation. Would anyone in this house be so foolhardy as to suggest that either of these things has been accomplished during the past ten months, or since the declaration of war? Ten months after the declaration of war we still have men in Canada pleading for the opportunity to make some contribution in this war. Industry is fighting to obtain orders. Now by this budget we are given to believe that all this is to be changed. For instance at page 1014 of Hansard we find this statement made by the Minister of Finance (Mr. Ralston):
Financial provision can be made and will be made for whatever it is physically possible for us to produce or to procure in the way of war services, supplies and materials. The limits of our effort are not fiscal; if there are any such limits they are physical, mental and moral-by that I mean the physical limits of our resources and the mental and moral capacity of Canadians to bear burdens and make sacrifices.
I would congratulate the Minister of Finance upon that statement. But it is comical to find that statement appearing in the budget speech. For the past five years we have advocated that principle in this house, and have always been ridiculed for stating, as we have on various occasions, that anything that is physically possible and desirable can be made financially possible. Last year in the banking and commerce committee the governor of the Bank of Canada stated that that was true, and now we find it stated in the budget speech. We have referred to the fact time and again in this house; we have pointed out that it has been physically possible during the past six years to increase greatly the production of this country, to establish a higher standard of living so that people would not have to go on relief. No one would dispute that. The governor of the Bank of Canada agrees that what is physically possible and desirable is financially possible. Therefore the only conclusion we can come to is this, that since it was physically possible to make a higher standard of living available to the people of Canada, and since it was financially possible, tihe only possible reason the government had for not doing it was that they did not consider it desirable.
The Prime Minister (Mr. Mackenzie King) has always been fond of expounding fine principles in this house. Unfortunately he has

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failed miserably in putting them into effect. I am not surprised that the hon. member for North Battleford (Mrs. Nielsen) stated this afternoon that she did not believe various statements that were made by this government. How could anybody believe that the various policies that they enunciate today will be put into effect, in view of the stand this government has taken time and again in the past? Have the people of Canada forgotten the statement made by the Prime Minister in 1935 that currency and credit would be made available in terms of public need to meet the domestic and social requirements of the Canadian people? Would any hon. member dare to say that that promise has been carried out? Have we forgotten the policy propounded by the Prime Minister at the outbreak of the war, and again on May 20, when he made this statement as recorded on page 46 of Hansard:
The unprecedented threat to the allied powers and ourselves must be met at once by immediate action. Production must be accelerated to its limit. Training must be intensified.
Does anyone suggest that that has been carried out during the past ten months? Can it be said that production has been accelerated to the maximum, while we still have thousands of men in Canada pleading for a chance to take part in the country's war effort? During the past five or six years, while Germany has been busily engaged in amassing war materials and thereby reaching a strong war footing, we have been busily engaged in amassing credit and gaining a so-called strong financial position. While Germany said in effect, "To hell with money" and spent itself into a strong warlike machine, we have been busily worshipping at the shrine of money and saving ourselves into a state of insecurity. I say that because wars are not fought with money, they are fought with men and materials. Germany had the materials by September of last year, and we apparently had the credit. But credit is merely faith in our ability to deliver goods and services as, when and where required, and unless goods can be delivered when required, that faith is destroyed. I wonder how long the people of this nation will continue to have faith in a system which for the past five years has wrecked the lives and health of thousands upon thousands of the people of this country, and in the past few months has seen nation after nation destroyed under the iron heel of fascism.
In peace time we have urged that production should be maintained at its maximum, or at least at a level sufficiently high to provide to the people of Canada a decent 95826-811
standard of living. We have repeatedly presented the physical picture, showing that industry was only producing at less than fifty per cent of its capacity. We have pointed out that this dominion has great natural resources barely touched, large reserves of energy and a large surplus of unused labour in the form of the unemployed, and in addition a large favourable balance of payments, a position of which we might well be proud but for the fact that on the other side we had a million or so people on the verge of starvation and destitution. And repeatedly we have asked in this house this question: Why should we not put the unemployed to work in the industries that are working only part time, and thereby produce the goods of which the people are so greatly in need? We always failed to get a reply to that question. Many hon. members have risen in their places and tried to place the blame upon industry. They have stated that industry should have had more confidence; that industry should have expanded and employed the surplus labour. I would point out that you cannot blame industry. If industry was not able to sell its restricted production, how could it possibly have sold its production if it had expanded?
We have stressed the reason for this condition, and it is necessary that we should understand it at this time in discussing the budget. We have contended that this condition is due to the fact that industry is not self-liquidating; that industry, owing to certain practices that are inherent within the system, does not create an effective demand for its own production except in times of abnormal capital goods production, and during the past ten years capital goods production has been sorely lacking. We have stressed the fact that if the Canadian people are going to be put in a position where they can buy the production of the country-and I think the house would agree that the only point in having production is in order that you may have the consumption of it-then we must maintain a certain definite relationship between the production - of capital goods and the production of consumption goods. That relationship is this: You must have at all times a sufficient volume of capital goods production so that the salaries, wages and dividends paid out in that production will be at least equal to the deficiency of purchasing power which exists as between the total prices of consumer goods and the monetary demand against them. If that equilibrium is not maintained, it will mean there will not be an effective demand against the production of the country. Production will become restricted;
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unemployment will increase and you will find yourselves in the vicious circle of deflation. We therefore contend that it is necessary for the government to take such steps as may be necessary to maintain that equilibrium by instituting national projects such as road building, reforestation, slum clearance, the elimination of level crossings and so forth.
On the other hand, in time of war we have an entirely different situation. The production of armaments means an increased production of capital goods. In turn, that means an increased demand against consumption goods. So long as we can increase production to satisfy the demand for war purposes and at the same time satisfy the demand for consumption goods, there can be no justification for increased taxation. It is only after the maximum capacity has been reached that it will be necessary to increase taxation. Otherwise excessive taxation is bound to result in an actual retarding of production. If there should be in Canada certain commodities of which there is a scarcity, for instance such commodities as are paid for by foreign exchange, and it should be desirable and necessary to reduce the demand against those commodities, I maintain that the only sound way to do that is by rationing rather than by attempting to reduce the purchasing power of the people by a heavy increase in taxation, because, when you reduce the purchasing power of the people by wholesale taxation, as exemplified in this budget, you are going to retard and so restrict the demand against the commodities of which we have a surplus. In the near future we shall probably have a great deal of trouble in selling our primary products, because we have lost a number of our markets in Europe. What is going to be the result of this budget? It will further increase that problem and further restrict the demand against commodities of which we have actually surpluses in this country at the present time. This is called a war budget. Certainly it is not a patriotic budget, because it is going to retard our productive capacity; it is going to restrict the demand against goods of which we have a surplus, and therefore make it so much harder to expand our production.
During the past five years I have pointed out that our production has been restricted ever since the Liberal party came into power in 1935. I have pointed out how the Minister of Finance, instead of following the policy laid down by the Prime Minister in 1935-that is, that currency and credit would be made available in terms of public need to meet the domestic and social requirements of the Canadian people-has been attempting to reduce the expenditure by the government to fMr. Qiifllch.J
the amount procurable from the pockets of the Canadian people. The result has been the restriction of production in the face of actual, physical want. Whilst Germany was busily expanding her production to the maximum, the minister's deflationary policy kept thousands of people in Canada idle, although we could have very well utilized the services of those people to build up our defences and increase the production of commodities so that the demand created by the money paid out for the strengthening of our defences would have been satisfied by the goods produced by industry.
So, Mr. Speaker, I would say that those people in this country, in England and in France, who have been guilty of this financial policy of restriction in the face of the great armament production that was going on in Germany, have been more guilty of treachery to these nations than many people who have been actually paid servants of Hitler. There is no question of it. I think we all realize to-day that Germany has gained her successes not by superiority of man-power but through treachery in various forms among the allies. Not the least of those acts of treachery were those policies imposed upon the allied nations under which it has been impossible to expand our production to the extent to which it should have been expanded. We had idle men; we refused them the right to work, while Germany was making every man work to the maximum in building up the greatest war machine the world has ever known. What was the situation here? We had half a million men unemployed. Am I not justified in calling that the greatest act of sabotage Canada has experienced? Those men who have been responsible for our financial policy during the past six years are the grand saboteurs of this country. The other day the hon. member for Parry Sound (Mr. Slaght) said we should hang people guilty of treachery. I said then, and I say now, that we should make sure we hang the right people.
On the other hand it is interesting to note how Germany, a country that was destitute and without capital in 1932, has been able to build up one of the greatest war machines this world has ever seen.


Paul Joseph James Martin: And at what expense to the people!


Victor Quelch: I am going to deal with that.


Paul Joseph James Martin: I do not mean financial expense.


Victor Quelch: I was in England two
years ago, during the crisis of that time, and I met a friend of mine who had just come

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back from a six weeks' tour of Germany. That was not a Cook's tour; he and his friends took a car and travelled through the country. He said generally speaking they found contentment in Germany. That was in 1938; since then there has been a big change. The standard of living has been reduced very considerably, and I am going to explain why. When I am dealing with the financial policy of Germany, however, I hope no hon. member will think it necessary to rise in his place and ask me if I am advocating fascism or nazism. Our policy is the very essence of nazism. Nazism believes in centralization of power; we believe in the decentralization of power. Nazism believes in the greatest possible regimentation; we believe in the greatest possible freedom. But I would ask this: Just because Germany uses tanks, would it make us nazis if we used tanks also? Just because Germany uses dive bombers, are we nazis if we use them also? When the Prime Minister asks this parliament to grant him dictatorial powers, does that make him a Hitler? Because we have conscription and Germany has conscription, does that make us nazis. Therefore, if Germany has had a sane monetary system in the past few years, I am not advocating nazism, I am sure, if I advocate that we should have adopted a similar financial policy.
I am going to quote from a speech made by Doctor Schacht formerly president of the Reichsbank. This speech was made on November 29,	1938, to the Deutsche
Akademie. It was entitled "The Financial Miracle," and from it I quote the following:
The public finances of Germany were in a hopeless state in 1932. Every increase in tax rates only caused a decline in revenues.
And I would especially refer that statement to the Minister of Finance. Doctor Schacht continues:
Those symptoms of economic collapse were of necessity reflected in an unexampled social distress. A shocking proof of this are the statistics of unemployment, which in the winter 1932-33 exceeded the six million mark and which together with the invisible unemployed amounted to about seven million.
That is the condition which existed in Germany in 1932. In the article Doctor Schacht points out that Hitler called him and told him he wanted to put into operation a financial system which would make it possible for Germany to expand her production to the maximum. Then he goes on:
All government assistance was from the very beginning used to bring about a rise in production, first in a so-called work creation programme through credit assistance for reconditioning, repairs and similar things, and
afterwards through the great armament programme which was steadily expanded. The extent of this programme and of the autohighway construction which was undertaken soon made it clear that these two tasks alone would be sufficient to overcome the existing unemployment, so that the other work creation measures soon became superfluous.
Naturally this work creation and armament-programme could only be set under way by the state and could only be carried out by financing on a large scale. No capital at all was available for this financing. In fact money creation had to be helped along. . . .
The fact that the newly created money would' be covered by newly created goods was not the only point; the type of goods also had to be considered. Simply expressed, the problem was as follows: The credit money, made available for the armament programme, produced a demand for consumption goods, in so far as it was paid out in the form of wages and salaries. However the armament manufacturers deliver military goods which are indeed produced but not consumed. This leads to two conclusions: First, care must be taken that in addition to armament production, a volume of consumption goods is produced which is sufficient for the needs of the population, including all those working for rearmament and, second, the less consumed, the more workers can be allotted to armaments.	[DOT]
The point I bring particularly to the attention of hon. members is that they did not reach maximum production until 1938. Up to 1938 they were expanding their production of war material and consumption goods. Therefore at that time they were able to put forward the maximum war effort, and at the same time maintain a comparatively high standard of living. Then he goes on to say:
Spring 1938 brought a change in our finance policy, because at that time German economy had reached a stage of full employment. As soon as an economy has made use of all available labour and materials, any further credit expansion is not only senseless, but actually harmful. For then newly created money can no longer effect a further increase in goods production but can only bring about competition for the available labour and raw materials; and such a competition must necessarily lead to an increase in prices and wages.


Paul Joseph James Martin: They ultimately disagreed, too.


Victor Quelch: At least we can judge by
results in Germany.


Paul Joseph James Martin: But Doctor Schacht ultimately disagreed.


Victor Quelch: No, I do not think he did. He was placed in a position of even greater importance than the one he held at that time. As a matter of fact, he was promoted because of work well done.


Paul Joseph James Martin: The hon. member must
mean subordinated. It is not correct to say that he was promoted; Doctor Schacht was actually demoted. He was taken out of control.
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Victor Quelch: He was placed in control
of foreign exchange affecting Germany, Italy and Japan. Surely that is an important position.
If our production were geared up to its maximum capacity, then it would be necessary to increase taxation. But such is not the case tb-day. Our production can be greatly expanded, and to-day we are faced with the difficulty of disposing of a great many of our primary products. To expand taxation ;at this time is bound to mean a restriction in demand against production of primary products. We have lost a number of our markets, and by this form of wholesale taxation, as suggested in the budget brought down by the Minister of Finance, we are just adding to the difficulty of making a distribution of our primary products among our people.
Again I say that if there are certain commodities in Canada which are considered to be scarce, which have to be purchased with foreign exchange, then surely the logical thing to do is to ration those commodities so as to make sure of a fair distribution, rather than cut down the income of all people, and thereby reduce the demand against those commodities which can be produced in abundance. Therefore I say it is not a patriotic budget, but rather one which will actually retard production at a time when we should be expanding production to its maximum.
With these thoughts in mind I move the following amendment to the amendment:
That the amendment be amended by adding thereto the following words:	_
"Furthermore this house is of the opinion that there should have been no increased tax burden placed upon the consumer until Canada attain maximum production of desired commodities or full employment by issuing through the Bank of Canada, currency and credit in terms of actual public need."
I hope the Prime Minister will not take the same attitude to this amendment as to the one moved a few days ago. This amendment I would point out is different. It refers to taxation and production. May I quote at this time what the Prime Minister said only a few days ago respecting the Bank of Canada:
Those who are voting for this amendment are voting to give the government power to relieve itself of all responsibility of financing Canada's war effort simply by passing an order which will enable it to transfer that whole responsibility to the Bank of Canada, an institution which has its home in this city.
And again:
We shall be ridding ourselves of all responsibility for what is required in the way of finance to carry on Canada's war effort, and we shall be turning it over to a single institution which is located on Wellington street not far from these houses of parliament.

How many would agree with that definition of the Bank of Canada? Do we recall the statement made by the Prime Minister in 1935 respecting the need for a Bank of Canada, in order to control currency and credit in terms of public need? To those who remember that statement, what must they think of the definition I have just read? When I heard the Prime Minister's statement the other day I was amazed. As a matter of fact I believe I might say I was thoroughly sickened to think that a prime minister of this country when speaking to the members of the House of Commons could be guilty of such puerile nugacity.
Perhaps hon. members recall what was said last year by the former Minister of Finance about the Bank of Canada. Last year he stated that parliament, through the instruments it had created, now effectively controlled currency and credit, day by day, week by week, month by month; furthermore he stated these instruments were the Bank of Canada and its directors, and that this parliament through the Bank of Canada controlled currency and credit. Yet the Prime Minister states that the Bank of Canada is an institution on Wellington street, and that if we place responsibility of finance in the hands of that institution, we would be evading all responsibility. Yet, I repeat, according to the former Minister of Finance, we control currency and credit through that institution. Undoubtedly we have a definite responsibility for the activities of that institution. Perhaps I might be allowed to quote a few words from a speech made by the Prime Minister on August 2, 1935. He said:
Until the control of the issue of currency and credit is restored to government and recognized as its most conspicuous and sacred responsibility, all talk of the sovereignty _ of parliament and of democracy is idle and futile. To regain for the nation what^ has been lost and to secure a properly constituted national central bank, will continue to be a first objective of Liberal effort.
He said it was a conspicuous and sacred responsibility to control currency and credit through the Bank of Canada, and yet to-day he says it is an institution on Wellington street and if that institution finances the war, we would be evading all sense of responsibility. I do not think the Prime Minister is doing credit to himself or to this government when he indulges in equivocations of that kind.
The budget shows that large sums will be needed in addition to the amounts to be secured by taxation. They may be secured in three ways: by borrowing the savings of the people; by borrowing from the chartered banks, which means monetary expansion; or by borrowing from the Bank of Canada, which

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also means monetary expansion. If we are to borrow the savings of the people, it will simply mean that this government takes the stand that we are responsible for providing a safe investment for the people. Although we have what might be called a smoke screen by which we try to convince the people that they are financing the war through their purchases of savings certificates, we all realize that the greatest proportion of bond issues will be purchased by financial corporations rather than by the savings of individuals. When we finance by borrowing the profits of corporations, it merely means that we are placing a levy for all time against the people of Canada in order that a tribute may be paid to a small class of society.
On the other hand, we have the power which we should exercise of issuing what money we need through the Bank of Canada. That is what the people believed was the purpose of the formation of this bank. The Minister of Finance may suggest that if we finance in that way it will mean increasing the amount of cash in the tills of the chartered banks, thereby making it possible for them to increase their loans and thus bring about inflation. That charge was made by the former Minister of Finance. I would stress the fact that it would be an easy matter to amend the Bank Act in order to compel the chartered banks to increase their cash reserve requirements, thereby preventing that expansion.
If the minister should contend that the banks could not operate on that basis, that there would not be sufficient profit for them, then I say what I have said before on many occasions: We should nationalize our whole banking system. Personally I am in favour of that. When men who are directors of banks and also directors of industry, have the power to expand their loans up to ten times the amount of their cash, it means that we have given them the power to effect the price level to their own advantage. I do not think that is a satisfactory state of affairs. Credit is a national matter, and it should be controlled absolutely by the people, for the use of the people.


Mr. CLARENCE GILLIS (Cape Breton South) :: Mr. Speaker, I regret that I cannot conform to the wishes of the leader of the opposition (Mr. Hanson). I feel that I must take up some of the time of the house in an endeavour to place before it my opinion of the budget as well as the opinion of the people whom I represent in this parliament. This budget does not impose many new direct taxes, but the poor of this country must still continue to pay the indirect taxes which
were in effect, such as the sales tax, as well as the new import duty of ten per cent which is imposed upon the necessities as well as the luxuries of life. I have not much to add to the position taken by this group on the budget. This has been made clear already by the hon. member for Rosetown-Biggar (Mr. Coldwell) and others.
It is significant to note that although the income tax exemptions are being placed quite low, the wage-earners and farmers of this dominion still come within those exemptions. This indicates quite clearly how low the income of our people actually is. The income of an average wage-earner in Canada is probably little above the exemption for a single man, namely, $750 a year. According to figures I have seen, the average farm income is even less than that, being about $500. These new exemptions will indicate that many of our people are in receipt of incomes much lower than is required for a minimum decent standard of living. My guess is that these exemptions will cover the majority of our people.
As far as the miners of Nova Scotia are concerned, they have already suffered a serious reduction in their standard of living. Their wages have remained stationary since the outbreak of the war, while, according to information which I have received as recently as yesterday, their standard of living has been reduced by about thirty per cent. I am in receipt of a resolution outlining the views of 5,500 organized miners in that section, and they claim that their cost of living has increased approximately thirty per cent while wages have remained stationary. They have lost that amount of purchasing power which, in the final analysis, is really wages.
The budget also proposes a two per cent income tax against wages. During the depressed days from 1929 to about 1934 the coal company in that particular section, which employs practically all of the gainfully employed men, was in the habit, where a man lived in a company house and purchased his coal from the company, of waiving the rent. During a time when the government of this country and many charitable organizations were providing money for the alleviation of distress caused by unemployment and parttime unemployment, coal and rent bills were piling up against these miners. Work has picked up somewhat since 1934, but these large debts had accumulated and they are now being deducted from the envelopes of the men. I assume from the budget speech that the income tax will be based upon the total earnings of these men and no deductions will be allowed for these back payments. This tax will be assessed against the total wage
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without allowance being made for the payment of a relief bill, as it were, to the coal company.
It is significant to note that while the income tax is quite steep, a man with an income of from $10,000 to $50,000 still has a handsome income left after all taxes have been paid. However, it is with the corporations of the country that I desire to deal particularly this evening. A few days ago there was an editorial in one of the Ottawa papers to the effect that the big industrialists and financiers had forced France into capitulation. In this great hour of trial, democracy must be made to work so that the morale, faith and determination of our people will remain steadfast in the days that lie ahead. For the common people democracy can be made to work effectively only to the extent that they are given an opportunity to solve their problems cooperatively, only to the extent that monopolies and huge corporations are investigated and controlled by government for the public welfare. If this is done, our own people will be given renewed hope and vigour, and the people now under Hitler's heel will be given a living example of democracy at work.
I have already said once in this house that in my opinion and in the opinion of the people of Nova Scotia, that province is largely in the hands of and dependent on the Dominion Steel and Coal Corporation. But hon. members do not have to take my word for it. In a brief dated March 10, 1934, H. J. Kelly, Vice-President and General Manager of Dosco, stated:
According to the records of the workmen's compensation board, this company and its subsidiaries pay approximately 40 per cent of the total industrial payroll of the province of Nova Scotia in normal times. It is estimated that at least 100,000 people are directly affected by the operations of this company and indirectly the whole population of Nova Scotia is affected.
In company with all the other workers employed in the Dosco mines, I watched the development of the corporation. It received its charter in 1928. In 1930 it took over the properties of the British Empire Steel Corporation and since then it has acquired various other companies and properties. To-day we find that Dosco owns and controls some twenty-six companies. As a result of purchases and financial reorganizations, this monopoly now controls:
Coal mines in Cape Breton county (north and south of Sydney harbour), in Pictou county and in Cumberland county, Nova Scotia.
Iron ore mines, containing about one-sixth of the world's iron ore, at Bell island, Newfoundland.

Steel plants at Sydney and Trenton, Nova Scotia.
Steel car works at Trenton, Nova Scotia.
Shipyards, marine railways, et cetera, at Halifax, Nova Scotia.
Steel fabricating plants and fence manufacturing and steel wire plants at Walkerville, Ontario.
Wire and nail manufacturing plant in Toronto, Ontario.
Rolling mills and steel wire plant in Montreal, Quebec.
Coal docks at various St. Lawrence ports.
Coal shipping steamers.
Railways in Cape Breton and Cumberland counties, Nova Scotia, and a switching and junction railway at Walkerville, Ontario.
Wire, nail and galvanizing plants in Saint John, New Brunswick.
The only large steam electric power plant in Canada, at Glace Bay, Nova Scotia.
Timber limits in New Brunswick and Quebec.
The total assets of Dosco and its subsidiaries at the end of 1939 appear to have been in the neighbourhood of $80,000,000.
All through the years from 1928 to the present, when mines were closed up and families thrown on relief, when the workers were persuaded to accept cuts in wages and had to be satisfied with part-time work, Dosco and its predecessors kept buying up various companies. Thus in 1928 Dominion Steel Corporation bi ught the Peck Rolling Mills.
In 1930-32 Dosco bought the Canadian Bridge Company, and its subsidiaries, and Canadian Steel Corporation from the United States Steel Corporation.
In 1937 it bought Graham Nail and Wire Products.
In the same year Dominion Coal bought the Cumberland Railway and Coal company from Dosco for $1,000,000. I am a worker and cannot be expected to understand the mysteries of modern legal and financial manipulations, but the workers would like to know why it was necessary for the coal subsidiary to buy a railway and co$l company from the parent company.
In 1939 Dosco bought the Sarnia Fence company.
Why were all these purchases made? Who owned these companies formerly? What was their record of earnings and what were the prices paid? It should be remembered that on the board of directors of Dosco are men like Sir Herbert Holt, Mr. G. H. Montgomery, Senator Webster, Mr. J. H. Gundy and Mr. J. A. Kilpatrick, who have their fingers in many industrial and financial pies in this and other countries. I am not saying that Dosco

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has at any time done anything improper. I do not know. But I do say that we should have more information on these and other transactions. There should be a thorough investigation of the records and history of this monopoly which, according to its own vice-president, affects directly and indirectly the life of all the people of Nova Scotia.
Hon. members may not know that a royal commission investigated part of the situation in 1926. It found many millions of dollars of watered stock in the companies which later became part of Dosco, although it is only fair to say that the Dosco reorganization seems to have squeezed out most or all of the water in the old companies. The same commission also found that the coal company used to sell its coal to sister companies at fire-sale prices, thus reducing the earnings of the coal company and depressing the wages of the miners. According to the report of the Duncan commission in 1932, this improper practice had also been abandoned by that time. The point, however, is that the knowledge that such things were done at one time gives rise to suspicion that other things may have been done since. It is no use indignantly denying it. It is the government's duty to learn the facts and to act on them.
I should like on this question to quote from the Financial Post of March 30, 1935, a statement made by Colonel G. S. Harrington, at that time premier of Nova Scotia. The Financial Post says:
He said that the new issue of $25 par value preferred stoek was "pure, unadulterated water," while the market value of the stock had been manipulated so that large fortunes had been made by "some gentlemen in this province."
"Some gentlemen have made fortunes out of this. It is extraordinarily unfortunate at this time, when labour wants its share in the earnings, that there should be stock manipulation."
I think Colonel Harrington should be an authority on that question because he has taken a great deal of interest in the coal industry in Nova Scotia ever since I have been employed by this company, and I have considerable respect for his judgment in matters of this kind.
In 1938 a royal commission under Mr. Justice Carroll investigated the Acadia Coal company, a subsidiary of Dosco. I wish to quote a few findings and statements of the report of this commission which appeared in the spring of last year, 1939:
Your commissioners readily admit their inability correctly and accurately to dissect or untangle intricate matters of accounting; but this at least may be said, that from the year 1925 until the end of 1932 the Acadia was in a comfortable position financially, and showed a surplus during those years of from $460,219.42
to $1,076,060. That is shown by schedule "B" which apparently means that the company had a balance at credit during those years which amounted to $583,630.25 at the end of 1932. During that period there was paid as dividends on first and second preferred shares of Acadia the tidy sum of $334,770.41. One of those dividends, amounting to $148,382.25, was paid on December 31, 1928, notwithstanding that the profit shown for that year amounted to only $100,976.28.
Schedule "C" indicates some rather startling facts. In 1925, when the loss of Acadia is shown to be $128,469.66, the Scotia company took from Acadia cash to the amount of $1,921.21. In 1932, when the loss of Acadia is shown to be $180,174.38, the Scotia company obtained from Acadia the sum of $724,895.87 cash; and on the 19th of January, 1933, the day that the receiving order was granted against Scotia, that company received from Acadia the sum of $20,000 cash, and on that day the memorandum shows that the Nova Scotia Steel and Coal Company owed Acadia Coal Company a total of $1,703,410.81 . . .
There was nothing illegal from the point of view of authority in the various matters of borrowing the dividend payments already mentioned. In fact it cannot be said there was anything illegal in those transactions from any point of view. Legality of action, however, is one thing, and preserving and safeguarding the industry and all that that implies is quite another thing.
It is therefore the considered view of your commissioners that some legislative action should he taken in regard to the powers of holding companies.
None has been taken.
To some people this story may be just another story of accepted financial manipulation. I know that this story affected human lives. The result was that the entire town of Thorburn became a ghost town and a thousand souls became destitute.
Only to-day, from that particular section, I received a letter from a lady. I should like to read part of it, because it has a bearing on the matter of the manipulations referred to in the report of the Carroll commission:
I am writing to you as' a last gesture of a number of destitute and starving people.
It would be too long a story to try to tell you half, and it is unbelievable in this dear land of ours-what we have suffered since the government took	away	our	employment. Now
there is not even desultory road work-and no direct relief-since three weeks, only for sixteen party people. Over 100 got nothing.

Dozens of committees have gone to Halifax and also to Ottawa. No one will come and no one will listen. We have no one to help us, when all we ask for is work and some way to once more earn our living.
That comes	from	a little mining	sectionwhich was closed as a consequence of the manipulation	which	is	mentioned	in the
report. It is seven miles from New Glasgow; it has no railroad and is practically in the wilderness; the houses are tumbling down;

The Budget-Mr. Gillis
there is no lighting system; and people who have given the best years of their life to the development of the industry are in great distress. In my opinion the enterprise was scrapped by high finance.
I say that the federal parliament is directly concerned in this matter. From 1897 to 1939 this parliament granted to the various companies which were later combined in Dosco a total of about $20,000,000 in bounties, subsidies, subventions and the like. In addition to this direct aid, a large portion of the eight and a half million dollars or so paid to the railways in the last ten years to assist in th'e movement of Canadian coal to central Canada has gone to help Nova Scotia coal. This is an indirect assistance to Dosco, since it widened	its markets at public expense.
These figures still leave out of account the enormous benefits granted the industry through the tariff, tax exemptions and the like. Thus the ten per cent import duty proposed by the present budget will, in effect, act as a subsidy to the coal industry.
I am not arguing that this assistance should not	have	been given	or	should bestopped. I	said	the other	day	that theminers of Nova Scotia appreciate this assistance very much. But I do say that it is the duty of this parliament and the government to	make	sure that	the	assistance
goes to improve the condition of the workers and people of Nova Scotia and that it is not misused for the enrichment of the owners of the industry or wasted through inefficiency. Down to March 31 of this year Dosco had received some 84,407,000 in war orders. Is it not our duty to investigate thoroughly the record of this corporation and its present standing? If the people of Canada are to go on providing public money to assist this enterprise, is it not time they took it over and ran it for the benefit of the workers in it and of the community generally?


Georges Parent: Order. I made a ruling the other day with regard to the reading of speeches. The hon. member is apparently confining himself very closely to his manuscript.


Clarence Gillis: Mr. Speaker, I was simply endeavouring to do what I noticed has been done by almost every hon. member who has taken part in the budget debate. The minister himself, when he presented his budget; the leader of the opposition, and practically everyone who has spoken to-day has, and I think correctly, used notes.


Georges Parent: The other day, when I was making a statement on this subject, the Prime Minister (Mr. Mackenzie King) asked whether it referred to ministerial statements. I said no, that the practice and the custom of the house had been to allow ministerial statements to be read. The leader of the opposition is in somewhat the same position; he to-day was giving a statement which appeared to be on behalf of the group of which he is the leader. No other hon. member who has spoken to-day has used his papers to the same extent as the hon. member who has just taken his seat. I would ask that he desist from doing so.


Clarence Gillis: Thank you, Mr. Speaker. I am endeavouring to make a statement on behalf of the people I represent, on a very complicated question, and the information I am giving is not my own. I have endeavoured to present it through various documents, such as the Financial Review for 1939, the Financial Post, and different sources of information from which I have selected this material. At this particular time I am following closely the information contained in these documents because I do not want to make any statements which are not in accordance with the facts. But I have not any intention of reading my speech so far as it consists of the comments which I intend to make upon these notes.


Georges Parent: I do not think there
would be any objection to the hon. member reading from documents which he wishes to quote, but so far as I have seen, much of that part of his speech which he has been reading has been in the nature of comments on the documents and figures which he has quoted. I would ask the hon. member, when he is quoting, so to state, and then to continue his speech in his own words.


Clarence Gillis: Thank you, Mr. Speaker.
Finally, I want to put on the record what the miners of Nova Scotia have to say about the situation in a brief which their union has prepared and which was presented by the miners to the conciliation board that is sitting at the present time in Pictou county and endeavouring to iron out the situation there. This is what they say:
In determining the amount of wages payable we believe that in the past the human factor has been required to take second place and that profits, dividends, and investment earnings have been given first place, and have been the principal aim and concern of the management. Perhaps that is natural under our economic system, yet we believe that there is need for a change. What is demanded of the workman is his labour, and when he has given that he

The Budget-Mr. Gillis
has cooperated with the owners by giving all that is demanded of him. The workman does not share in the management of the industry, he does not control its policy or direct its destiny, he does not decide what dividends shall be paid, what borrowings shall be made, what expansion or development shall be undertaken; has had no voice in deciding corporate set-up, appointment of managers, or directors, or affiliations with other industries. He gives his labour, others manage the industry. Sometimes an industry fails due to factors over which the management has no effective control and often it fails as a result of bad management. In either case the workman is not responsible for the failure. He has given his labour, he has done what was demanded of him, and having done so, he should be the last to suffer, and he should not be obliged to suffer if his suffering can be avoided by action within the control of the management.
It is said that investors are entitled to a return on their money invested. We cannot agree that that is always so. Often the money invested is surplus money which the owners do not require for the reasonable needs or even luxuries of themselves or their families, they have it to spare and have invested it in order to make more money. Often, too, the money is inherited, money not earned by the investor. We believe that a reasonable living wage for the workman who gives his labour and who needs such a wage in order to get even the minimum requirements of subsistence should take precedence over earnings on such invested capital, and that profits and returns on invested capital should not be regarded as more important than payment of proper wages.
That is the principle which we support. I believe that this is the principle which the people of Canada support. But I know from my own life and from the lives of thousands of other workers in Nova Scotia that the opposite principle has been applied in practice. As a result, the people of my province have no confidence in the corporation which controls them.	,
We must win this war. To win we must have the whole-hearted cooperation of the workers of this country. They are ready and anxious to give that cooperation. But wealth must be made to pay its share. Monopolies should be investigated and controlled. Otherwise they will make fortunes at the expense of the people.
My endeavour in presenting the case as I have at the present time is to bring to the attention of the government and particularly the Minister of Finance a situation that now exists in Nova Scotia. The Dominion Steel and Coal Corporation is a large corporation that controls the destinies of twenty-six other companies with ramifications throughout eastern Canada. Since I have come here, telegrams, letters and resolutions have been sent to me and, I believe, to other hon. members of parliament, demanding that
something should be done in Nova Scotia with respect to an investigation into the management and general financial structure of this corporation. The action now taken by the government for the purpose of probing for a solution is in my opinion misleading and not going to arrive at any permanent solution.
At the present time there are four conciliation boards set up in Nova Scotia, bound by certain terms of reference, beyond which they cannot go. I think the terms -of reference relate to the ability of the respective subsidiary companies of the Dominion Steel and Coal Corporation to pay the wages demanded, on the basis of their earnings for the past year or two. While these conciliation boards may serve some purpose and have done so in the past, in my opinion they are not going to serve any purpose, or will serve very little, at the present time. After thirty odd years of experience working for that corporation and its subsidiaries and dealing with them through the medium of unions and so on, I believe that the people of Nova Scotia generally, not only the miners, have completely lost confidence in the word of the people who head that organization, and are sceptical as to what will come from these conciliation boards. What is now required is an exhaustive survey carried on under the jurisdiction of the federal government into the financial structure of that corporation and labour conditions under its management. The boards that have been set up are in my opinion not able to do that because of their terms of reference.
For the past eighteen months the miners all over Nova Scotia have been endeavouring to come to some understanding with the corporation on the question of wages. We have been signing contracts now for a period of thirty years. In this war effort every endeavour should be made by the company with respect to both signing agreements and carrying them out and pushing that industry to its highest capacity, because coal and steel are necessary war commodities. The steel operations are in just the same position as the coal mining. For the last two years the steel company at Sydney and the workers have been at loggerheads; no agreement, no understanding, spasmodic strikes, lack of confidence and general demoralization. The brief presented by the Carroll commission should have a thorough investigation from the federal government, in view of the fact that the federal government is paying relief to people left destitute by virtue of the manipulations as shown by the commission. For the past six or seven years the people of Nova Scotia have been endeavouring to present their case
The Budget-Mr. Brunelle

before some responsible body that will try to find a solution for a problem which affects practically all the people of Nova Scotia, because steel and coal are basic industries of that province and ramify into every phase of its economic life.


Mr. H. E. BRUNELLE (Champlain):: The present debate gives members of this house an opportunity to make general observations, and I wish briefly to avail myself of that opportunity. The budget now before this house is such that if anyone did not previously realize what it means for this country to be at war, he must realize it now. Several new and heavy taxes are imposed; other taxes are increased, and yet it appears we must face a large deficit. And apparently the worst is yet to come. But we must carry on and make the best of the situation. Things that could be said or suggested in normal times cannot be expressed now for fear of hurting someone's tender feelings. But only one thing matters, that is to win the war into which we went voluntarily and of our own accord. However, the present war, terrible though it may be, does not mean, even if we were to lose it- which God forbid-the end of the world. But, I hasten to say, it might mean the loss of some privileges which we cherish very much. Yet, in spite of everything, at the end of hostilities the people in general, and our youth in particular, will expect to live normally and in reasonable comfort. I was pleased to note in the speech from the throne that the government is concerned with post-war conditions. That is why in that speech we have the following declaration:
While the present session of parliament will necessarily be mainly concerned with Canada's war effort, and the measures essential to the achievement of ultimate victory, my ministers are of opinion that, despite what to-day is being witnessed of concentrated warfare, it is desirable, as far as may be possible, to plan for the days that will follow the cessation of hostilities.
In consequence we are to have unemployment insurance, in spite of many difficulties and obstacles which had to be met, and I am sure that the whole country, and the industrial workers in particular, will be very glad of it. Also some legislation has already been passed to assist youth training in conformity with the plan originated by the late regretted Minister of National Defence, the Hon. Norman Rogers, while he was Minister of Labour. But I think it is apropos to remark here that our Canadian young people must prepare themselves to earn their living, must equip themselves with special knowledge and particularly with those qualifications which more than ever are needed to enable them to [Mr. Gillisd
compete with others. Ordinary training and education are no longer sufficient in this age of specialization. The young must study; they must learn; they must specialize in some branch of trade, work or science. In so preparing themselves, they will pave the way to their own success, and no one can do this for them as well as they can. Let our youth have confidence in themselves and cease to think of or count on outside protection or influence. The doors of our technical schools are open to them; day and night courses are available. I need not say that the appalling burden of the war will fall on the shoulders of youth or on the next generation.
I can speak only of the province from which I come, but I am afraid that immediate prospects for the employment of our young people in Quebec are not very bright, since up to the present industry has not come close to absorbing those available for employment. It was hoped that the sacrifices required by the war would be to some extent compensated for by additional industrial activity, but so far very few opportunities have been offered our unemployed. Of course the government is not to blame for this lack of industrial activity, which is a matter of private enterprise and individual initiative; but it is a pity that no practical, appealing and up-to-date plan of colonization has been set up in my province to prevent our farmers' sons from flocking to the cities, where they simply increase the number of men out of work. In Canada, a country that we call agricultural, it is not normal to have only about 40 per cent of the people residing in rural districts while 60 per cent live in the cities. I suggest that a conference of the dominion and the provinces be held without delay in order to devise a real back-to-the-land movement and a plan to keep on the land those already there, and to place more farmers' sons on new land under more favourable conditions.
I am deeply concerned with the youth problem, and I ask that every effort be made by the appropriate authorities to encourage the reopening of plants which in many instances have been closed since 1930. Some industries are working seven days a week but still have parts of their plants closed. I would rather pay these companies for employing people on relief than continue the payment of direct relief to these people. In order to encourage the sons of our farmers to take up new land, I suggest that eastern farmers should receive constant attention, particularly at this time when their production is so essential. Unfortunately the war has closed many of our former markets with the result that the prices of some agricultural products have fallen. This situation is liable to get worse

The Budget-Mr. Brunelle
but, as I said in the beginning, we realize now what it means to be at war. No doubt this dislocation of our foreign markets was inevitable, but in my opinion something should be done for our eastern farmers. For instance, there is plenty of feed grain in western Canada being sold at very low prices; yet when that grain is transported to the east our farmers must pay very high prices for it, because of the high cost of transportation. Railway rates on grain sold to eastern farmers by western farmers should be considerably reduced. Since the war began the farmers in the east have been invited to produce more beef and bacon, the prices of which have not been as good as we expected. I repeat that the loss of our foreign markets due to the war has been the cause of the drop in prices of agricultural products.
Our efficient and capable Minister of Agriculture (Mr. Gardiner) already has done a great deal for the farmers of the east, who are grateful for his efforts to improve their lot. I am sure the Minister of Transport (Mr. Howe) would gladly cooperate with the Minister of Agriculture in reducing railway rates on feed grain from the west. Let the rates cover the cost only. The present rates are almost prohibitive, and in many instances the eastern farmer cannot afford to pay the price demanded for feed grain coming from the west. In view of their past contributions to assist others, I believe the eastern farmers are entitled to the benefit of some little sacrifice on the part of our railways or other groups and classes of our citizens who have profited from those contributions. At present the cost of transporting grain from the west is so high that the retail price of that grain in the east is not at all commensurate with the sales price in the west. Eastern farmers and their organizations should enjoy a lower freight rate at least on feed shipped to them direct.
Before I resume my seat I must touch upon another subject. Last September the sales tax was imposed, as a war measure, on the domestic consumption of electricity. It is not my intention to criticize the tax itself, but rather I would offer a suggestion as to the manner of levying that tax. I submit to the Minister of Finance that the tax is not fair to some taxpayers, inasmuch as certain sections of the country feel that they are being discriminated against. This was a new tax. I am sure the former minister never meant to impose a hardship on anyone or to create an injustice, but in my opinion an injustice has been created. The amount of the tax should be in proportion to the quantity of electricity used. As the law now stands, those who pay the largest tax are not always those
who consume the greatest quantity of electricity. I happen to be president of an electric plant in Gaspe, and a little study has made it clear to me that the present tax on electricity is in fact a tax on the electricity bill whereas, to be fair to all, the tax should be on the quantity of electricity consumed.
The point I wish to make is that while electricity is standard in its nature, there is considerable variation as between the prices of electricity in different parts of the country. It happens that in some instances where the rates of electricity are highest, the people can least afford to pay the 8 per cent sales tax. And irrespective of their means and ability to pay the tax, those people who are fortunate enough to profit by hydro-electric plants, or by municipal electric systems, receive advantages which are not enjoyed by the consumers who live in areas served by steam electric plants, by insulated small waterfalls, or more especially by the big power plants which overcharge the consumers.
To illustrate my point I beg leave to quote from the publication Electrical News and Engineering published in Toronto on March 15, 1940. The quotation is as follows:
Based on the most recent report of the Dominion Bureau of Statistics, the per cent of total dominion domestic consumptions for each province is as follows:
Per cent
Prince Edward Island	 0T
Nova Scotia	 l-6
New Brunswick	 l-2
Quebec	 13-2
Ontario	 58-5
Manitoba	 15-1
Saskatchewan	 1'8
Alberta	 1'8
British Columbia and Yukon	 6'7
Computing the revenue derived from the existing tax from the statistics showing the average monthly bill and the number of consumers as shown in the same report of the Dominion Bureau of Statistics, the proportion of taxes paid by each province is as follows:
Per cent
Prince Edward Island	 4-0
Nova Scotia	 3-9
New Brunswick	 2'9
Quebec	 20-7
Ontario	 45-2
Manitoba	 7'9
Saskatchewan	 4-7
Alberta	 4'7
British Columbia and	Yukon	 9'6
From the above figures it will be noted that Ontario contributes 45 per cent of the total taxes for a consumption of 58 per cent of the total dominion consumption and Manitoba's share of the taxes is only 7-9 per cent for 15T per cent of the total consumption.
It will be noticed that Quebec pay 20-7 per cent of the total tax on electricity, and consumes only 13-2 per cent of the total kilowatt hours of the dominion. I ask the Minister of
The Budget-Mr. Brunelle

Finance to devise a plan whereby the tax will either be placed on a kilowatt hour basis or will follow the block principle, namely, a decrease in the tax in proportion to the increase in kilowatt hours consumed. I feel sure at any rate that the Minister of Finance will find a more equitable way of levying the tax on electricity.


James Layton Ralston: It depends on where one lives. The suggestion made by the hon. member might be complained about, by someone living at some other point, as being inequitable. The view taken depends on where one lives.


Hervé-Edgar Brunelle: That may be.


James Layton Ralston: If one takes it the other way, namely, to tax on the kilowatt hours, then the gentleman using a large quantity of kilowatt hours will complain that the tax bears inequitably upon him. I mention this because the horn, member suggests the tax should be imposed more equitably. Either way it is imposed, some person will feel he has a right to complain.


Hervé-Edgar Brunelle: But if everyone were paying on a basis of consumption of electricity there would be practically no reason for complaint by anyone.


James Layton Ralston: The other man may say that he would like to pay on the dollar basis, and would believe that that is the equitable ground.


Hervé-Edgar Brunelle: Apparently there are two types of justice.
I have refrained from making any comment on the gravity of the war situation, because I believe up to this time practically everything has been said, and what has not been said is deeply felt in the heart of every Canadian.
Suffice it to say with reference to the mobilization measure which has recently been passed that I have never met a person in my constituency, or anywhere else, who has objected at all to the defence of Canada, or to the means to be taken to defend Canada in Canada. I would not need to say this, had I not in previous sessions disagreed with my friends in connection with war measures. But the situation is no longer the same. On the one hand the law itself restricts the compulsory service to the boundaries of Canada, and on the other hand there is an evident danger of attack in Canada.
In my opinion what has taken place in Europe, and the misfortunes of France justify the recent passing of the mobilization measure providing for the defence of Canada within 
Canada. Let every Canadian do his duty. I am prepared to do mine. I am at the disposal of the Minister of National Defence whenever and wherever I may be needed or useful-but for home defence only. I am always opposed, and intend to remain opposed to conscription for overseas service. To foresee and to be prudent is the duty of every representative of the people, and the mobilization measure which has recently been passed is one of prudence.
I have absolute faith in the Prime Minister of Canada (Mr. Mackenzie King). He is, if anyone is, a true Canadian. He is a steadfast and judicious administrator. Moderation, tact and sincerity are qualities he has always displayed in good as well as in bad days, and I am proud to say that no one enjoys to a higher degree or deserves more than he does my confidence and that of the people whom I represent.
I therefore without any hesitation support the budget presented by the government.


Mr. F. D. SHAW (Red Deer):: Mr. Speaker, in rising to participate in the debate on the budget, it is my desire to make certain definite observations relative to a question which has not been dealt with to any great degree, namely the question of national health. I anticipate that in what I have to say hon. members, irrespective of party, and particularly hon. members belonging to the medical profession will stand shoulder to shoulder with me.
I should like to concentrate my remarks upon national health, and especially as it applies to children. Therefore, in making no attempt to cover the whole field of national health, I may be in a position to be brief. I hesitate to use the word 'brief", because invariably when it is used someone shouts, "hear, hear." As a rule we hear that from an hon. member who has not time to deal with those matters with which he was sent here to deal.
I believe the presentation of the budget last week brought home to the people of Canada as it could have been brought home in no other way a supreme realization of the fact that we are at war. After all, I do not believe that there is anything in the world which will bring people to a complete realization of their responsibilities more quickly than the application of a tax. I am satisfied that we all realize the gravity of our undertaking. We do not want it thought that we have lost sight of the seriousness of the situation. We must above all else comprehend the responsibilities which are ours.

The Budget-Mr. Shaw
Unfortunately I am not satisfied that all hon. members really realize the responsibilities which are theirs.
I should like at this moment to read a short quotation, but before doing so may I say that it is the tendency of many of us to lose sight of the fact that we have more than one battle front. Some of our people, and unfortunately some of the members of this house, think of this war only in terms of what might be taking place in the North sea, in the Mediterranean or along the Magi-not line, absolutely overlooking the fact that the greatest front, the front which ultimately is going to be the most important, is right here at home.' I should like to read an article which appeared on December 2, 1939, on The Front Page of Toronto Saturday Night and which was reprinted in the Canadian Welfare Summary, December-January issue. It reads:
The psychological task of this war is the task of endurance. This is not a time for the whipping up of temporary enthusiasm by preachments of a kind of hatred which even the Germans can only maintain for six months or a year at a time, and which Anglo-Saxons and French are utterly incapable of making the predominant motive of their acts for an even shorter period. It is vital to remember that the spirit of the country as a whole includes, to a much larger extent than we like to think, the spirit of those who, as a result of many causes but chiefly by their sheer ill-fortune and the hostile conditions of a difficult economic era, are dependent on the civilian health and welfare agencies for a considerable part of the food, clothing and housing which are necessary to keep them in spiritual and physical fitness. We have not only to defeat Germany, we have also to defeat a condition at home which prevents a large part of the population from making its proper contribution to the defeat of Germany or to the achievement of any other national purpose. War is at home as well as in the North sea and on the Maginot line. We cannot afford to lose sight of any part of the front.
After reading that article, I felt that it was my duty to deal with the home front. Being engaged in a conflict as we are, it is essential that our people be strong. The strength of a nation, in peace time and more especially in time of war, depends directly upon the health of its people. History has proven beyond all shadow of doubt that when the people of a nation decline to any degree, either mentally or physically, the glory of that nation is short-lived. A statement like that is irrevocable. I think it is high time that we started to take stock with respect to the health of our people. I do not intend to be unduly critical in what I have to say. That is not my purpose. However, if I were to speak without being
critical, it is not likely that I would be here in this corner. Perhaps I may be excused if my remarks become quite critical at times. I do intend to be accurate. I do not propose to recite long lists of statistics, because my experience has taught me that no matter how carefully statistics may be tabulated, they are not always as accurate as we should like them to be, especially when they have to do with a survey of our health situation.
A few weeks ago certain hon. members made some observations relative to economic conditions which existed in certain provinces of Canada. I speak particularly of my hon. friends to my immediate right. Apparently they are determined to put their constituents first and their party last if necessary. During the discussion of a bill which it is hoped will bring a certain amount of alleviation to the distressful sufferings of our agricultural and unemployed people, they dealt in a large measure with the question of health, particularly the health of little children in the different constituencies. They painted a picture which was not unduly coloured, a picture which was absolutely correct. If all hon. members would be really honest, they could paint similar pictures of conditions obtaining in every province in Canada. When the hon. member for Mackenzie (Mr. Nicholson) was referring to the hunger and semi-starvation which existed among the little children of his constituency, the leader of the opposition (Mr. Hanson)-unfortunately he is not in his place but I must say what I am going to say-made this statement:
I am distressed to hear him say that children go to bed hungry. Will he state that at any time during the last ten years, since relief was first instituted by the Bennett government, in September, 1930, anybody in Saskatchewan has starved or has been in actual want? I would be disturbed if that were the case. I know it was not the intention of R. B. Bennett and his government that anybody in Canada should be in want, and I cannot for a moment believe that it is the intention of anybody on the other side of the house since 1935 that anyone shall be in actual want.
Then follows this statement upon which I lay particular emphasis:
I can scarcely credit such a thing.
When I heard the leader of the opposition make that statement, the thought came to my mind, are conditions in New Brunswick, from which province he happens to come, in such a satisfactory condition that he is unable to realize that conditions in a constituency as far removed as Saskatchewan are as they were represented as being? So in order to try to find out what the leader of the opposition was
The Budget-Mr. Shaw

really getting at, I made an investigation into conditions in certain parts of New Brunswick, and I quote what I am going to quote for the simple reason that I wish to show the house that the hon. leader of the opposition should have been able to credit what was said by the hon. member for Mackenzie, and furthermore to show the effect that these economic conditions have upon the health of little children. Let me make clear at once that I am not a member of the medical profession but I have spent over one-third of my life in rural areas, dealing with children, and after listening to the hon. member for Wood Mountain (Mr. Donnelly) the other day, I do not think one has to be a member of the medical profession to comment intelligently on questions of health.
I wish to quote from the report submitted by the Saint John Family Welfare Association after they had made a survey of conditions among two hundred families in the city of Saint John, New Brunswick, from which province the hon. leader of the opposition hails. When I speak of Saint John I have no pick on that city. I simply say to all hon. members: Be honest and you will admit that these conditions are not uncommon in all of our cities right across Canada, and if they are common in all of our cities right across Canada, surely you can believe the agricultural representatives when they say that these conditions are true of the rural areas. What I am going to quote may bring tears to the eyes of the most callous politician; I hope it does. I quote from the Saint John Family Welfare Association's report, which appears in the April-May issue, 1939, of the Canadian Welfare Summary, so this was only a very short time ago:
A great many of the families were living in quarters actually unfit for human habitation; there was also overcrowding, suffering from cold, lack of clothing, bedding, cooking utensils and food.
Now for the hon. leader of the opposition:
There was plain evidence of slow starvation among many adults and little children in this group-
I wonder if he believes it now.

and the ravages of diseases were apparent as attested by their medical and hospital records. Most of these homes were without bed sheets or towels and had less than half enough other bedding.
It would be bad enough if that were all, but that is only the introductory paragraph. It goes on:
Some families had one bed for the family and no mattresses; a large number had exhausted supplies of cooking utensils and in some homes one pot was used for cooking and

bottles for drinking, in .absence of cups. In the remainder of the cases visited, the majority revealed evidence of considerable hardship, with undernourishment, and the results had affected a number of children. In almost every case visited, the family were existing very much below the minimum standard of decent living and without enough food or clothing.
Even that as a second paragraph would be bad enough, but I have more here:
As many cannot pay rent, the result is very bad for both landlord and tenant. The record of evictions and seizures of furniture is particularly disastrous for little children of these families; other phases of acute distress relating to fuel scarcity, worn-out clothing, etcetera, might be given, but only a summary of major conditions can be shown here.
Most housing conditions are squalid and unsanitary; a terrible lack of clothing, bedding and utensils. A large section of those visited had been evicted from three to six times a year. During the past two years, 50 per cent of these families had moved from three to twelve times.
Of the families interviewed, 155 were in receipt of work relief and a great many were destitute and in desperate need.
I might mention that there were 200 families interviewed:
The majority cannot be classed in much better condition.
Slightly over 50 per cent have suffered from ill health and had hospital treatment during the last two years, having had from one to six members of the family in hospital at different times. According to a recent report by the district medical health officer on conditions, this was due because

I point this out particularly:
-"undernourishment, insufficient or inadequate food, acute and chronic illnesses, and poor hygienic conditions, have existed so long a time in the community that they are now presenting a most serious economic problem."
I could go on and on and on. But this, Mr, Speaker, proves that the leader of the opposition, knowing conditions in a city in his own province, should have had no difficulty in realizing the truth of statements made by western members with reference to undernourished and starving children. One of the greatest troubles, shall I call it weaknesses, of many members of this house, is that they do not know what conditions are actually like in their own constituencies or provinces. That is true of many, I feel quite satisfied; otherwise we would not have some of the statements which are made in this house. I was more than surprised when the hon. member for Wood Mountain said-and he was making a deliberate attempt to ridicule the members in this part of the house-"I hear people say, 'Oh, it is terrible the way people are suffering, without proper food'." That statement was made on June 21, as reported in Hansard. I

The Budget-Mr. Shaw
wonder if the hon. member, in view of what I have just read as to conditions in Saint John, realizes now that these men were speaking the truth.


James Layton Ralston: If my hon. friend will
permit me, I have been listening to his address with interest and I would not be one to say that such a statement as he is making should be cut off, but perhaps Mr. Speaker would call attention to the fact that it is contrary to the rules to refer to a previous debate in the same session; my hon. friend should refer to these matters at the time of that debate. I am sure my hon. friend can see that it is difficult for us to retrace our steps over a previous debate, and he can see the reason for the rule. It would reopen entirely a previous discussion which had been closed by whatever vote or other disposition was made of the question.


Frederick Davis Shaw: May I point out, Mr. Speaker, that in making reference to previous statements I am only doing what hon. members have been doing ever since the 16th of May. I am new so far as the House of Commons is concerned. I have tried to learn by watching and listening, and I believe that I am carrying out a procedure in which most hon. members have indulged. I am dealing at the present time with the national health problem. I hope the minister will not say that his budget has no effect upon the health of the nation.


James Layton Ralston: Mr. Speaker, I endeavoured to be as considerate as I could in calling attention to the rule. I do not think the hon. member has any right to suggest that I am not perfectly happy to listen to him as long as he has the right under the rules to speak with regard to the subject matter, but I suggest that my hon. friend should take my suggestion in the spirit in which it was made. I knew that he was a new member. After I had permitted him without objection or interruption to make his reference to previous debates, I did, considerately I think, call his attention to the rule. It seems to me that my hon. friend might accept that suggestion, and I would ask you, Mr. Speaker, to advise him if that is the rule. Then he may go on as long as he likes with regard to the health problem. We are all interested in it. But surely my hon. friend does not attempt to suggest that what I have stated is not the rule. The fact that somebody else did not follow the rule is not, I think, justification for my hon. friend persisting in its infraction. I do not know of any hon. members who have
broken the rule. If I did, I would have felt it my duty to call their attention to the fact if I happened to be leading the house. I think my hon. friend is not taking the suggestion I made in the spirit in which I made it. I do point out that it makes for brevity, accuracy and conciseness in debate if old debates are not reopened, particularly if those who took part in them, and who are now being answered, are not now here.


Georges Parent: 1 wish to call the hon. gentleman's attention to the remark made by the minister. As he has pointed out, no reference can be made to some debate which has already taken place. I understood the hon. member to quote from a statement then made by another hon. member. That is contrary to the rules, and I would ask the hon. member to refrain from doing it.


Frederick Davis Shaw: I bow to your ruling, Mr. Speaker. I shall make it a point to confine myself to my topic.
I was endeavouring to point out the intense suffering which our Canadian people have been going through during the past number of years because of their ill fortune and because of certain conditions over which they had absolutely no control. I contend that it is necessary in view of conditions as we know them to be, that our governments, and especially the minister of national health, give every possible consideration to the matter of national health. We have adult suffering and child suffering; and all in all it has a direct tendency to affect the efforts which we are able to put into the present struggle. It appears to me that we have been more concerned to preserve the orthodox system of finance and economics than to conserve or preserve the health of our people. It is bad enough that adults are called upon to suffer, but consider for one moment the effect which avoidable suffering has upon children. I know it is charged that many adults are not providing the necessities of life for their children and thus not guaranteeing decent conditions of health, and it is contended that these parents are entirely to blame. But our children outnumber the adults by about four to one, and irrespective of what the adults may be, the children are worthy of every possible consideration, in fact they are the best and most lasting assets we have. Everything depends upon those children. May I quote briefly a statement made by Sir George Newman, formerly general medical officer of health for Great Britain:
The European war has given new emphasis to the importance of the child as a primary
Questions

national asset. The future and strength of the nation unquestionably depend upon its education and equipment for citizenship. Great and far-reaching issues have their origin and some of their inspiration in him. Yet, in a certain narrow sense everything depends upon his physique. If that be sound, we have a rock upon which a nation and a race may be built; if that be impaired, we lack that foundation and build upon the sand. It would be difficult to overestimate the volume of inefficiency, of unfitness and suffering, of unnecessary expenditure, and of industrial unrest and unemployment to which this country consents because of its failure to rear and educate a healthy, virile and well-equipped race of children and young people. There is no investment comparable to this, no national economy so fundamental; there is also no waste so irretrievable as that of a nation which is careless of its rising generation. ...
It is my contention that we have been careless of our rising generation.
On motion of Mr. Shaw the debate was adjourned.


[Stage Direction]
At eleven o'clock the house adjourned, without question put, pursuant to standing order.
of the province of Quebec, the Premier of Quebec, the Right Hon. Ernest Lapointe, and other French-Canadian dignitaries?
4.	If there is only one version, does it include those speeches made in the French language, and if not, why not?
5.	What department of the government was in charge of the preparation and the distribution of this film?
Mr. MacKINNON (Edmonton West):: 1.	Yes.
2.	Two versions, French and English.
3.	In the French version there are speeches in French by their majesties and by the premier of Quebec, but it was not found practicable, in a film which had to cover so much ground, to include all the speakers throughout Canada.
4.	The speeches in French by their majesties and by the premier of Quebec are retained in the English version.
5.	The film was produced by the Canadian government motion picture bureau of the Department of Trade and Commerce and distribution was made under the authority of the national film board.
Wednesday, July 3, 1940



DEFENCE OF CANADA REGULATIONS

[Stage Direction]
Second report of special committee to consider and review the defence of Canada regulations.-Mr. Ilsley.


[Stage Direction]
Bill No. 6S, for the relief of Kathleen Irene Mae Stephens Morrissey.-Mr. Macdonald (Brantford City).
Bill No. 69, for the relief of Dorothea Frances Poyser MacDermid.-Mr. Macdonald Bill No. 70, for the relief of of Sheila Alice (Brantford City).
Dolly Young Dodge.-Mr. Factor.
Bill No. 71, for the relief of Margaret Louise MacDonald Russell.-Mr. Hill.
Bill No. 72, for the relief of Edward James Holt.-Mr. Factor.
On division.


[Stage Direction]
On the orders of the day:
Herbert Alexander Bruce: I should like to direct a question to the Minister of Justice (Mr. Lapointe) based upon an editorial prominently displayed on the front page of the weekly journal Le Jour, in its issue of June 29. Le Jour is edited by Jean Charles Harvey, probably the most widely known of French Canadian journalists and a man who is universally respected. To save time I shall give only the English translation:
Sunday evening the German radio, in a shortwave broadcast directed especially to French Canada, informed Quebec that Hitler offered it full and complete independence. We have only to rebel against Great Britain, and then we shall have our Laurentia. There will be a customs union with nazi Europe; and it was announced that our first gauleiter would be Adrien Arcand.	.
This is a damning charge against this man, and if we had blood in our veins instead of turnip juice our little fuehrer would not be facing such legal procedure as he is at the moment; he would be up before a military court.	.
Has he not time and again talked of standing so and so against a wall, when he became dictator? The writer of these lines, for one, has no illusions about the fate that would await him if the suave Adrien succeeded in a blitzkrieg here.
I should like to ask the Minister of Justice four questions, of which I have given him notice. First, has he seen the editorial minted?
95826-79}
Passports and Visas

Second, has he made inquiries with regard to the alleged broadcast and has he any information to give the house in connection therewith? Third, has he information that Adrien Arcand has made threats to shoot French-Canadian leaders loyal to the British connection if his plans to become fuehrer under the auspices of Hitler succeeded? Fourth, in view of the close connection between Arcand and the Hitler regime, as revealed by this broadcast, does the minister deem the measures taken to place Arcand under restraint to be adequate?


Ernest Lapointe: I am sorry my hon. friend's notice of these questions came to me only as I was coming to the chamber. I have not read the editorial, nor have I heard of this broadcast. Of course I am going to investigate, but I may say that I have heard of the threats made by the gentleman mentioned, because I was the principal person who was threatened all the time. Perhaps it may suffice to add that the internment of Arcand and the others associated with him does not mean that this is the only penalty they are *going to incur. They are interned in order that we may know that they are safely in custody, that they cannot get out on bail or because of any technicality. They are being held to await any further proceedings or prosecutions to which they may be liable -under the criminal code or any other statute, find I can assure my hon. friend that the matter is being fully considered at this time.



PASSPORTS AND VISAS


[Stage Direction]
On the orders of the day:
Angus MacInnis: Mr. Speaker, I should like to direct a question to the Prime Minister (Mr. Mackenzie King). British Columbia papers arriving in Ottawa this past week-end, and letters from persons intending to visit the United States, indicate that there is fear of considerable delay in the obtaining of passports. Could the Prime Minister make a statement as to what arrangements are being made to facilitate the issuing of passports, and to obviate undue delays?


William Lyon Mackenzie King: Mr. Speaker, two or three questions have been asked with respect to passports, and I have in my hand answers to most of them, including the one just asked by the hon. member for Vancouver East (Mr. Maclnnis).
On June 26 the hon. member for Kootenay "West (Mr. Esling) inquired as ito what steps
fMr. Bruce.]
might be taken to facilitate the issue of passport visas in south-eastern British Columbia. I am glad to be able to inform the hon. member that the United States authorities have decided to establish a consular representative at Trail, to facilitate the granting of visas to residents of Eastern British Columbia.
The hon. member for Yukon (Mr. Black) asked concerning the issue of passport visas to persons wishing to travel by boat from the Yukon to other parts of Canada. In reply I would say that unfortunately the situation in the Yukon is somewhat different from that prevailing in other parts of Canada. The situation has been brought to the attention of United States authorities. All I can say at the moment is that we hope a ruling may shortly be obtained which will facilitate the moving of passengers from the Yukon to British Columbia.
In reply to the question of the hon. member for Vancouver East, a question which might be extended to apply to other localities, I would say that the problem of opening additional passport offices has been very much under consideration. A branch office was opened at Windsor on June 29 under the sharge of the assistant passport officer. There is every desire to meet the convenience of the public, but it will be recalled that the final decision on the part of the United States authorities to impose passport and visa requirements was not communicated to us until a fortnight ago. It is essential, in order to avoid fraud and mistakes, that the work of issuing passports be under the supervision of an experienced staff.
It might be pointed out that with air mail, an application mailed from Vancouver, for example, to-day, will be in the passport office in Ottawa to-morrow. The question of the feasibility and desirability of establishing additional temporary branch offices has been receiving consideration, and I hope shortly to be in a position to announce a definite decision. I am afraid that to-day I cannot go farther than that.


Karl Kenneth Homuth: Would it be convenient to open passport offices in each provincial capital? I suggest that because the work here is going to be tremendously heavy.


William Lyon Mackenzie King: I shall be glad to discuss that matter with the officials of the passport office.


Richard Burpee Hanson: There is a situation at the border between New Brunswick and Maine which requires immediate attention. Two thousand persons in the towns of St. Stephen and Milltown, New Brunswick, are clamouring

National Defence
for passports, and there is not even an application form in that part of the country. I had about five hundred application forms sent down by express, but even then it will be some days before those passports are issued. I have made an appeal to the passport officer and to the Prime Minister's office to send a special officer to that point. I realize it is necessary to have an experienced officer, but surely there must be some such person who could be sent down to that point, where, as I have said, two thousand persons are being held up in their daily intercourse with the neighbouring towns ' of Calais and Milltown, Maine. Action is imperative, and while I do not wish to bother the minister about it I have called the matter to the attention of his department. I hope he will have something done at that point.


William Lyon Mackenzie King: I saw the hon. member's letter, and I know the Under-Secretary of State for External Affairs is making every effort to meet the request made therein. Of course questions in connection with the issue of passports are coming to us from every side. They are reaching us from one end of the continent to the other, and it has been very difficult to get the necessary forms and general equipment in readiness as rapidly as we might have wished.



BRITISH CHILDREN


[Stage Direction]
On the orders of the day:
Agar Rodney Adamson: I should like to address a question to the Minister of Justice (Mr. Lapointe): In view of his statement to the house on June 27 with regard to "Calling Canada," what if any action has been taken; or does he propose to take action, and if so under what act or regulation? I am sorry I had not an opportunity to give my right hon. friend notice of the question before the house met.


Ernest Lapointe: This inquiry comes just
after my having received a telegram signed by a lady and two gentlemen, saying:
You said that you were going to investigate "Calling Canada." Here is the number of our room at the Chateau Laurier. Please investigate.
It is not my purpose to investigate those highly estimable ladies and gentlemen. But what I said was that I would submit the advertisement in question to my officers, in order to ascertain whether it comes under some of the regulations respecting the Defence of Canada; that is all.


Richard Burpee Hanson: Be careful that you do not make martyrs of them.


Ernest Lapointe: I won't.



NATIONAL DEFENCE


[Stage Direction]
On the orders of the day:
Charles Edward Johnston: Mr. Speaker, I have a question which I believe might be directed to the Minister of Munitions and Supply (Mr. Howe). I received a telegram from the vice-president of district 18, United Mine Workers of America. They say government contracts have been let for war buildings in the Calgary area in which the original specifications called for mechanical firemen for coal consumption. The contract required that mechanical firemen be installed. Since then I understand specifications for the contract have been changed, and the order now is to instal machines for gas instead of coal consumption. The United Mine Workers of America are very much concerned, and properly so, because of the effect it will have in the mining areas of Alberta, particularly around Drumheller, if the new installations require gas instead of coal. Will the minister please tell the house what has been done, and whether or not the specifications in this particular have been changed?


Clarence Decatur Howe: The work in question was ordered by the Department of Munitions and Supply on the specifications of the Department of National Defence for Air, in compliance with the usual practice. I have no knowledge as to these particular specifications. In any event it seems to me that as, by either system, local products are being used, little criticism can be made. It then becomes a matter of the judgment of the Department of National Defence for Air as to which is the more efficient installation.



RATES PAYABLE BY ENLISTED MEN AND WOMEN TRAVELLING BY TRAIN

[Stage Direction]
On the orders of the day:
Charles Gavan Power: On Friday last the hon.
member for Peterborough West (Mr. Fraser) asked if anything is being done "to fix special and reasonable rates for enlisted men and women travelling by train." The reply furnished by the officer of the department is as follows:
Personnel of the Canadian Active Service Force may obtain through their commanding officers special forms which will entitle them to.
Royal Canadian Air Force

obtain round trip tickets on the railways for the price of a one-way fare. Special week-end rates, when in effect, are available to soldiers as well as civilian travellers, and may be obtained upon application.



ROYAL CANADIAN AIR FORCE


Charles Gavan Power: About a week ago the hon. member for Kootenay West (Mr. Esling) asked for some information with respect to recruiting in the air force. I have here a statement explaining the procedure with respect to recruiting, and I am prepared either to read it or to ask permission that it be placed on Hansard.


Some hon. MEMBERS:: Read it.


Charles Gavan Power: Very well; I shall do so.
I should like to take this opportunity to give a brief account of the present position of recruiting for the Royal Canadian Air Force. As the house knows, the requirements of the Royal Canadian Air Force for recruits can be divided broadly into two classes. First, there are the air crews, that is, those who actually will fly either as pilots, air gunners or observers, and, second, there is the maintenance personnel, both trained and untrained, using the word "maintenance" in its broadest sense as including all those whose duties are necessary to the operation of active service squadrons or training establishments. Both of these groups require training, the extent of which depends upon the qualifications necessary to perform the task to which they will be assigned. The problem of recruiting is, therefore, in large part a training problem and the rate at which recruiting can properly proceed is conditioned by the rate at which the capacity of existing training facilities can be enlarged and extended. It is obvious that recruits ought not to be called up and withdrawn from their civil occupations until we are in a position to train them to perform their duties in accordance with the plans that have been made. It is simply not possible to call them all up at once.
Nevertheless, the house will recall that, in conformity with our determination to accelerate our training effort in every way, we determined some time ago to enlist immediately 5,000 recruits who otherwise would not have been called up until some future date. I am happy to report that these enlistments have been proceeding at the rate of about 1,000 per week-a rate which, under the circumstances, must be regarded as satisfactory. .Some idea of the amount of work involved

can be gained from the fact that since September 15 last over 115,000 men have requested and obtained information from us relative to enlistment in the Royal Canadian Air Force. This is in addition to a great many informal inquiries of which no record is kept. Of course, not all who receive papers complete them and actually offer their services, but a very large number have done so and over 26,000 have passed the medical examination and been trade tested. Of these over 13,000 officers and men have been already enlisted and, as I have said, the balance are being called up as rapidly as circumstances permit. Of the 13,000 who have not been enlisted, 1,433 have made application to be trained as crew men; 7,962 desire to be trained tradesmen, while 4,000 are unskilled. With respect to the 4,000 who are unskilled, they may at any time join any other force or unit of the expeditionary forces. However, we would like to keep on the strength those men who provide good material for air or ground crews. A reserve of 1,400 is not too large for our requirements of air crew men. As a matter of fact, it is a rather low reserve to have, considering the number of future pilots, gunners and observers who will be needed very shortly for training.
So far as the selection of individual recruits is concerned, this is determined by priority of application except to the extent that there may be a special need for those with special qualifications. In the nature of things some trades are needed in greater numbers than others and thus it often happens that of two candidates volunteering at the same time, one will be called before the other. This is sometimes rather hard for the individual to understand, but the house, I am sure, will realize why it must be so. The procedure on application for enlistment is that every applicant is interviewed personally with a view to ascertaining in a general way whether he posseses the educational and other qualifications necessary. Once this is done, the applicant is assisted in filling out an application form and advised as to how he should obtain certain necessary documents, such as proof of age and education. Arrangements are then made for the applicant to present these documents and be medically examined. Once these requirements are met there is nothing further to be done until we are in a position to take him on our strength for training and he is called up accordingly.
It must be pointed out that by submitting his application and being medically examined, a recruit in no sense commits himself or prevents himself from enlisting in some other branch of the service. Until actually called

The Budget-Mr. Hanson (
to report for duty, those who have offered their services are perfectly free to withdraw their applications,-


Richard Burpee Hanson: They do
not want to do that; they want to go into the air force.


Charles Gavan Power: I quite realize that, but the
request of the hon. member for Kootenay West (Mr. Esling), was that these men be released. I have just stated that in so far as the unskilled men are concerned, there is no objection on our part to their being released. In so far as the others are concerned, we would prefer to have them wait until we are ready to call them up. But even then we have no strings on them in any way. Until actually called to report for duty, those who have offered their services are perfectly free to withdraw their application, and in all cases in which we think it unlikely their services will be required for some time, our officers try to say so frankly in order to avoid any subsequent misunderstanding or disappointment. Nevertheless, when recruiting is proceeding so rapidly and on such a large scale, individual cases of misunderstanding and disappointment are bound to arise. I should like the house to believe that we are doing everything we can to reduce such incidents to a minimum.
One of the commonest misunderstandings has arisen because of the belief that many of those who served in the Royal Air Force in the last war could simply and easily be trained to serve again. This whole problem of the use that can be made of ex-service pilots and observers is naturally one to which we have given the most careful consideration, and I am happy to be able to say that appropriate employment in the Royal Canadian Air Force has been found for over 250 officers who saw service in the air force during the last war. Nevertheless, I am afraid we must accept the view that so far as actual service in the air is concerned, this war, like the last, is a young man's war. The spirit in many cases is as eager and willing as ever, and is one of which we all must feel proud, but, as is the case with all of us, the intervening years have weakened the flesh. Except for those exservice men who may be described as fully qualified commercial pilots-and the number of those available is, unfortunately, small-I am afraid we must find places for most of them that do not involve the physical and nervous strain incidental to flying high-powered modern aircraft under service conditions. Such places can and will be found for a great many in administrative positions, and for these positions those who served as officers in the air force during the last war are
York-Sunbury)
naturally given a preference. Here again it is not possible to take every one at once, but more openings are constantly occurring as our establishments increase in number.
I trust the foregoing information will assist the house to understand that we are trying to carry on recruiting and enlistment for the Royal Canadian Air Force as rapidly as possible and, at the same time, with the maximum of courtesy and consideration for the many individuals whose patriotic desire to help has led them to offer their services. We have recruiting centres in the principal cities throughout the country and, in addition, mobile recruiting units intended to serve those in the more remote areas. The officers in charge of these activities have been most carefully selected with an eye to their special qualifications for the arduous and exacting duties they have to perform. We are keenly aware of the special qualities our young men possess and that fit them peculiarly to serve to advantage in our air forces, and we are determined to do everything in our power to make sure that these special qualities are employed to the fullest possible extent.


Vincent Dupuis: Is there anything in the regulations to prevent a woman from enlisting in the Royal Canadian Air Force?


Charles Gavan Power: I should think so, yes.



THE BUDGET


[Stage Direction]
The house resumed from Friday, June 28, 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, and the amendment thereto of Mr. Coldwell.
Richard Burpee Hanson: Mr. Speaker, I am greatly indebted to my colleague, the hon. member for Davenport (Mr. MacNicol), for having given way to me this afternoon. I know he had, as always, a most distinguished contribution to make to this debate, and I trust that an opportunity will be given him at a later stage in these proceedings to deliver the message which he had for us this afternoon. Again I desire to thank him for his courtesy.
When I heard the Minister of Finance (Mr. Ralston) deliver his annual budget statement on June 24 I confess that I did so with very .mixed feelings. I realized then, as I do now, and as I am sure we all do, that this country is really at war. I have from the very beginning of this titanic struggle realized and visualized a war of long duration. I do not
!248	COMMONS
The Budget-Mr. Hanson (York-Sunbury)
claim any superior vision, neither have I any special information, but having read all the relevant material on the subject which I could obtain, and having pondered deeply the whole position, especially since the failure of Munich, I came to the conclusion that this war, like the great war of 1914-18, would be of long duration, and that as a result a longterm point of view with reference to finance was the proper one to take.
In addition I have always held the opinion that Canada, as an integral part of the British empire, as one of the allies and a de jure as well as a de facto belligerent, should mobilize and use her man-power and her material resources in such a way as to give the maximum of effort to the allied cause. In holding this opinion I believe I am in accord with the views of all true loyal British subjects in this dominion, and in that regard I find my views also in accord with those which the minister expressed in his budget statement of the 24th of June.
I am aware, of course, that there are those in this country who do not share these views in their entirety. I am, however, inclined to think that those holding views at variance with my own in this regard have materially altered their own point of view, and this has been brought about by the force and trend of events as they have developed during the past six or seven weeks.
In one respect only do we differ in any substantial degree, and that is with respect to the method of marshalling our man-power for service overseas. Here again the trend of events has intervened and in a degree altered our position. It may well be that because of the cessation of fighting in the continental theatre of war, man-power overseas is not so pressing a problem as at first appeared. But because it may not be so yet, I suggest that our duty to assist with mechanical equipment such as planes, tanks and guns, with munitions and with foodstuffs and material supplies, is all the more pressing. In other words we should be utilizing our every resource to assist the mother country with all those material things of which she is in such dire need at the present critical juncture.
There is, too, the problem of the defence of Canada. On the 21st of June this parliament passed the National Resources Mobilization Act, which in addition to the legislation already on the statute books gives to the government of this country the most dictatorial powers ever conferred by this parliament on any executive, so that there is no longer any excuse on the part of the government for refusal or neglect to do anything and everything humanly possible to defend

this country and to bring the maximum of support and assistance to the mother country. Apart from the question of national leadership, the only consideration remaining to round out the whole orbit of defence and assistance lies in the realm of finance.
It is axiomatic to say that the right arm of a nation in time of war is its man-power and the necessary and essential equipment thereof for war purposes.
It follows without doubt that the next most important element in marshalling the fighting strength of the country for any and every purpose is finance. Our problem at this time is to marshal our financial resources in the wisest and best manner possible so as to achieve the maximum of results, and if possible at the same time preserve our corporate existence, so that after the struggle is over and after victory has crowned our efforts we may proceed not only to bind up the wounds of the nation but also to rebuild what may be a shattered structure.
This problem cannot be achieved in one budget, but the government, and especially the Minister of Finance, should have as long a vision as possible and chart out a course for the nation, looking not only to the immediate necessities for the day and hour but also to the time when we shall, if we continue to exist as a nation, have to prepare for the future or after-war period.
I quite agree with the minister that we must pay for the present peril. It will not matter much what becomes of our national wealth if we lose this war, but I do suggest that we do not approach in any defeatist spirit the consideration of the financial problems now confronting us. Rather should we approach their consideration on the theory that we shall win this war, as we must, and I shall discuss the problem in that spirit and with the hope that I may make some contribution of a constructive character. One thing is certain-the Canadian people will not withhold from the government the money necessary to win this war.
There may be differences of opinion, honest differences, as to how the money shall be raised, but I am as certain as I ever was of anything in my whole life that the Canadian people will give of their treasure as gladly and as wholeheartedly as our gallant fellow-citizens gave their lives in the last great struggle and as I believe the present generation are prepared to give theirs for the defence of their loved ones, their homes, their country, this Canada of ours, and the motherland in this struggle.
I was not privileged to be a member of this house in September last when the Minister of

The Budget-Mr. Hanson (York-Sunbury)
National Revenue (Mr. Usley) at that time delivered his financial proposals, but I read and have re-read his statement with great care. In that speech he indicated that the government proposed:
1. A policy of pay-as-you-go, as far as possible and practicable;
2. A policy of borrowing, preferably on short-term obligations.
3.	Inflation was definitely taboo.
Generally speaking, I am in agreement with
the principles enunciated. I am perhaps not so pronounced in my views against inflation as I -was some years ago. I believe that a reasonably limited amount of inflation will, cn a given occasion, help to start the wheels of industry and the interchange of currency. That may sound like heterodoxy to some of my sound-money and more orthodox friends, but the difficulty is to know what is a reasonable limitation. If such a limitation is exceeded, the result may be disastrous. One immediate result of unlimited inflation is a rise in prices. This occurs always before a rise in wages, and as prices increase, wages lag behind. A vicious circle is established and sooner or later deflation, even collapse, may come.
So that I am not chiding the minister for not having utilized a limited degree of inflation. Its exclusion, however, leaves us, according to the tenets of the minister, only two sources from which we may obtain the necessary funds to carry on our war effort, namely, taxation and borrowing. And these are the two methods which the minister has invoked. Let us examine the government's proposals.
It seems to me that with respect to the taxation proposals the minister has proceeded for the most part, and speaking generally, upon lines which heretofore have been generally accepted and have proved useful for the purpose to be accomplished. There is no new radical departure from accepted principles of taxation, with some certain rather unimportant exceptions. This shows caution, and from that standpoint is to be commended. Generally speaking, it seems to me that our taxation proposals at this time should be based upon two principles: (1) Ability to pay; and (2) equality of sacrifice.
Let us deal first with ability to pay. The minister for the most part has utilized this principle as far as is practicable. His whole hypothesis as to quantum appears to me to be based upon the theory that the national income for the calendar year 1939 approximated $3,800,000,000 and for the fiscal year 1940-41 will approximate S4,500,000,000.	I
do not know upon what scientific and mathematical data the minister bases his calculation, but I very gravely doubt whether the national income in 1939 approached $3,800,000,000, and if I am correct in that doubt, then I feel very certain that our national income for 1940-41 will fall far short of $4,500,000,000.
I say this for various reasons. While Canada is in a substantial degree an industrial country, and many of us have been striving for years to increase her industrial activities and thus increase the size of her payroll, yet primarily Canada is an agricultural country, and the sum total of the value of her agricultural products exceeds in sum total the value of her mining, fishing and industrial production. It that be so, and with a very large wheat carryover and a large wheat crop in immediate prospect, and no market in sight beyond the domestic requirements of Canada and those of Britain, it would appear, to me at all events, that any large immediate cash return such as could be justifiably included in the category of national income is rather remote, and a substantial allowance on that account will have to be made from this estimate of $4,500,000,000 of national income.
While this wheat situation is the largest of the marketing problems, it is by no means the only one. What about bacon? I understand that a substantial surplus is being piled up each week and that after October first the surplus will grow to enormous proportions. It has even been suggested to me that the price of hogs will fall as low as five cents. I do not wish to be considered an alarmist, but I do at all events believe in being realistic, and I have been obliged all my life to face facts as they are, not as I would wish them to be. This bacon situation sits very securely on the government's own doorstep. The much-vaunted Canada-United States trade agreement and the operations under it on the part of certain importers are directly responsible for the situation now confronting the Canadian hog producer. He is bound to lose money, and next year unless conditions are remedied he will not produce this commodity.
Then there is the apple crop, the situation in regard to which is well known. Just recently we have been told that we cannot find a market for our canned salmon and our canned lobsters. And what about the New Brunswick potato crop! There is a market for seed potatoes in Cuba, but just at present that market is more or less cornered by the activities of the minister of lands and mines of New Brunswick, who, by some means unknown to me, apparently has obtained control of that market for himself. There is opportunity, however, for the government to do something in regard to this matter in Cuba, in Central
1250	COMMONS
The Budget-Mr. Hanson (York-Sunbury)
America, and in South America, and I urge the Minister of Trade and Commerce (Mr. MacKinnon) to get busy at once with respect to this matter.
All these considerations lead me to conclude that the national income will not approach the figure named by the minister, notwithstanding huge government spending on war effort. That, I submit, is not true national income. It is rather the reverse, and I shall have something to say about it later on. My own view is that it will not exceed four billions, and if so the results from the new taxation proposals will not yield as much in new money for the treasury as the minister anticipates, and we shall not be able to implement the pledge of "pay as you go" to the degree indicated.
I should like to point out to the house and the country certain things with respect to the national income and its effect on the standard of living in Canada. Assuming that our national income is $3,800,000,000 and will go to $4,000,000,000 in 1941, and assuming that the total dominion outlay, including both peace and war expenditures, amounts to $1,200,000,000, provincial and municipal expenditure aggregate about $600,000,000, and we have therefore a great spending programme of $1,800,000,000. Now, on the basis of $4,000,000,000 national income this is 45 per cent of the total national income being spent for public purposes. This leaves us just $2,200,000,000 or about $200 per capita for every man, woman and child in Canada with which to buy food, clothing and household goods, to pay rent, medical and similar services and all the other things human beings require. I suggest to the house and the minister that this represents a very low standard of living. It cannot be helped by further soaking the rich, or by any other unorthodox finance. The only way it can be helped is for the government to cut down its ordinary expenditure and by provincial governments and municipalities all determining to take less money from the taxpayers. This must be done. Raising the national income by governmental expenditure will help, but it will be a long time before it seeps through to business and comes back in some degree in the form of taxation. The only fertile field for immediate income is to be found in the provincial arena and in the municipalities. Certainly there must be no increase in the levy by either authority.
As I view it, there are two difficulties in the government's position. One is that the budget is based, as the government's financial policy has been based for some years, on the assumption that the volume of business can be stimulated by government expenditures and

that this can be very largely covered by the resulting increased taxation. The other difficulty I have already alluded to, namely, the government has not yet by any means been active in reducing non-wrar expenditure.
With respect to the government's first difficulty based on its past financial policy, having regard to its own failure to undertake large war expenditures at an earlier date, it now finds itself faced with the necessity of undertaking a programme of this character just prior to bringing down the budget. The result has been that the budget announcement will have a very serious effect on ordinary business before the stimulating effect of war expenditures is felt, but even their accepted theory of public expenditures to "prime the pump" requires that the expenditures should be made first and the resulting increase of possible taxation obtained later. For all effective purposes, the government has undertaken to obtain the taxation first and make the stimulating expenditures later, but I suggest that it will take months for war expenditures to filter down through the business structure, while the heavy taxation announced in the budget has led a great proportion of the population to take immediate steps for reducing expenditures. This is the only opportunity left to this government to do anything at all effective to relieve the situation. It occurs to me that even political expediency should dictate a revision of policy in this respect. Many new thousands of direct taxpayers created by the budget, as well as all those older taxpayers to whom their income tax was not a matter of vital importance, are now thoroughly alive to the fact, long concealed from or ignored by them, that the people pay for governmental expenditures.
Let me reaffirm that the people will not object to paying for the war, but every one of them who sees a single case of an unnecessary employee, or a wasteful expenditure for non-war purposes, or even an expenditure which could be postponed, is certain to feel vigorous resentment. At the moment I have in mind the failure of the government to halt the work on the Montreal terminal. It did halt construction work on certain public buildings, such as new postal stations in Quebec and Toronto, the supreme court building in Ottawa, and others of a similar kind, but the Montreal terminal seems to be sacrosanct. It will cost this country $12,000,000 in war time and it may even run to $15,000,000, money which can ill be afforded at this time. To me its continuation at this time is a shocking thing.

The Budget

Mr. Hanson (York-Sunbury)
There are four good features in this budget:
1.	Pay as you go, so far as possible.
2.	Restrictions upon civilian buying, as indicated by the huge taxes on luxury motor cars.
3.	Diversion of dollars away from the United States.
4.	Avoidance of inflation.
These principles incorporated in the budget indicate, to me at all events, that the minister in these aspects has been soundly advised by the two very able men associated with him. But to say that this budget represents national sacrifice, or that there is equality of sacrifice, I suggest to him is far from the truth. There is not one single new tax which is designed to bear, however lightly, on the entire population. There is nothing comparable to the match tax imposed during the last war-we have returned to that position, of course-or to the sugar tax, which was imposed as a revenue measure but designed to be a national sacrifice paid by everyone in .a time of extreme economic warfare. Per contra, there are no nuisance taxes, for which I think we should all be grateful. However, national sacrifice, as I interpret the term, means sacrifice by all the people of the nation according to their respective abilities to make and sustain sacrifices. In fact all the national sacrifice that is made under this budget is concentrated upon a mere handful of the population, not on the whole population, as it should be.
What is the position? According to a chart prepared and published in the "National Revenue Review" for May, 1940, under the caption "Income Tax and Those Who Pay It," there were for the period 1938-39 individual taxpayers totalling 264,804 who paid a total of 846,937,205. I have tabulated the different classes, as follows:
			Number	Total
Income	paying	paidUnder \	12,000	
119,346	$1,269,724$ 2,000	to	$ 3,000	
63,572	1,324,663$ 3,000	to	$ 4,000	
34,392	1,462,000S 4,000	to	$ 5,000	
15,902	1,296,625$ 5,000	to	$ 6,000	
8,627	1.234,400$ 6,000	to	$ 7,000. .. .	
5,563	1.260,057$ 7,000	to	$ 8.000	
3,674	1,144,597$ 8.000	to	$ 9,000	
2.612	1,107,188$ 9,000	to	$10.000	. . . . 1,986	1.059,919$10,000	to	$15,000	
4,687	4,247,516$15,000	to	$20.000	. .. . 1,775	3.210,835$20,000	to	$25.000	
816	2,551,849$25,000	to	$30.000	
469	2.132,006$30,000	to	$35,000	
353	2,156.943$35,000	to	$40.000	
234	1.732,270$40,000	to	$45,000	
182	1,656.133$45,000	to	$50,000	.... 157	1,662,512
Those in receipt of taxable income of over '$50,000 numbered only 457, or -17 of one per cent of the total number of taxpayers, but contributed $17,289,365, an average of $37,882 each, or 36-17 per cent of the total collected.
On the other hand those in the class under $2,000 represent 45 per cent of the total taxpayers, and they contributed 2-66 per cent of the total amount paid by individuals. I am sorry to have wearied the house with these figures, but I think they ought to be put on record for the purpose of comparison with what these people will pay under this budget. Now under this budget all the sacrificial taxation is being concentrated upon a handful of people in the lower middle bracket. A total of about 22,000 individual taxpayers in the brackets between $6,000 and $50,000 are being asked to contribute next year a total of over $50,000,000 in addition to the sum of $22,254,000 or thereabouts which they are now paying. And this takes no account of their contributions under the national defence tax, which of course will be substantial. Thus these 22,000 odd taxpayers will pay nearly four times what they are now paying. Is there anywhere else in this budget any sacrifice comparable with the tax imposed upon this comparatively small element in our population?
These people will pay; make no mistake about that. They will of course have to adjust themselves to new conditions of life to meet these new burdens laid upon them, while the great mass of the people will be able to pursue their normal manner of living with little or no interruption. These people are not complaining, and I am not complaining on their behalf; I am just pointing out what I believe to be the true position.
I suggest further to the minister that this budget falls hardest upon those already hardest hit by the war. With respect to those who are actually benefiting in their standard of living from the war and war expenditures, the budget makes little demand, except through the corporation tax. I would have wished that the government had placed some imposts which would have had a psychological effect upon our people, making them realize more and more that Canada is at war. That is what I meant when on June 17 and again the next day I asked the Prime Minister to declare a state of national emergency in Canada. A sacrificial tax, which would affect even the humblest in Canada, would have had a tremendous effect in awakening our people. Others realize the necessity for such an awakening. Only two Sundays ago a great ecclesiastical personage in Canada sent out a letter to be read in all the churches under his charge, and it opened with these pregnant words:
At long last Canadians have been awakened to the imminent dangers which threaten our own country no less than Great Britain.
That is the sort of thing I mean.
1252	COMMONS
The Budget-Mr. Hanson (York-Sunbury)
It is not my specific duty to suggest detailed measures. Rather should I indicate principles which I think should be followed; but I cannot refrain from inquiring why some additional impost was not placed on spirituous liquors. It was done under the last budget in England. If I were consulting my own views and principles alone-and I advance this suggestion with a feeling of temerity-I would do away with the sale and consumption of spirituous liquors for the duration of the war as a purely economic measure. The drink bill of this country is enormous, at least $200,000,000 per annum, if not more. I realize, however, that this may not be feasible, for reasons upon which I shall not enlarge.
Why was not a tax of say one cent a gallon placed on all gasoline sold in Canada? They have such a federal tax in the United States, and, mark you, that tax was imposed in addition to, not in substitution for, a similar state tax theretofore imposed in every state of the union, and as a peace-time measure. I suggest to the minister that such a tax was fully expected in this country. Why should there not have been a further elimination of exemptions under the sales tax, in order to raise more money? When I was at home over the weekend a wholesale grocer called me up and expressed great surprise that there had not been some further elimination of these exemptions. I asked what he had in mind and he mentioned condensed milk, on which not a cent of sales tax is collected, and of which huge quantities are sold in this country. I know the answer will be that this would come out of the farmers, but I do not believe it would. I believe the consumer would pay it just as he pays the tax in every other instance.
I now desire to refer briefly to the excess profits tax, which I think will prove to be an important revenue producer. I think the minister has acted wisely in eliminating option A as provided for in last year's act. At best that was merely a skeleton act. I made some examination of it for a client last October and in fact came to Ottawa for the purpose of interviewing the authorities and obtaining a clarification of certain points in relation thereto. To my surprise I was informed that study subsequent to the enactment had convinced the officers that the tax was inequitable and indeed unworkable, and I came away with the distinct impression that a wholly new act would be evolved this session. It was a classic example of hasty, ill-digested legislation. In effect the minister admitted this in his statement. He said one main feature which appeared to be undesirable was the right of the taxpayer to choose between two IMr. R. B. Hanson.]
options; that it had been found that many old firms would pay little or no tax while new firms in business since the war, or those operating in a depressed industry, or undergoing rapid expansion, would be subject to unwarranted discrimination. I agree with that analysis of the situation. Therefore, I understand, a new measure is to be submitted _ It is agreed that it will be much more drastic-I understand that after I left the house on Friday afternoon my friends to the left moved an amendment expressing want of confidence-in the government because this tax had not been made one hundred per cent. I had not intended to deal with that aspect of the matter; no doubt the minister will reply to that. But I should like to point out to the house and to the country that the situation here is not nearly comparable with the situation in the United Kingdom, because in England they have no corporation income tax; and a large sum of money will be paid under this tax, yoked up with the corporation income tax.
While we accept the principle of conscription of wealth in war time, it must be kept in mind that in times of peace excessive income and profit taxes and excessive succession duty on estates may work great injury to the state; that is if we are to maintain the capitalist system. It is no crime to accumulate a moderate degree of wealth. The accumulation of a large amount of wealth in Canada at least is exceptional, and in no sense proves the rule. I venture to suggest that most of us sitting in this house have striven as hard as we could to accumulate capital; and I venture further to say that most of the accumulated capital in this country has been attained by the exercise of the old-fashioned virtue of thrift, a virtue which all too many people have ceased to practise. Do not, then, in peace time penalize too severely those who practise this virtue. In war time it affords a reservoir from which the government may and will under this budget draw huge sums of money for the country's war effort. In peace time thrifty savings must be put back into business, which in turn will employ labour, utilize materials and supplies and employ more of our people. If not invested directly in industry it must be invested in securities, which largely represent industry.
I had not intended to go into the various ramifications of the new measure, but it is an intricate matter and one which I think hon. members should endeavour to understand, as I should like to understand it myself; therefore I think some reference should be made to the details. Like the September act, which has now passed into

The Budget-Mr. Hanson ( York-Sunbury)
oblivion, the new act takes a base period as a starting point, and this base period is the average of the net profits before deducting regular income tax-am I right there?-for company years ending in the years 1936, 1937, 1938 and 1939. All profits in excess of this four year average are subject to the new excess profits tax.
Taxable income is to be determined under the provisions of the Income War Tax Act. Deduction of the regular rate of corporation income tax, 18 per cent for unconsolidated returns and 20 per cent for consolidated returns, is permitted before calculating the annual tax under the excess profits tax. The amount by which the current year's taxable income, before regular income taxes, exceeds the four year average income tax is subject to excess profits tax at the new rate of 75 cents. I hope I have correctly stated the effect of the proposals.
There is another provision in this new tax bill, however, which in effect makes the minimum corporation income tax rate 30 per cent for unconsolidated returns or 32 per cent for consolidated returns. Under the new income tax act a minimum of 12 per cent is payable, in addition to the regular 18 per cent or 20 per cent rate, in cases where this amount would be larger than the excess profits tax computed at 75 per cent, and the amount by which the year's profits exceed those of the base period. That, of course, is a very heavy impost, as the minister knows better than I do.
No alteration is made in the provision whereby ten per cent of the cost of capital expenditure computed in the year 1940 may be amortized against taxable income over a period of three years, and I congratulate the minister on having left this concession in the law. I note, too, that the excess profits tax will not apply on income received by Canadian companies from subsidiaries or other investments in Canada. This, of course, guards against duplication. I am wondering if it is clear that this provision applies in respect [DOT]of income received by a Canadian company operating a subsidiary in the United States, or does it only apply to subsidiaries in Canada? I am hopeful that the minister will give some consideration to that point, and make it clear.
I am curious as to the reference to a board of referees, which the minister suggested would be appointed, and for which the resolution provides to assist in carrying out the provisions of the proposed measure "fairly and realistically," as he stated. Just what are to be the real functions of this board? Is it to be a court of appeal? If so,
then great care should be exercised in the selection of the personnel. Above all, political consideration must be strictly taboo, and only men of the highest integrity and judicial ability should even be considered. I warn the minister that his selection will be watched with great anxiety, because an arbitrary board could easily make or break any concern coming under its jurisdiction.
Then, in respect to gold mining: The minister made more than a gesture to the gold mining and oil producing industries. It is, of course, wholly desirable that any new ventures should be encouraged, but I would not think it desirable or in the public interest that proven ventures should be given special consideration. I have in mind the type of man who makes a lucky strike, and then because he is being taxed pretty heavily leaves the country. They must, without question, be treated liberally with respect to depletion and depreciation. It is being borne in mind, too, that our gold production is a most important item in our exports and helps mightily to maintain our trade position, and also our exchange position, but it must also be borne in mind that gold as a commodity for sale and export has come into its own to a greater degree than any other Canadian commodity. There is a tremendous unearned increment there, and this industry must, and I have no doubt will, bear its just share of the national burden, especially in war time. The difficulty has been, and I presume now is, to arrive at a wise and just conclusion as to the incidence of the taxes to be imposed. I know some of the difficulties of the past. I know, too, that every ounce of gold taken is just that much exhaustion of our estate, but providence has been reasonably kind to Canada in this regard, and we are indeed fortunate in having this huge reservoir upon which to draw in this hour of peril.
Then, with respect to the national defence tax. in theory this tax is a supplement to the graduated income tax. It will bring in an army of new taxpayers and to that extent it is all to the good, because I have found that any one who has to pay a particular tax for the first time becomes interested in the application of the tax moneys. This new war tax will help to impress upon the new taxpayer that he is in this war. The results from the tax, S20.000.000, for the balance of this fiscal year, and $35,000,000 estimated for 1941, are substantial and will be a welcome addition to our war effort.
While this is all true, yet may I remind the country that this sacrificial taxation is in a degree coming from the same source as that from which the increased income taxes
1254	COMMONS
The Budget-Mr. Hanson (York-Sunbury)
are coming-in this case salaried or the wageearning classes, many of whom will be already found in the lowest income brackets. These will be obliged to pay both taxes. I am not objecting. I now desire to call attention to the situation with respect to the method of collection-at the source. I agree that the minister has taken the most practicable course; any other procedure would have resulted in great expense to the treasury and there would have been some loss. At the same time this has shown that he appreciates the fact that this tax will add another burden to executives and business generally. To offset this he proposes to make provision toward reimbursing employers for expenses so incurred.
So far, so good; but may I be permitted to make a suggestion to the minister. For years I have heard complaints-sometimes bitter complaints-that business enterprises have to make altogether too many returns to governmental departments. All this costs time and money and is frequently a source of irritation. Some people, you know, thrive on statistics. Is it not possible that with this new duty cast upon the accounting departments of firms and corporations some attempt can be made to reduce the volume of statistics and returns which they are now obliged to make? I know that statistics are important, but they never fed any one, and we are apt to allow bureaucrats to demand much more than is requisite and necessary. Some amelioration in this regard may be reasonably expected in war time.
I think, Mr. Speaker, I should make some reference to the new war exchange tax. Its primary importance is to conserve exchange. I have no means of judging as to whether it will be a revenue producer or not. I am prepared to accept the minister's estimate of $65,000,000 in the first full year, of which $50,000,000 will be collected in the present fiscal year. It does not apply to empire countries and will be subject to drawback for export, as in the case of customs duties. Cases of hardship will arise because of its imposition. I hope the minister has given full consideration to this aspect, and that he will see, if he has the necessary power, that such injustices as may arise and be properly established are corrected. Here again great care will have to be exercised.
I have in mind persons, firms, or corporations which sell United States made heavy goods, such as caterpillar tractors or other such equipment, of a class or kind not made in Canada, ordered for contractors having contracts with this government for the clearing of airport sites under a firm contract on a laid down duty paid price in the maritime provinces. It is quite clear from the
fMr. R. B. Hanson.]
new section 88-A (1) of the Special War Revenue Act, read in conjunction with section 13 of the resolution, that all such goods must pay this extra tax and that it will apply on all goods imported or taken out of warehouse for consumption on or after June 25, 1940, and on all goods previously imported for which no entry for consumption was made before that day.
Now, the case I want to put to the minister is this:	What about goods in transit,
ordered in good faith, on a firm contract on a duty free basis laid down in Canada prior to the budget? It seems to me that some consideration at least should be given to importers who find themselves in this position. These machines cost a lot of money, they are usually sold at a laid down price at the point where the contractor takes delivery, that is to say, duty paid in Canada. Are these dealers to be penalized?


James Layton Ralston: Is my hon. friend referring to the same class of article?


Richard Burpee Hanson: Yes. I
suggest the minister give very serious and sympathetic consideration to their position. But I am bound to say that balancing the disadvantages that may arise against the advantages which will accrue in respect to conservation of exchange, I am of opinion that the tax is justified. In fact, I would have gone somewhat farther.
In order to conserve our exchange position, that is, if it is deemed desirable and in the public interest to preserve the pegged rate at its present position, and having regard to the large adverse balance of trade which is steadliy mounting against us in respect to non-empire countries, principally the United States, we must either restrict our imports or impose new imposts as suggested. I would think that consideration might be given to taking even more drastic action looking toward the total exclusion of certain luxury imports, that is if our hands are free to do so. It is one of the things they have had to do in England and we might well follow their example. We could save a lot of exchange if such a course were adopted, and at the same time do no violence to a decent standard of living. I commend this suggestion to the minister. He has, however, elected to adopt a middle course, I assume on the theory of revenue requirements.
But while he has done that, do not imagine that this tax will not operate as an additional protective duty. It is bound to have that effect no matter what the minister may say as to measures which he may take under the war-time prices and trade board. Increased prices will follow because, under the theory

The Budget-Mr. Hanson (York-Sunbury)
of a protective tariff, the consumer in the final analysis pays the duty. All the minister can do is to see that there is no unjustified increase in prices. I commend this matter to the attention of my free trade friends in this house, if there are any left after following this government for five years.
I am in agreement with the principle of taxing high-priced motor cars. With respect to these luxury taxes on automobiles there is a proviso which will be found on page 8 of the ways and means resolutions to the effect that if a new and unused automobile is in the hands of a dealer on June 25 and not delivered to another purchaser, the tax shall be paid by such dealer when such automobile is delivered. This means that any new and unsold car in the hands of a dealer must bear these increased taxes. I suggest that that is neither fair nor equitable, and that the tax contemplated by this proviso should not be imposed. I have no special information, but I feel certain that as the public anticipated this new taxation on automobiles the situation has been discounted largely and that not many new cars were in the hands of dealers when the budget speech was delivered. The loss of revenue which would be sustained if this item were dropped would not be large.
May I remind the minister that years ago when Sir Henry Drayton was minister of finance a similar tax was placed on automobiles left in the hands of dealers when the budget of that time was introduced. The tax collected amounted to several hundred thousand dollars, and after the change of government in 1021 a campaign was carried on here in Ottawa and a lobby established in this house, as vigorous and intense as any I have ever known, with the result that years afterwards the government of the day, then led by the present Prime Minister, succumbed to the importunities of an organization here in Ottawa and rebated the tax with interest. I suggest to the minister that he does not, even in war time, want to get into a similar position. If he does, I have no doubt that no matter what the political stripe of the administration may be, the result will be a repetition of the experience we had years ago when the government of the day succumbed to the importunities of a powerful lobby.
Finally, there is a matter to which I desire to draw the attention of the house and the country; I refer to retrenchment in the ordinary public services of the country as distinguished from war services. I have already expressed the view on more than one occasion during this session that with this country at war the Canadian people will gladly yield all
the money the government may require to defend Canada successfully and to aid our mother country. Of that there is no doubt. The measure of their contribution will be the measure of their ability to pay. They will even expect wasteful expenditure-all war is wasteful-but they will frown upon any and every expenditure not absolutely necessary in the ordinary operations of the country. The estimates before the house indicate that the government has made a substantial move in that direction. In the September 1939 budget, total expenditures aggregated approximately $651 million, not including two items of capitalized defence expenditures and further losses of $27 million on wheat. The total expenditures for last year are now estimated at $681 million. I would assume that with the close of the fiscal year now three months past this figure is reasonably correct. This figure is broken down in the minister's statement. It should be noted that due to increased taxation during the year the revenues were $46 million greater, but we had an actual deficit of $118 million and our net debt rose accordingly. This was without reference to war expenditures.
For 1940-41 the estimated expenditure is $448 million as compared with $525 million estimated for the past fiscal year, an apparent reduction of $77 million. But I am afraid that this is not a true picture. The saving is more apparent than real. Because of war activity a certain amount of expenditure, which in peace time would be charged to ordinary expenditures, is now being paid out of war appropriations. In his press interview in May last, when bringing down the estimates for 1940-41, the minister did not even pretend that the entire $77 million would be net saving. This was because of the necessity of switching certain peace-time services and administrative charges to war account, both in personnel and services; but the minister did make it clear that there would be a holiday in ordinary public works. That is to date the most important indication of the government's intention to save something in the ordinary expenditure.
The minister indicated that the expenditures under the main estimates last year amounted roughly to $400 million. Of this $260 million represented what was regarded as absolutely uncontrollable expenditure. By that is meant war pensions, old age pensions, subsidies to the provinces, interest and what I would term statutory obligations. This left only $140 million, out of which savings might be made, and of this amount $80 million was for salaries and wages, leaving $60 million covered by the main estimates which might be subjected to reductions. Then the minister stated
1256	COMMONS
The Budget

Mr. Hanson (York-Sunbury)
in effect that nothing could be saved out of the $80 million reserved for salaries and wages, apart from discharging government employees. I am not recommending wholesale dismissal of salaried government employees. There have been dismissals of wage earners and temporary employees, but I would recommend limited reductions in personnel without the public service being imperilled. What I do earnestly recommend, however, is that when vacancies occur by death, resignation and superannuation, such vacancies be not filled unless it is absolutely imperative in the public interest. This can and should be done, and all and sundry should be given notice to govern themselves accordingly. It has been done before. It was done between 1930 and 1935 when literally thousands of positions were left vacant with a resulting saving of hundreds of thousands of dollars. It can be done again, and it should be done again.
Furthermore, the minister should see to it that no new personnel is taken on. The other night I referred to the position of Mr. Brockington, the very talented lawyer who was brought down here recently from Winnipeg under an arrangement by which, as I am informed, he was to become the historian of Canada's war effort. He was to be paid $9,000 annual salary and $12 per day living allowance. Now it would no doubt be a splendid thing to have Canada's war effort recorded from day to day provided it was done impartially, truthfully and accurately. But history is not usually written up from day to day. It is recorded in the immortal pages of time; a true history is never written until time has rendered a true perspective. This expenditure is wholly unnecessary at this time, especially at the expense of a tax-ridden people.	I believe that Mr. Brockington's services are not being utilized in any degree for the purpose indicated, and I hear he is most unhappy about it. Be that as it may, I allege that the creation of the position was unnecessary and at this time is a waste of public money. Furthermore, Mr. Brockington's brilliant and talented services are being utilized in writing propaganda purely and solely to bolster up the shattered prestige of this government. I do not say he is the Prime Minister's ghost writer, but his services approach that description, and I do protest against this type of wasteful public expenditure.
I could refer to instances of the creation of jobs to take care of defeated candidates.
I protest against this sort of thing. Let us have an end of it. I mention no names, but ;he names are well known.


Paul Joseph James Martin: They are not all Liberals.
! Mr. It. B. Hanson.]


Richard Burpee Hanson: That does not help it any. It is the principle I am contending for, and the hon. gentleman should sustain me. In fact, the action of the government in this regard seems to be naked and unashamed. If the government will not stop this sort of thing, a rapidly awakened public opinion will make itself heard.
The minister closed his lengthy remarks by paying a well-deserved tribute to the Canadian people. I have already done so on more than one occasion. I know, as he knows, the stock from which they sprang. Comprising in the main the offspring of two great races, cognizant of the gravity of the occasion, they will rise to the challenge and, like our kindred in Britain, they will give their blood, their treasure, their all; but they will impose this condition, that this government give the highest type of leadership, and if this government will not give the necessary and vital leadership required, then the people of Canada will demand a new government, a really national government.
In conclusion, Mr. Speaker, I desire to make this statement. In ordinary peace times this debate would go on perhaps for weeks. But these are not peace times. The Minister of Finance has become, if he has not already taken over the duties of the office, the Minister of National Defence, and I have asked myself this question: Why should the Minister of Finance, who is to become the Minister of National Defence, be compelled to stay in this chamber and listen to a large number of speeches, some of them relevant and some of them irrelevant? And so, Mr. Speaker, to expedite the business of the country, to expedite particularly our war effort, to expedite the minister's plans with respect to the defence of Canada and especially of our Atlantic shore line, I suggest to the house, I suggest to the government and their followers, and I make a special appeal to my friends in the far corner, that we let this budget pass and release the minister to administer his new office of Minister of National Defence. Let the new Minister of Finance, whoever he is to be, or the very competent, shall I say, Minister of National Revenue (Mr. Ilsley) pilot the financial resolutions through committee and let us get along with the war. I am prepared to help him, but I want to make just one proviso, and that is that when we are in committee on the resolutions hon. members who have prepared speeches and who want to make themselves heard or who want through this medium to talk to their constituents, should be given the opportunity and very wide

The Budget-Mr. Abbott
latitude to make their statements in the committee. I make this offer, I make this appeal in the interests of Canada's war effort, which I am prepared to back up and help support with all the power at my command. Whatever little ability I have I want to place it at the disposal of the government, not to help this government survive as a party government, but to help Canada win this war.


Douglas Charles Abbott: Mr. Speaker-


Richard Burpee Hanson: Is the minister prepared to make a statement before the hon. member proceeds?


James Layton Ralston: If the hon. member for St. Antoine-Westmount will permit me, I want to say to my hon. friend the leader of the opposition (Mr. Hanson) and to the house that in regard to opportunity being given for discussion in committee of any matters which ordinarily would be discussed on the budget itself, the government is perfectly satisfied to give the undertaking that such opportunity will be given. It is a matter, of course, for the house to decide, but hon. members may be assured that if it is desired to make their statements on the budget in committee they will not be precluded by the budget itself being disposed of without prolonged debate.


Angus MacInnis: We are all involved in this, Mr. Speaker, and you cannot deal with the matter unless we have the opportunity-


Georges Parent: I understood that the
Minister of Finance was making a statement in reply to the question asked by the hon. leader of the opposition with regard to an opportunity being given to hon. members to make their statements in committee. The hon. member for St. Antoine-Westmount (Mr. Abbott) now has the floor.


Douglas Charles Abbott: Mr. Speaker, this is almost the first occasion on which I have had the honour of addressing this house. That it is not the first is due to the fact that my hon. friend the leader of the opposition (Mr. Hanson) asked for an explanation of one or two private bills standing in my name. In view of his concluding remarks I am almost discouraged from rising now; nevertheless having steeled myself to do so, I shall proceed notwithstanding what he has said.
I have observed that it is customary for a new member, speaking for the first time, to make some reference to the constituency which he represents, and I propose very briefly to discharge that pleasant duty.
The constituency of St. Antoine-Westmount is one of the larger Montreal constituencies.
Predominantly residential, it includes all the city of Westmount, part of St. Antoine ward, part of the old St. Andrews ward and a little bit of St. George's ward. Such outstanding landmarks as the Forum and Bonaventure station are included within its limits.
The leader of the opposition has mentioned that the increase in the graduated personal income tax bears very heavily on the lower and medium brackets. I think it is fair to say, Mr. Speaker, that there are perhaps as many people in my constituency, who will be directly affected by these increases, as in any other constituency in Canada. The Minister of Finance (Mr. Ralston) made his budget speech a week ago to-day. The country has had notice of these increases, and I am glad to say that since that time I have not heard of a single objection to the increases on the part of my constituents. Their attitude is best expressed in the words of one of them, the Minister of Finance himself, when he said that these increased burdens would be loyally accepted and paid as a small price to pay for the preservation of our liberties.
On this question of my constituency, Mr. Speaker, perhaps I can give hon. members some idea of the intellectual qualities of its residents when I say that I have five electors who are members of this house, two of them ministers of the crown. I have not compiled any statistics on the senatorial representation, but I think it is fair to say that St. Antoine-Westmount has contributed its fair share, in numbers at any rate, to the public life of Canada.
I propose to-day to discuss some features of the excess profits tax, with particular reference to the criticism of that tax voiced in the house the other day by the hon. member for Rosetown-Biggar (Mr. Coldwell). I am sorry that he is not here this afternoon. I spoke to him this morning and he told me he had to attend a meeting of the special committee on the defence of Canada regulations. In the course of his remarks the other day he stated that some corporations were paying no excess profits tax. That, of course, Mr. Speaker, is clearly incorrect, since under the resolution every corporation, whether it makes excess profits or not, will pay a minimum excess profits tax of 12 per cent on its total earnings.
After he had given a considerable number of figures and percentages, with which I propose to deal in a few minutes, the hon. member went on to say, as reported at page 1232 of Hansard:
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 capita] invested and the
The Budget-Mr. Abbott

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.
That, Mr. Speaker, is indefinite. Speaking in the debate on the National Resources Mobilization Act on June 18, the hon. member for Rosetown-Biggar spoke of the British excess profits tax. On page 873 of Hansard he is reported as having said:
... we have a right to ask that the government at the same time assure these young people that the excess profits tax will be instituted as iu Great Britain, and will be one hundred per cent. And we ask that prior to giving our support to this bill.
May I say that, as has been pointed out by my hon. friend the leader of the opposition, the proposed excess profits tax, taken in conjunction with the corporation income tax, is more onerous than the tax under the English act. As many hon. members know, and as the leader of the opposition has already indicated, there is no corporation income tax as such in England. There, a corporation deducts tax at the standard rate, but the individual shareholder is entitled to take credit for that deduction in his own return, so that in effect there is no double tax, as there is in Canada, on corporation earnings.
' I propose this afternoon to compare briefly the provisions of the two taxing acts, in Great Britain and under the proposed act which is now being discussed.
Under both these acts, as has already been indicated, excess profits are treated as being profits in excess of an average or standard rate. Under the English act, for the purpose of establishing that average rate the taxpayer has one of four options. He can take his earnings for 1935, or he can take his earnings for 1936, or he can take the average of his earnings for 1935 and 1937, or the average of his earnings for 1936 and 1937. That applies of course to companies which have been operating during that period. I may say in passing that similar provisions exist under both acts for a board of referees to establish the standard or average profit for new companies and companies which have been operating under depressed conditions.
Under the Canadian act the taxpayer has no such option. His average or standard profit is established by taking the average profit of the four years 1936, 1937, 1938 and 1939, and all companies pay a minimum corporation tax of 18 per cent in the case of a straight return and 20 per cent in the case

of a consolidated return, plus a minimum excess profits tax of 12 per cent on all earnings whether they are over and above that average or standard rate or not.
Perhaps I could illustrate that position best by one or two examples. Take a company for instance with earnings in 1940 of $100,000. If that amount is equal to or less than the average or standard earnings of that company for the four preceding years, in Canada, such a company would pay a tax of $30,000, that is to say, 18 per cent income tax and 12 per cent excess profits tax, assuming it did not file its return on a consolidated basis. In England a company making the same profit of $100,000 with an average or standard profit, on one of those options I mentioned, of $100,000, would pay no tax at all.
Take a second case of the same company earning $100,000 in 1940, whose average earnings during the relevant period were $75,000. In that case, under the definition in both the English act and the Canadian act the excess profit would be $25,000. That company in Canada would pay a tax of $33,375. In England it would pay a tax of only $25,000; in other words, 100 per cent of the excess profit of $25,000.
As will be seen, it all depends on where you start paying your tax, and obviously a company which pays no excess profits tax on, say three-fourths of its income, and in the case of England, pays no tax at all, on three-fourths of its income, is better off than a company which pays 18 per cent on all its income and an excess profits tax of 75 per cent on the remaining quarter.
It seems to me that if the hon. member for Rosetown-Biggar is satisfied with the provisions of the British act, he should be more than satisfied with the provisions of the proposed Canadian act taken in conjunction with the corporation income tax under the Income War Tax Act.
In his speech last Friday the hon. member for Rosetown-Biggar referred to a list of thirty-three Canadian companies which, he said, had been prepared by himself and someone to whom he referred as an able statistician. He gave the house a great many figures, percentages, estimates of earnings and so on of these thirty-three companies, including an estimate of what those companies would pay on their 1940 income assuming that that income were the same as it was in 1939. My hon. friend was good enough to furnish me with a copy of the statement to which he referred, and I was able to see how he had arrived at those calculations.

The Budget-Mr. Abbott
May I say, Mr. Speaker, that the figures which the hon. member for Rosetown-Biggar gave to this house on Friday as being the estimated tax which those companies would pay in 1940 based on their 1939 income, were incorrect, and the estimate of the tax which he made is substantially lower than the tax that those companies would pay on the basis referred to. They are incorrect for two reasons. First, that my hon. friend computed his tax on the basis of net earnings available for dividends, which of course was the amount after deducting provision for income tax. Obviously that is wrong, because in the case of a percentage tax you do not deduct the amount of your tax before you calculate how much you have to pay. They were wrong for a second reason, that in .the case of twenty-eight of the thirty-three companies he computed his minimum excess profits tax at 10 per cent and not 12 per cent as provided under the resolution. I am going to deal briefly with the five specific cases to which the hon. member referred.
With regard to Consolidated Smelters, he estimated his tax on $9,339.586, which was the net amount shown by that company as available for dividends. It had made provision of $2,280,000 for tax, which must be added to that figure of $9,339,586, so that the correct figure should be $11,619,586. If we use that figure, the total corporation income tax plus excess profits tax at the minimum rate amounts to $3,718,267 instead of $2,801,876 as given by my hon. friend, or a [DOT]difference of $916,391.
The second company with which the hon. member dealt specifically was Canadian Industries Limited. Again by the same process he underestimated the tax by $579,457.
The third was International Nickel, the big one of the five. International Nickel had included in its accounts $7,296,986 for income tax. Figuring again on the same basis, my hon. friend underestimated the tax payable by International Nickel by the amount of $3,071,984.
The fourth was Asbestos Corporation; this is the small one as far as earnings are concerned. Figuring that on the same basis, we find the underestimate is $101,796.
Aluminium Limited is the only one of those which my hon. friend selected which would in all probability be taxed on the higher basis, that is 75 per cent of excess profits. His statement did not enable me to see exactly what four years he used as a basis for his average, but I think they must have been 1936, 1937, 1938 and 1939." On that basis he underestimated the amount of tax payable by that company by $878,162.
I did not attempt to calculate the amount of the underestimate with respect to the other twenty-eight companies, but on these five my friend underestimated the tax which would be payable by them by $5,547,590, or in other words an average of something over a million dollars per company. If the same ratio continued with respect to the other twenty-eight, he would have underestimated by about $33,000,000, or pretty close to the amount which the Minister of Finance estimated will be produced by the national defence levy.
It is a considerable time since I had lectures in logic, but as I remember, the soundness of the conclusions reached depends on the soundness of the premises on which those conclusions are based; if the premises are false, the conclusions are false. I suggest that that reasoning might be applied to the conclusions reached by the hon. member for Rosetown-Biggar with respect to the excess profits tax.
One last point. My hon. friend mentioned that he had not overlooked the fact that these corporation profits, or what was left of them after the deduction of the corporation income tax and the excess profits tax, would be subject to taxation in the hands of the shareholders who received them. I am glad he did not entirely overlook that point, because, as hon. members know, that income, or rather what is left of it, is subject to tax a second time in the hands of the shareholder who receives it, a third time by the different provinces, with the exception of New Brunswick and Nova Scotia, and a fourth time in the case of a shareholder residing in my own city of Montreal, by that city. And for good measure those same corporation profits are subject to corporation profits tax in many of the provinces with respect to the profits earned in those provinces. In the case of Ontario and Quebec the rate is five per cent.
In the course of his address the other day the Minister of Finance used the word " fantastic " as applied to a possible combination of federal, provincial and municipal taxes on the same income. That seems to me a very apt word. I have little sympathy with the view expressed by hon. members in the other corner that the taxes to be imposed on industry and on corporation earnings under this budget are inadequate.
I have already taken rather more time than I had intended-


Some hon. MEMBERS:: Go on.


Douglas Charles Abbott: I had some comments or rather suggestions to make in connection with the administration sections, but in view of what the leader of the opposition said I have no doubt an opportunity will be accorded to
The Budget-Mrs. Nielsen

put these forward in the committee stage, so I conclude by thanking you, Mr. Speaker, and hon. members for the patient and courteous attention which has been given to my remarks.
Mrs. DORISE W. NIELSEN (North Battle-ford) : As a new member of this house I have during these last weeks listened with a great deal of interest, and I may also say patience, to the debates which have taken place. As a new member I have of course very much to learn. As the representative of an agricultural riding where not only the farmers who have been long established but also those who have newly attempted to carve homes for themselves out of the wilderness of the north all find themselves in great distress, it has been my primary duty to attempt to place before this house a fair picture of conditions in my constituency. I have had a great deal of consideration from the Minister of Labour (Mr. McLarty), and he has promised an investigation into the particular conditions which I have outlined. During the weeks since I came here I have learned a great deal, not only in this house. I have visited some of the great cities of the east, and I have come to the conclusion that the problems which face our western farmers are more or less the same problems which face the working people in the cities of the east.
I have watched the legislation introduced in this house. I must confess that when I came here I had hopes that the great crisis facing the nation would force this government to bring in constructive and progressive legislation really in the best interests of, and to the benefit of the people of Canada. The budget debate follows very closely on the heels of the bill to conscript man-power and property. In my opinion, Mr. Speaker, it proves that bill false. We were led to understand that the bill conscripting man-power and property would conscript the great reserves of wealth within the borders of this country, to be used in the prosecution of the war. Now that the budget has been brought down, we realize that the great masses of the working people of Canada, out of their scanty earnings and low wages, will have to provide the enormous amount of money for our war effort.
I can no longer remain silent and support this government. My hon. friends to my right have opposed some legislation which has been introduced in this house; yet they have constantly affirmed their support of this government. I cannot do that. I do not,
I will not support this government. After a careful appraisal of the policy of this government I find that if I am to remain loyal to the people who sent me here, it is impossible

for me to support either this budget or the legislation which has been introduced by the government, and I am prepared to tell the people why that is so. I know that anyone who dares to disagree with the policy of the government is accused of being disloyal and an enemy of Canada; but, as time goes on, I become more convinced that in the days to come those who support this government will be judged to be the real enemies of the Canadian people. As I see it, if I remained silent I should be disloyal to those whom I represent.
During this session this government has passed legislation to subjugate the Canadian people and force them into both political and economic bondage. To a large extent we have lost our political liberty through the defence of Canada regulations, and now in the proposed budget we face social and economic disaster. The worst of it is that all this is proposed under the guise of patriotism. As everyone knows, our press is more or less controlled by the same powers that control the great financial institutions, the corporations and the monopolies of this country. The press has led the people to-believe that this budget calls for national sacrifice. They say it is an emergency budget to save Canada, to save the world, and that it will bring about equality of sacrifice. We are told that we need some $700,000,000 for the war and further sums for other expenses, making a grand total of about a billion and a half dollars. If the conscription bill had been what it purported to be, there would have been no necessity for this increased taxation, which will so greatly harass and burden those in the lower income brackets. There is wealth in this country, sufficient not only for the prosecution of this war to even a greater extent than we are now prosecuting it, but also to rehabilitate our people.
To-day, Mr. Speaker, we are facing two great crises. We have a war crisis and we have a domestic crisis. If anyone says that a domestic crisis does not exist, I can only say it is because they do not wish to see it. There are none so blind as those who will not see. When we say that the war crisis is the only crisis which matters, we are absolutely failing the Canadian people. Provision could have been made to meet both these crises if the government had not been the mouthpiece of the great financial interests of this country, as it always has been. Government spokesmen have told the people that the incomes of the wealthy are to be taxed so that they wll help bear the cost of the war. That hides the real truth from the people. It is possible for the great monopolies, the great

The Budget-Mrs. Nielsen
industrial corporations, to increase their [DOT]capital by millions of dollars without paying any tax except on a very small portion which they may set aside for certain purposes. They can increase their capital and set aside enormous amounts for reinvestment without ever coming under the taxation laws of this dominion. They have certain surpluses of capital which, under our laws, may be exempt from immediate taxation. That is where any government, working in the true interests of the Canadian people, should have looked for reserves with which to finance not only this war but also a rehabilitation scheme for the people still in distress in this country.
The minister has acknowledged that even with the increased taxation proposed he will not have sufficient money to prosecute the war, and he says that we must meet the rest *of our obligations by borrowing. Where will he turn? Of course he will go to these vast reserves of capital which, instead of being loaned to the government, should be conscripted. It amounts to this: During the last great economic crisis these reserves of capital were already in existence, but at that time it was not profitable to lend them for the rehabilitation of our people. In this war crisis to-day, however, it is profitable not to have this great wealth conscripted but rather to loan it to the people of Canada for the prosecution of the war. That is so because the people who loan this money are the same people who will have the advantage of possessing huge sums of money with which to go ahead with new industries for the production of munitions and so on. Now it is profitable for them to show their patriotism and loan their money. But it is not the kind of patriotism that is being demanded of them by means of conscription, as it should be. The working people are asked to give their sons. *Our working men will go into the factories. As time goes on they will find that their wages will become more meagre and the real value of their money will be decreased.
The situation to-day is the same as it was in 1914. Then the people thought the greater part of the war burden was to be borne by the wealthy, but in 1918 the people found that they themselves had borne the brunt of the sacrifice, not only through the giving up of their sons but also through the piling up of debt. The farmers of our country will go on with their unremitting toil, and what guarantee have they that in the years to come they will be able to establish for themselves even a decent standard of living? These things are all part of the domestic crisis which we as a responsible body cannot and must not neglect. The Canadian
people are going to be told what is their patriotic duty. During the last war we made sixty new millionaires in Canada, and we sacrificed 60,000 men. That meant roughly the lives of a thousand men for every new millionaire created; and during that period the debt of the people increased. In 1914 our per capita debt amounted to $42.64, while at the end of the war period, after we had created sixty new millionaires, the per capita debt had increased to $266.37.
As far as I can see, the same sort of thing will go on during this war. No one can say at the present time how many new millionaires we are going to create, but from the legislation which has been passed by this house already, I feel sure that we shall continue to increase the number of wealthy people in this dominion and add a further burden of debt to the shoulders of the working people during the years to come. That is not what we understood by the conscription bill which has just been passed. It is not the kind of legislation which we, as representatives of the people, should allow to pass through this House of Commons. The borrowing of vast sums of money will create unadulterated inflation at the expense of the Canadian people. The great interests will not suffer enormously through these coming years. Roughly $700,000,000 will be taken out of the purchasing power of the people, and at the same time the shackles of debt will be tied round the Canadian people, like millstones round their necks, to make of them slaves into the future. And children who are not yet bom will be among them. Not only will it affect the people who are to-day destitute and barely managing to live, but it will affect hundreds, yes, thousands of the middle-class people who will lose their scanty savings, and be forced down to a degree of poverty unnecessary and unneedful in a country of great wealth such as this.
After all, for what reason are the youth of Canada being conscripted? The government says it is for home service. That is true enough. What are they to protect at home? Besides the homes of their own people it is their duty to protect the great corporations, the banks and the factories-all those organizations which in the past have cared so little for the youth of Canada that during the late crisis they refused to lend their money, let alone have their money conscripted, for the rehabilitation of our people.
The most patriotic procedure for the government to take would be to go to these vast reserves of capital which, if unmolested, will be used for reinvestment, and from this money finance not only the prosecution of this war but a rehabilitation scheme for our people.
The Budget-Mrs. Nielsen

many, there has been a decrease of $17,016,794. Everything which would encourage our people and give them an opportunity to become selfsupporting and perhaps be in a position to make a further contribution to this war effort is being cut down by the government.
I cannot find words strong enough to condemn this budget. As I said before, I hope the people of this country, realizing that there is no necessity for this added burden which is being placed upon them, will raise their voices unitedly in protest.


Daniel (Dan) McIvor: Mr. Speaker, I count it a great honour to be allowed to follow the lone, yet happy and brilliant lady member of this house. I think you will agree with me when I say that there should be more of her kind in this house, provided that increase in numbers would not cause some of us to lose our seats. We each look upon this budget from our own background. We consider it from our own educational point of view and the course that we follow in our everyday life. We heard the farmer refer to the budget as giving him the needed protection he required for his home and loved ones; he saw in it an opportunity for a stable market. The business man looks upon this budget as having a steadying influence; behind the scenes he sees a government which stands for the maintenance of traditions and the payment of just debts. A mother considers this budget in the light of the protection it provides for her home and loved ones. A lawyer looks at it from the point of view of the law; he is thinking of the sacred trust to which he obligated himself before he received his gown. Your Honour knows perfectly well what I mean. The doctor looks at this budget through the eyes of a man hungry for a really healthy nation; he knows that there is disease in the body politic and he hopes to find a way of killing that disease. Those clerical gentlemen who are members of this house, those men who have studied the queen of sciences, look at this budget from another point of view; they want to know upon what foundation it rests. As we gave an attentive hearing to the Minister of Finance (Mr. Ralston) when he proclaimed his budget, we realized that it rested upon the foundation of truth.
I want to congratulate the government-
I have no doubt the former Minister of National Defence had a hand in it-upon the action they took to increase the pay cheques of our soldiers from $1.10 to $1.30 a day. He entered the trenches during the last war as a private, and I have no doubt he was able to recall the smell of the gas which sent him 
home a weaker man. No matter who may disagree with me, I contend that the poorest paid men in the British empire are those who risk their lives for $1.30 a day to protect the welfare of their country. Those who served in the last war were able to save very little. When they came home, some of us had to do our best to find them jobs at twenty-five cents an hour. I must say that in many instances I failed to find even a job of that sort. That was one of the things which constrained me to permit my name to be submitted to the electorate of the finest constituency in the Dominion of Canada.
As I listened to the minister introducing his budget, he looked to me a real minister, as he is, but just now I mean a minister in the sense of a clergyman. He stood up in his place in the house and obviously was convinced that he had something to say. He was not ashamed of it. He felt that it was the truth which the vast audience that filled this house and the galleries needed to know. And he delivered his message in such a way that we all realized he was in earnest and spoke with conviction.
As I heard his opening remarks, which we call the introduction, there arose a spirit of expectancy. He rises and tells the house why he stands in his place and delivers his message. Here are his own words: "The Hun is hammering at the gate."
Could we not almost hear the big hammer as the minister's words echoed through the house? We were almost within sound of the Hun with his mechanized warfare, with his record of cruelty and cussedness all along the line, leaving a trail of broken hearts, broken homes and broken souls. The minister certainly introduced his subject in splendid style, and we were all ready to listen.
Then he makes his plea. He asks for money.
1 know some ministers who hate to ask their people for money, but I have never stood in any pulpit yet and felt ashamed to ask for money for a worthy cause-and no one has a right to be ashamed or to come before the public with an apologetic air when he is asking for money for a worthy cause. I think the minister showed his real sincerity as he asked for money.
Then he went on to present his subject in splendid form, and as he proceeded with arguments that were logical we were convinced that he would get what he was asking for, and that when the collection plates came in they would be loaded. When he was making his plea for a collection he used concrete examples, which are a splendid argument. He told us of one war veteran who gave him the best

The Budget-Mr. Mclvor
he had, which was a collection of old coins, and I suppose that war veteran had handled them over and over again, and loved them and talked about them often. Then he told us of another soldier who was a caretaker in an armoury and gave freely twenty dollars a month. Then the minister said:
With such examples to challenge and inspire us, I cannot believe that any man in Canada will complain about his burden, or by greed, panic or selfish fear, betray his Canadian citizenship in the hour of Canada's need.
Britain is giving her blood, her treasure, her all.
We too will give our best to help make up this budget.
As the minister sat down, I noticed that very few members were reading newspapers, which would have struck me as an act of sacrilege at such a time. I noticed, too, that very few members were sleeping-and it is a mark of a great preacher to keep his congregation awake.
There are some things which the budget suggests to me, Mr. Speaker. Of course, one sees through the eyes of one's constituents. I can see an opportunity for developing at the head of the lakes a great iron ore industry. It is standing there inviting those who have the ability and the cash to come along and develop it. I think the government should pay a bounty of one or two dollars a ton on iron ore in the same manner that subventions on coal were granted to help Saskatchewan and Alberta. I will also mention now, as there are to be no supplementary estimates, that there is a dire need to keep our harbour open at the head of the lakes. Dredging that should have been done two years ago and last year was not done because the government wanted to cut down expenditures. The channel must be kept open for shipping, and if there are any accidents to ships coming in or going out, the government will be liable to some extent.
At the head of the lakes we have also a splendid shipbuilding yard, with two ships almost ready to launch and another with her keel laid. We have grain elevators, the largest and best filled that one can find anywhere. We have pulp and paper industries, and a great shipping centre. We have there the Canadian Car and Foundry company, which built the first Hurricane fighter that was built in Canada, and it stood the tests all the way through.
The minister in making his budget proposals certainly showed himself to be no respecter of persons because he made everybody pay who was earning anything worth 95826-80
while. We admit that the budget is hard on the bachelors; but this is leap year, Mr. Speaker, and notable bachelors will always be able to find somebody to help them out with their exemption, even if it costs something more.
I can see a sign of the times in this budget because it brings a leveling down. I have no trouble in convincing myself that when this war is fought and won, there will have to be a considerable change in our economic system so that every able-bodied man in Canada will have something worth while to do to earn his bread and keep a cosy corner of his own.	i
I ask myself, what is the cause of all this war? The lawyer would say, broken laws and broken treaties. The business man would say, hunger for trade. The doctor would say, disease and sickness in the life of the nation. But a minister of the gospel accustomed to call a spade a spade would say that the cause was disobedience of the laws of God and disregard of the brotherhood of man. The old law emphasizes "thou shalt not". "Thou shalt not kill." "Thou shalt not steal." Another commandment is: "Remember the Sabbath day to keep it holy." Perhaps the cause of the war is that we have been leaving God out of our plans and out of our thinking. We need to examine the fundamentals again, and times like these certainly cause us to think. The other day I was reading the old book of Ezekiel, and I was convinced that when men and women place their trust in God and go out and keep their powder dry, they will win, and win in the right way.
Not long ago our great king, not only the king of Great Britain but the king of Canada, called in all the churches of the commonwealth for a day of prayer, and I do not think since Easter have our churches been as well filled as they were on that day. I wonder how many men and women and how many ministers looked for an answer to their prayers that day. But when the British army was hemmed in at Dunkerque there came the announcement across the seas that it was nothing short of a miracle that the British army got out so well.
When I consider the purpose of our custom of observing the Sabbath day, that is, for worship and rest and the upbuilding of body and mind, and then when I reflect how too frequently that day is spent, I suggest that we need to rethink along another line the matter of Sabbath observance. We in Canada have a habit which has cost us about $180,000,000 this past year. I have yet to hear an hon. member in any quarter of this

The Budget-Mr. Mclvor

chamber lift his voice in protest against the wasting of that money. Admittedly I would rather see a man take a drink than have him sit on one side of the fence and act on the other. I know that once I took a little drop of cognac, real brandy. I had a bad throat once and the doctor said, "You should have a good gargle." All the other gargles failed, so I resorted to the cognac and gargled it, and I nearly choked.


John Ritchie MacNicol: Did the hon. member
spit it out?


Daniel (Dan) McIvor: The doctor said, "You
allowed a little drop of it to trickle down, and that did the trick." In that traffic we spend $180,000,000 a year. Why do hon. members not dare to protest against the drink traffic? I can tell you, Mr. Speaker. We are scared of losing the votes of the supporters of beer parlours. I am scared too, but not into silence.
Let me close upon a more hopeful note, a note of confidence in the morale of our country and the courage of our soldiers. I may be pardoned for reading an extract from a letter which I received from a young lad, an acquaintance of mine who is now in the air force. The men of that force may or may not be better than others, but I know them to be great lads. This is the extract:
The war news looks bad, but it looks as if it is up to the air force and the navy now, and that is where we shine. As long as our leaders stand up and show real common sense I am not a bit afraid of what the air force will do. There is nothing here but the will to fight, and I know that the boys will do their part.
That indicates the character and calibre of our air force; they will give a good account of themselves and chase the Hun and his leader back again ere long into that railway coach.
As I think of these youths, of Canada and its educational institutions, of our citizens who strive for the benefit of mankind, of the welcome extended by the press to news of the churches and reports of all good movements; as I see the Christian home and the old Bible restored to their honoured place, with the Bible used as a guide to life, not for superstitious reading; as I think of our Christian manhood and womanhood more steadfast than before in its trust in God, I cherish the hope of a glorious commonwealth greater than anything this world has ever known, in which God will be first and every good thing will have its rightful place.
At six o'clock the house took recess.

After Recess
The house resumed at eight o'clock.



PRIVATE BILLS


[Stage Direction]
Mr. J. H. BLACKMORE (Lethbridge) moved the second reading of Bill No. 26, to incorporate the Alberta Provincial Bank.
He said:	There are several reasons why
this house should proceed forthwith to give this bill second reading and refer it to the banking and commerce committee. Among the reasons which might be mentioned are, first, that the premier and cabinet of one of the provinces of this dominion have petitioned that this bill be enacted. This is a most unusual event in the history of Canada. Again, the government at present in power in Alberta is there definitely for the welfare of the common man. It set out with a proposal to give a dividend of $25 a month, however absurd that might seem. It set out also to give a fair price for primary and secondary products. Obviously both these proposals are in the interest of the common man. I feel, then, that I am justified in saying that the government is there primarily in the interest of the common people of the province. Again, that government has managed the affairs of Alberta unusually well. There has been no increase in the provincial debt since the Social Credit government took office. According to the best information I am able to obtain, Alberta is the only province in the dominion in which that is true.
There has been a constant effort on the part of the present Alberta government to be realistic. It has endeavoured first of all to adjust debts so that they might eventually be paid. The principle which it has espoused and so energetically followed has come to be recognized pretty well all over the dominion to-day, namely, that debt should be adjusted to the ability of debtors to pay. The same is accepted as being true of interest. Everyone realizes to-day that it is utterly absurd to hold men to an interest rate of seven or eight per cent when money is being obtained at a rate of three-quarters of one per cent. The Alberta government has consistently striven to reduce the interest rate to a point at which it is possible to pay it, and then it has endeavoured to pay that rate honestly and without fail. It has been unable to meet all its obligations when they came due, with the result that there has been default, but there was no blame to be attached to the Social Credit government for that default. A

Alberta Provincial Bank
situation, had been built up for years which was completely impossible for them and which would have been impossible for any government of any name that could have been elected in Alberta.
The government since it was elected has given the province sound management. It has saved a good deal of money for the people of Alberta. It has collected taxes well. It has increased the revenue of the province. For example, the oil returns of the province have increased $732,000 a year. The revenue from automobile licences has increased $760,000. The income from petroleum and natural gas rentals and royalties has increased $786,000. Liquor sales have yielded $930,000 more. There have been great savings to taxpayers on the insurance of government cars and government buildings, the total savings in three years being $111,104.74. They have organized a central purchasing board through which all the purchases of the government are made. Through that central purchasing board they hope to be able to save $400,000 a year. Between July 1, 1939, and February, 1940, they saved $260,000. In addition to these considerations, they have paid their interest promptly; they have paid off millions of dollars of the savings certificates which were hanging about their necks like a millstone when the government took office; in a general way they have done a good job of housekeeping in the province, building fine roads, improving the health of the people greatly, encouraging industry, endeavouring to refund the debt of the province, and in every other way that they found available they have managed the province well.
I should like to read a quotation from a letter which I believe will be of interest. The Alberta government from the time they took office tried to refund the debt by every means which was possible to them, but they were unable to have a refund of that debt.
One of the firms with which they were working was the Municipal Bond Company of Los Angeles. Mr. Harold B. Reed, representative of that organization, wrote to Mr. Low, the provincial treasurer, on March 4, 1940, a letter in which appeared these words:
I presume that by this time you and your colleagues are in full swing of the fight to return your government to power and I am convinced that you will make a good account of yourselves. From the situation as I know it, you can be proud of the accomplishments which you have made in the matter of the finances of the province-
I break off there to ask if hon. members suppose this man knew what he was talking about. He had access to all the provincial records; he examined with great care the 95826-804
financial position of the province, because he was counting on undertaking, with his associates, the refunding of the Alberta debt of over $160,000,000. It was very likely that he knew what he was talking about; his words, therefore, should carry more than ordinary weight:
-and despite criticisms to the contrary, you have the strength which comes from the knowledge of having done well a difficult job. Even though the debt readjustment may still be a matter of uncompleted business, nevertheless I think it has been conducted in such a manner that it should be relatively easy of final accomplishment once the elections are over and the Rowell report is issued.
Those words carry tremendous weight; they indicate that this man was completely satisfied after his investigation. It may be asked what bearing this has on the passage of this bill. I say it has important bearing, because it indicates the sort of men who are in charge of the affairs of Alberta, who have asked this government to give them a bank with which they can proceed with the rehabilitation of the province according to the principles in which they believe.
Alberta is in a very difficult position; another reason why this matter should be given consideration. It has a heavy debt. It is a province of primary producers, in the main, and therefore subject to serious fluctuations in the prices of primary products. The tariff incidence is particularly heavy on the three central western provinces, and the freight rate is especially onerous to the people of Alberta. As they say, the freight rates "get them going and coming." Their land settlement problem is grave, because land settlement was carried on under the direction of the dominion government. As a result, large numbers of people were allowed to settle in areas that were too dry for settlement, that part of the province which falls within the Palliser triangle. There was a great deal of scattering out of the people, giving the province a heavy administrative task with respect to roads and other social services; Alberta has, for example, to care for ninety thousand miles of road. An extremely difficult situation awaits any government in that province.
All the provinces are in trouble now; everyone realizes that. The Rowell commission was appointed to investigate conditions as between the provinces and the dominion, manifestly because the dominion realized that there existed a grievous problem and a grave situation. The dominion itself is in serious trouble. How we are all going to get out of the trouble no one would even dare forecast at the present time. It behooves us, therefore, to give earnest attention to the
Alberta Provincial Bank
[Stage Direction]
proposals of any group of thoughtful, careful people in this dominion. Fdr a good many years Alberta has been eager to be selfsupporting, to relieve the dominion of the burden and to stand on its own feet. Surely any group of people having that attitude ought to be given all the assistance they can safely be given.
The people of Alberta ask for this bank. Can we in reason deny their request? I believe every one in this house at the present time realizes that there must be a change in our economic system. I believe I have heard more men express that idea in this house in the last week or so than in any previous two years since I have been here. What form is this change to take? We cannot agree on it. Many hon. members do not agree with the people of Alberta; yet I do not think any hon. member would be so reckless as to say that he positively knew the people of Alberta to be wrong. They may be right. If they are right, if they have the right solution, then surely hon. members want to know it. If they have not the solution, then I am sure all hon. members wish to give them every opportunity to go forward and prove to themselves that they have not. Then they will be satisfied, and so will the rest of the people of Canada.
The proposed bank is safe. All the rules and restrictions which apply to the conduct of the ordinary bank will apply to the proposed bank for Alberta. Thus all the guarantees will be there to safeguard the deposits of the people; all the guarantees will be there to safeguard the people of the dominion against inflation and other abuses to which banks might be addicted. The bank is to be publicly owned. The shareholders are to be the people of Alberta, through their government; the directors are the members of the cabinet of that province as it may be constituted at any given moment. Therefore it is an ideal publicly owned bank. It is not to go beyond Alberta in its operations; therefore it is strictly an Alberta bank. Anything that happens to it or because of it will affect the people of Alberta and nobody else, at least directly.
Paul Joseph James Martin: How will it compare with the Ontario savings scheme?


John Horne Blackmore: I think it would be better to have that discussion in the committee, where we shall be prepared to answer all questions. I am afraid we would take up too much time if we carried on that discussion here.
Inflation will be rendered impossible because of the fact that there are abundant goods in Alberta, it being one of the richest provinces 
in the dominion. The currency issue possible is strictly limited by the banking laws of Canada, which also strictly limit the credit issue. Some may be afraid that Alberta will borrow from the bank. The province is going without borrowing and is committed to the policy of refraining from increasing the provincial debt. Therefore I think I can safely say that the government of Alberta will not try to borrow from this bank. I repeat that the credit issue is limited, so there can be no possibility of inflation.
Finally, the bank is to exist only until 1944. Surely no serious damage can be done, either to the people of Alberta or to the people of the dominion, in such a short time. Some may feel that probably serious damage could be done; but let us bear in mind that the people of Alberta are alive and alert. They exercise influence on their government, just as do the people in any other province of this dominion. It is a foregone conclusion that they are not going to tolerate any foolish behaviour on the part of their government, no matter what that government may be. Anyone who has been in Alberta will know that, and of course anyone who has not been there will not know it.
Some may object to public funds being used for the $500,000. But let me recall the fact that the present provincial administration in Alberta has saved the province $500,000 over and over and over again. Therefore there need be no anxiety on the part of anybody in Alberta because of the fact that his money is going to be used for that $500,000.
In Alberta there is a central purchasing agency which, as I said a few moments ago, is saving $400,000 a year. At the rate it was going in February it undoubtedly will do that. That alone will supply the money which is to be used from the public fund. A moment ago I mentioned the great savings effected from liquor management.
Another aspect of the matter worthy of our attention is that the people of Alberta need banicing facilities. The number of banks in the western provinces which have closed in the last few years would, I believe, surprise hon. members. Between December 31, 1929, and July 31, 1935, there were ninety-two bank branches closed in Alberta.


Douglas Gooderham Ross: Banks or branches?


John Horne Blackmore: Bank branches. In Manitoba forty-nine were closed, and in Saskatchewan, 160. Between December 31, 1929, and December 31, 1939, there were closed in Alberta 130 branch banks; in Manitoba, seventy-five, and in Saskatchewan 222.

Alberta Provincial Bank
Let us remember that people need banking facilities. If our present chartered banks are unable to give the facilities so vital to the economic welfare of our people, surely some government agency, somewhere, must take steps to deal with that situation. Alberta has taken such steps. In order to provide banking facilities, the Alberta government has established treasury branches which, to a surprising degree, have been successful. They have decreased unemployment and increased business. The Alberta government bank is designed to aid the treasury branches in accomplishing their good work.
There is a further matter bearing on an Alberta bank which I suggest is worthy of the attention of the house. In 1938 the Hon. Charles A. Dunning rose in his place in the house and in the hearing of many hon. members now present offered to give Alberta a bank. Hon. members will find his offer at page 1861 of Hansard for March 30, 1938.


An hon. MEMBER:: Read it.


John Horne Blackmore: I do not think it would be well for me to take the time of the house to read it; but it is there for anyone to read. In effect he said that if we would follow the rules contained in the banking laws of Canada, we could establish a bank in Alberta, and that he would gladly help to give us a charter. The proposed bank does follow the rules-every one of them.
Another matter of importance is this: The Prime Minister of Canada (Mr. Mackenzie King) promised he would keep his hands off Alberta. I believe when he made the promise he intended to keep it. This is one instance in which he can give Alberta somewhat of a free rein. The Conservative party, under the Right Hon. R. B. Bennett, were favourably disposed towards Alberta. On several occasions that great statesman signified his sympathy for Alberta, and did what he could to assist her. For a long time in Canada the Cooperative Commonwealth Federation have advocated a publicly owned bank. Under those circumstances I would expect this bank to commend itself to them.
So that in the discussion of this bill we shall not have to use all the time allotted to the discussion of private bills, may I say in closing that all the details any member may wish to have can be obtained before the banking and commerce committee, to which this bill should be referred. Before that committee we shall have responsible ministers of the crown from Alberta who will be ready to answer any questions any hon. member may wish to ask, and who will be prepared completely to satisfy whosoever may desire to go into that committee. That is the type of committee to which this house sends difficult tasks for careful consideration.
Inasmuch as there are on the order paper other bills awaiting discussion, and as there is not a great deal of time for the consideration of private bills, I shall close my observations by asking that hon. members permit this bill to be turned over to the banking and commerce committee for careful examination and consideration.


James Layton Ralston: Mr. Speaker, I have listened with interest to the observations of my hon. friend, and I should like immediately to deal with what he has mentioned last, namely, his reference to what was said by my predecessor in office, the Hon. Mr. Dunning. From what Mr. Dunning said on that occasion I shall read two extracts, the first of which is as follows:
I suggest that in all seriousness, and I shall do the best I can to facilitate the formation of such an institution, within the four corners of this Canadian bank act.
The second extract is as follows:
True, they will have to come to this parliament for a charter, and I shall tell them here and now that if the social erediters of Alberta comply with that statute with which all other Canadian chartered banks have had to comply, and with which they must comply to-day, I for one shall be pleased to do all I can to facilitate the passage through this house of a bill granting a charter to a social credit chartered bank.
I am afraid that in the measure before the house the hon. member has not brought himself within the terms of the assurance given at that time by the Hon. Mr. Dunning. It does not come "within the four corners" of the Bank Act, nor does it "comply with that statute." I do not wish to take the time of the house at any length, because I propose to indicate that the government feels that at this time this bill should not have second reading, but it would be prepared to propose, in amendment, that the bill be not now read a second time, but that the subject matter thereof be referred to the select standing committee on banking and commerce, for consideration and report.
The outstanding feature of the bill-and I may say there are several unusual features in it-is that, entirely at variance with the provisions of the Bank Act, which provides for the election of directors by the shareholders, and the consequent election of a president, it purports in effect to make this parliament the rubber stamp of the premier for the time being of Alberta, in this way, that parliament shall now state, if the measure receives support in the other place, that, "The
Alberta Provincial Bank

members of the executive council referred to in section 1 of this act, shall be the directors of the bank." The members of the executive 'Council are of course chosen by the lieutenant-governor on the advice of the premier.
Section 1 reads:
Those persons who are for the time being members of the executive council of the province of Alberta are incorporated under the name of "The Alberta Provincial Bank" hereinafter called "the bank".
May I point out that this section does not come within the terms of the Bank Act. The Bank Act provides for individuals, whose names are placed before parliament as incorporators and whose responsibilities and banking experience can be ascertained, being incorporated after due examination by the house and by the committee. This bill provides, in effect, that at the will of the premier of Alberta, no matter who that may be, those whom he recommends to the lieutenant-governor as members of his executive council, automatically are to be the incorporators and shareholders of this bank. This is a considerable departure from the provisions of the Bank Act. Without being facetious at all, one might just as well consider the incorporation here and now of the board of trustees of any church or the committee of any club or the officers of any society, who may for the time being happen to be in office, as the incorporators and directors of a bank, and these directors would change automatically whenever the trustees, or committee men or officers change. I am quite satisfied that the house will realize that there is at least grave doubt as to whether that procedure is the procedure called for and contemplated by the provisions of the Bank Act.
It seems to me that that is the outstanding feature of this bill and the one which ought to be considered carefully before the bill is given second reading. It is an anomaly, it is unusual, it is unique in the history of banking legislation to have parliament place its seal of approval upon a body of men as organizers, incorporators and operators of a bank, simply because they happen for the time being to be holding a particular office, no matter how high that office may be. It seems to me that that feature should be enough to indicate to the house why this bill should not be given second reading at this time, but that the subject matter should be carefully examined by the banking and commerce committee.
As hon. members will have noticed, section 7 of the bill indicates quite clearly that this bank is not to be a bank "within the
four corners" of the Bank Act, to use Mr. Dunning's words, but is to be a bank in respect of which a great many of the sections of the Bank Act are not to apply. Without dealing at any length with these exceptions, may I just mention one or two. Section 14, from which this bank is to be excepted, prohibits the issue of bank notes until the approval of the treasury board has been obtained. That section is out. Section 15 requires that a certificate shall be procured from the treasury board with regard to the amounts to be paid in with regard to the incorporation and organization of the bank and the list of unpaid liabilities. This section also provides that the treasury board certificate is not to be granted unless the treasury board is satisfied that the requirements of the Bank Act and of the special act of incorporation with regard to the organization and incorporation have .been complied with, and that the expenses of incorporation and organization are reasonable. This section also is not to apply.
Section 16 provides that if the treasury board certificate is not granted within one year, all the powers of the bank shall cease. It is provided by this bill that these sections are not to apply to the bank which it is proposed to incorporate. Section 20 of the Bank Act sets out the minimum qualifications of a director. A director must be the sole owner in his own right of shares of the bank on which $3,000 has been paid up, when the paid-up capital of the bank is one million dollars or less. He must be the sole owner of shares of the bank on which $4,000 has been paid, when the paid-up capital of the bank is over one million and does not exceed three million dollars. A director must have stock to the value of $5,000, when the paid-up capital stock of the bank exceeds three million dollars. That section is not to apply to the proposed bank. Section 23 of the Bank Act reads:
The directors, as soon'as may he after their election, shall proceed to elect, by ballot, from their number a president and one or more vicepresidents.
The directors may also elect by ballot one of their number to be chairman of the board and one to be honorary president.
But that section is not to apply to this bank. Instead of that this bill provides that the lieutenant-governor in council may appoint one of the directors the president and another the vice-president of the board of directors of the bank. He may also fix the quorum of directors for the purpose of a directors' meeting. I do not think I need trouble the house at greater length with regard to the other provisions of the Bank Act which are
IMr. Ralston]

Alberta Provincial Bank
excluded in their application to this particular bill. I know my hon. friend will not regard me as treating this matter lightly if I do not go exhaustively into the details of the bill now, but I do submit that because of the first feature I have mentioned, namely, the proposal that we shall here and now incorporate whoever happens to be selected from time to time by the premier of Alberta for the lieutenant-governor as his executive council to be the directors of this bank, and that the lieutenant-governor in council is to be given the power to elect the president and other officers of the bank, this matter is one which ought to be considered seriously by the banking and commerce committee.
We are not asking the house at this stage to refuse further consideration in connection with the bill, but rather asking to have the subject matter of the bill discussed before the appropriate committee. May I point out that several rather grave constitutional questions are involved. There is the question whether the dominion parliament can make a banker out of the lieutenant-governor in council of the province. That I submit is a serious question. There is also the question whether parliament can compel the lieutenant-governor in council to undertake the business of banking, which is what is proposed to be done here. For these and other reasons which I could give, I trust that the hon. member will accept the amendment which I propose to move. I move:
That the bill be not now read a second time, but that the subject matter thereof be referred to the select standing committee on banking and commerce for consideration and report.


Richard Burpee Hanson: Mr. Speaker, I have only a few words to say about the amendment and the motion now before the house. I am not going to oppose the amendment, but I suggest to the minister that his course is not a courageous one. Either there is a need for this bank, or there is no need. There is a principle involved that should receive the consideration of the government and this bill should go through the house or it should not go through. I shall not make any observations at this time as to the contents of the measure beyond saying that if you eliminate the provisions of twenty or twenty-five sections of the Bank Act from this charter, you are not going to have a bank, you are simply going to have a department of the provincial government of Alberta. I think the minister should have discussed the principle involved in this measure rather than have it go to the banking and commerce committee where it may be buried in oblivion and never return to this house. That is likely to be the fate of this bill.
The government, through the minister, should have a policy with respect to applications for bank charters, whether made by the province of Alberta or by any other group of individuals. I well remember when my friend, the late Hon. J. A. Robb, was Minister of Finance and an application was made by a group of gentlemen from my own province for a charter for a bank to be called the Eastern Bank of Canada. The very first consideration which, if I remember correctly, Mr. Robb took into account in connection with that application was the question of the necessity for a new bank in eastern Canada. He questioned very closely, not the bona fides of the applicants, but the necessity for establishing a new banking institution down there having regard to the services that were being performed by the old-established chartered banks in that part of the country. I think he would have refused the application if I had not made a personal appeal to him myself on behalf of the incorporators, who were not particularly friendly to me, by the way, on the ground, first, that they believed there was the necessity for a new chartered bank and, second, that they were quite capable of underwriting the whole initial $500,000, or whatever the initial paid-up capital was to be. On that basis the charter was granted, but it never became effective because unfortunately the chief promoter died quite suddenly and that ended the scheme.
With regard to this bill I have no objection, as I said at the opening of my remarks, to having it referred to the banking and commerce committee, but I warn my hon. friends to the left that it will be the burying place for this bill. We can see requiescat in *pace written on it right now-R.I.P.-it will never emerge from that committee, and certainly it never should in its present form. I will say that, and I will content myself with that.


George Henry Ross: Mr. Speaker, since I represent an Alberta constituency and feel strongly that it would not be in the interest of Alberta to pass this bill, I think I should set forth some of my reasons for opposing it.
In the first place I challenge the statement of the hon. member for Lethbridge (Mr. Blackmore), the leader of the Social Credit group, that such a bill as this had the approval of the former Minister of Finance, Mr. Dunning.
The object of this bill is to create a bank. The capital stock of the projected bank is to be issued to and vested in the provincial treasurer of Alberta in his official capacity, and shall be held by him and his successors in office on behalf and for the use of the
Alberta Provincial Bank

province. The directors are to be those persons who are, for the time being, members of the executive council of Alberta. Therefore the charter is being applied for by the corporate body known as the province of Alberta. It is to be a provincial bank pure and simple. The stock is to be owned by the bank and the directors are to be members of the executive council of the province. Mr. Dunning never offered in this house to assist in the creation of a bank owned and operated by a corporate body known as the province of Alberta. What he did was to offer to assist a group of Social Creditors should they wish to incorporate a bank and comply with the provisions of the Bank Act. Let me read his words, from Hansard of 1938, page 1861:
My suggestion is that inasmuch as the Social Credit movement boasts considerable strength in one province of the dominion, and from that point of view at least, the provincial point of view, is a movement of major dimensions, those who believe-
Mark these words:
-that the banking system can be employed to put into effect the Social Credit theory and that the banking system has unlimited privileges such as have been outlined by my hon. friends, have within the four corners of the Canadian Bank Act the opportunity of their lives. All they have to do is, of themselves-
Not the province, but the Social Crediters who wish to put their theories into effect.
-to form one of these institutions which we call a Canadian chartered bank. The procedure is all set out in the law. True, they will have to come to this parliament for a charter, and I shall tell them here and now that if the Social Crediters of Alberta-
Not the corporate province of Alberta, but the Social Crediters.

comply with that statute with which all other Canadian banks have to comply and with which they must comply to-day, I for one shall be pleased to do all I can to facilitate the passage through this house of a bill granting a charter to a Social Credit chartered bank. In that way my hon. friends would have, under their own control, all of the privileges, and it is my duty to point out also that they would have all the responsibilities of a Canadian chartered bank.
Later on be says, at page 1862:
Any group of citizens in Canada may come together for the purposes outlined in the Bank Act of Canada.
Any group of citizens, not a corporation.
I am suggesting to my hon. friends that they are a group of citizens in Canada; that those in Alberta who adhere to their theories are citizens of Canada, and that as citizens of Canada believing in the Social Credit doctrine they can see to it that only those who believe in that doctrine may have any control or say in the chartered bank they may form.

So that it was an offer made not to a corporate body, the province, but to a group of Social Crediters of the province; and I have no doubt that if a group of Social Crediters applied to-day for a bank charter, complied with the provisions of the Bank Act and put up their own money, the application would receive the sympathetic consideration of the house. But to-day these men want to put their hands into the treasury of Alberta and use the money of the province to finance and carry on this institution. Mr. Dunning never offered to assist any such proposition.
Banking differs from other businesses in that bankers handle money for other people on a very large scale. As the money is being handled for others on a very large scale, an additional duty is imposed upon this house when an application comes before it, to see to it that the persons who are to be entrusted with the handling of the money are persons who are qualified and who will probably make a success of banking. In the past successful public enterprises of this type have been organized quite differently. A separate corporation would be set up with a board of directors who were familiar with the business to be transacted by the corporation. The directors would be selected because of their sound business judgment and because they would be likely to make a success of the business to be undertaken. They were usually appointed for fixed periods and were subject to supervision by the government that granted them incorporation. The Hydro-Electric Power Commission of Ontario and other successful corporations were organized in that way.
But in the proposal before us the experience of ages is cast to the winds. The directors of the proposed bank are to be those persons who are for the time being members of the executive council of Alberta. Even the president is to be chosen from among them. None of them is a banker, and none has had any experience or training in business that would qualify him to be a director or manager of such an institution. There is no provision for continuity of policy or management. The government may change two or three times in the course of a year. If it does, the board of directors of this bank changes two or three times in the course of a year. Each board will have its own ideas as to how a bank should be run. Much experimenting will be done with the depositors' money. Hard-earned savings will be frittered away in carrying out foolish experiments. Are we going to be parties to such recklessness? Furthermore, they do not want to apply to this bank

Alberta Provincial Bank
section 30 of the Bank Act which provides for the removal of directors for maladministration or other just cause.
Let us examine a little more closely the record of the first directors of this projected bank. Their past record should be of assistance in determining whether they are fit and proper persons to manage such an institution.
To secure election in 1935, Mr. Aberhart, the present premier of the province, promised a dividend of $25 a month to each and every adult in Alberta. He also promised interest-free production loans of $1,500 to each producer. Some of the people were bold enough to inquire of him where he was going to get the money to operate this bank and where he proposed to get the money to make these loans. He told them in all sincerity that he was going to do it with a fountain pen and entries in books which he would keep for this purpose. All he asked was eighteen months time within which, presumably, to train the fountain pen.
After their election the first step towards reaching their goal was to indulge in a covenant-signing crusade. The covenant signers were asked to turn over each year one-half of their crops to the government to help pay for this $25 a month dividend.


Charles Edward Johnston: Where does the hon. gentleman expect to go when he dies?


An hon. MEMBER:: Alberta.


George Henry Ross: Several signed
the covenant, but rumour has it that they first transferred their property to their wives. Then they took good care to see that their wives did not sign. The covenant-signing campaign collapsed after costing the province $10,000. By this time the farmers of Alberta had begun to realize that dividends did not depend on fountain pens and book entries but that they had something to do with the farmers' crops.
Then came a prosperity certificate proposal, a certificate intended to take the place of money, a scheme devised to get credit into the hands of the consumers. They managed to get rid of much of this spurious money among the public. It is to be noted, however, that none of the members of the government had sufficient faith in the scheme to accept any part of their pay in this spurious money; they required when they were paid to be paid in the coin of the realm. After thousands of dollars were spent on prosperity certificates, the scheme was dropped.
The Aberhart government then imported two experts from England:	Powell at $12
a day and a bonus of $4,000; the other expert, Byrne, was given a ten-year contract at $6,000 a year. These men conceived it to be their duty to make a frontal attack on the banks. The idea was to control the banks by placing them under the domination of a social credit board, the members of whom knew nothing whatever about banking. They ignored the fact that banks come under federal jurisdiction. The necessary legislation was enacted by the province of Alberta, but it was duly vetoed by the dominion government.
Having failed in their attack on the banks, they opened up a number of treasury branches throughout the province. At last they visioned their utopia where the fountain pen would play its full part. These treasury houses are still being extended from time to time. The more houses they open, the more money they lose. Already they have cost the province more than a million dollars.
Mr. Aberhart and the other members of the executive council have for years been proclaiming that banking is a racket, that credit can be extended indefinitely by making bookkeeping entries with a fountain pen, and that the issue of unlimited credit is the key to prosperity. His government have defaulted in $12,000,000 of Alberta bonds and $6,000,000 of provincial savings certificates. They have arbitrarily repudiated one-half of the interest rate payable on Alberta's debts. And these defaults and repudiations were not dictated by necessity; they were done deliberately and gloried in as representing real statesmanship.
The hon. member for Lethbridge (Mr. Blackmore} in the course of his remarks complained that many branches of banks throughout Alberta were being closed. Can any one wonder at the banks closing their branches under such circumstances?


John Horne Blackmore: Mr. Speaker, would [DOT]the hon. member permit a question? Did he notice that far more banks closed in Alberta before the Social Credit government went into power than closed afterwards?


Norman Jaques: And what about Saskatchewan?


George Henry Ross: The interest cut was held illegal by the judicial committee of the privy council, but the government is now defying the courts by hiding behind the immunity which a government enjoys of not being suable without its consent.
(Expiry of hour for public and private bills.)

The Budget-Mr. Quelch



THE BUDGET


[Stage Direction]
The house resumed 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, and the amendment thereto of Mr. Coldwell.
Victor Quelch: This afternoon, just before the leader of the opposition (Mr. Hanson) took his seat he made a plea to hon. members in this corner to restrict their discussion of this budget. I would suggest that the leader of the opposition would have been in a better position to make that appeal if he had lived up to it himself and if the hon. member for Danforth (Mr. Harris) had already done so. I make that statement because the leader of the opposition and the hon. member for Danforth have monopolized in their discussion of this motion over five hours of the time of the house. Therefore it is hardly being logical or consistent to ask us at this time to limit our contributions to the debate.
In discussing the budget it is necessary to keep in mind that it is a war budget, and that in time of war the major objective becomes that of winning the war and defeating the enemy. All the resources of the nation must be organized to that end. This means that great sacrifices will have to be endured. It therefore behooves the government to see to it that those sacrifices are imposed upon the people in the most equitable way possible. It is absolutely essential that during the war we maintain a high morale among the people in order to build up the will to win. Such a spirit is usually built up over a number of years. It is not usually prevalent among a people that have been ground down by poverty, misery and want, unless it can be shown that that condition exists as a result of the nation being deprived of a fair share of the resources of the earth. In such case of course the people will be willing to fight to change that condition.
But that is not the position of Canada. We have almost unlimited resources. In spite of that we have had a great deal of poverty, misery and unemployment in this country during the past ten years. Can a people who have been in this unhappy plight be enthusiastic about fighting for a continuation of such a condition? Unfortunately that is the only course which has been or is presenting itself to many people since the declaration of war. Despite this handicap, a high morale and a fine esprit de corps would prevail among 
the Canadian people if there were strong leadership; but unfortunately that has been sorely lacking in Canada during the past six years. If under strong leadership immediate evidence were forthcoming that we were putting forth our maximum effort and at the same time insisting upon the greatest equality of service and sacrifice, I believe that confidence could quickly be restored in this nation. Would anyone in this house be so foolhardy as to suggest that either of these things has been accomplished during the past ten months, or since the declaration of war? Ten months after the declaration of war we still have men in Canada pleading for the opportunity to make some contribution in this war. Industry is fighting to obtain orders. Now by this budget we are given to believe that all this is to be changed. For instance at page 1014 of Hansard we find this statement made by the Minister of Finance (Mr. Ralston):
Financial provision can be made and will be made for whatever it is physically possible for us to produce or to procure in the way of war services, supplies and materials. The limits of our effort are not fiscal; if there are any such limits they are physical, mental and moral-by that I mean the physical limits of our resources and the mental and moral capacity of Canadians to bear burdens and make sacrifices.
I would congratulate the Minister of Finance upon that statement. But it is comical to find that statement appearing in the budget speech. For the past five years we have advocated that principle in this house, and have always been ridiculed for stating, as we have on various occasions, that anything that is physically possible and desirable can be made financially possible. Last year in the banking and commerce committee the governor of the Bank of Canada stated that that was true, and now we find it stated in the budget speech. We have referred to the fact time and again in this house; we have pointed out that it has been physically possible during the past six years to increase greatly the production of this country, to establish a higher standard of living so that people would not have to go on relief. No one would dispute that. The governor of the Bank of Canada agrees that what is physically possible and desirable is financially possible. Therefore the only conclusion we can come to is this, that since it was physically possible to make a higher standard of living available to the people of Canada, and since it was financially possible, tihe only possible reason the government had for not doing it was that they did not consider it desirable.
The Prime Minister (Mr. Mackenzie King) has always been fond of expounding fine principles in this house. Unfortunately he has

The Budget-Mr. Quelch
failed miserably in putting them into effect. I am not surprised that the hon. member for North Battleford (Mrs. Nielsen) stated this afternoon that she did not believe various statements that were made by this government. How could anybody believe that the various policies that they enunciate today will be put into effect, in view of the stand this government has taken time and again in the past? Have the people of Canada forgotten the statement made by the Prime Minister in 1935 that currency and credit would be made available in terms of public need to meet the domestic and social requirements of the Canadian people? Would any hon. member dare to say that that promise has been carried out? Have we forgotten the policy propounded by the Prime Minister at the outbreak of the war, and again on May 20, when he made this statement as recorded on page 46 of Hansard:
The unprecedented threat to the allied powers and ourselves must be met at once by immediate action. Production must be accelerated to its limit. Training must be intensified.
Does anyone suggest that that has been carried out during the past ten months? Can it be said that production has been accelerated to the maximum, while we still have thousands of men in Canada pleading for a chance to take part in the country's war effort? During the past five or six years, while Germany has been busily engaged in amassing war materials and thereby reaching a strong war footing, we have been busily engaged in amassing credit and gaining a so-called strong financial position. While Germany said in effect, "To hell with money" and spent itself into a strong warlike machine, we have been busily worshipping at the shrine of money and saving ourselves into a state of insecurity. I say that because wars are not fought with money, they are fought with men and materials. Germany had the materials by September of last year, and we apparently had the credit. But credit is merely faith in our ability to deliver goods and services as, when and where required, and unless goods can be delivered when required, that faith is destroyed. I wonder how long the people of this nation will continue to have faith in a system which for the past five years has wrecked the lives and health of thousands upon thousands of the people of this country, and in the past few months has seen nation after nation destroyed under the iron heel of fascism.
In peace time we have urged that production should be maintained at its maximum, or at least at a level sufficiently high to provide to the people of Canada a decent 95826-811
standard of living. We have repeatedly presented the physical picture, showing that industry was only producing at less than fifty per cent of its capacity. We have pointed out that this dominion has great natural resources barely touched, large reserves of energy and a large surplus of unused labour in the form of the unemployed, and in addition a large favourable balance of payments, a position of which we might well be proud but for the fact that on the other side we had a million or so people on the verge of starvation and destitution. And repeatedly we have asked in this house this question: Why should we not put the unemployed to work in the industries that are working only part time, and thereby produce the goods of which the people are so greatly in need? We always failed to get a reply to that question. Many hon. members have risen in their places and tried to place the blame upon industry. They have stated that industry should have had more confidence; that industry should have expanded and employed the surplus labour. I would point out that you cannot blame industry. If industry was not able to sell its restricted production, how could it possibly have sold its production if it had expanded?
We have stressed the reason for this condition, and it is necessary that we should understand it at this time in discussing the budget. We have contended that this condition is due to the fact that industry is not self-liquidating; that industry, owing to certain practices that are inherent within the system, does not create an effective demand for its own production except in times of abnormal capital goods production, and during the past ten years capital goods production has been sorely lacking. We have stressed the fact that if the Canadian people are going to be put in a position where they can buy the production of the country-and I think the house would agree that the only point in having production is in order that you may have the consumption of it-then we must maintain a certain definite relationship between the production - of capital goods and the production of consumption goods. That relationship is this: You must have at all times a sufficient volume of capital goods production so that the salaries, wages and dividends paid out in that production will be at least equal to the deficiency of purchasing power which exists as between the total prices of consumer goods and the monetary demand against them. If that equilibrium is not maintained, it will mean there will not be an effective demand against the production of the country. Production will become restricted;
The Budget-Mr. Quelch

unemployment will increase and you will find yourselves in the vicious circle of deflation. We therefore contend that it is necessary for the government to take such steps as may be necessary to maintain that equilibrium by instituting national projects such as road building, reforestation, slum clearance, the elimination of level crossings and so forth.
On the other hand, in time of war we have an entirely different situation. The production of armaments means an increased production of capital goods. In turn, that means an increased demand against consumption goods. So long as we can increase production to satisfy the demand for war purposes and at the same time satisfy the demand for consumption goods, there can be no justification for increased taxation. It is only after the maximum capacity has been reached that it will be necessary to increase taxation. Otherwise excessive taxation is bound to result in an actual retarding of production. If there should be in Canada certain commodities of which there is a scarcity, for instance such commodities as are paid for by foreign exchange, and it should be desirable and necessary to reduce the demand against those commodities, I maintain that the only sound way to do that is by rationing rather than by attempting to reduce the purchasing power of the people by a heavy increase in taxation, because, when you reduce the purchasing power of the people by wholesale taxation, as exemplified in this budget, you are going to retard and so restrict the demand against the commodities of which we have a surplus. In the near future we shall probably have a great deal of trouble in selling our primary products, because we have lost a number of our markets in Europe. What is going to be the result of this budget? It will further increase that problem and further restrict the demand against commodities of which we have actually surpluses in this country at the present time. This is called a war budget. Certainly it is not a patriotic budget, because it is going to retard our productive capacity; it is going to restrict the demand against goods of which we have a surplus, and therefore make it so much harder to expand our production.
During the past five years I have pointed out that our production has been restricted ever since the Liberal party came into power in 1935. I have pointed out how the Minister of Finance, instead of following the policy laid down by the Prime Minister in 1935-that is, that currency and credit would be made available in terms of public need to meet the domestic and social requirements of the Canadian people-has been attempting to reduce the expenditure by the government to fMr. Qiifllch.J
the amount procurable from the pockets of the Canadian people. The result has been the restriction of production in the face of actual, physical want. Whilst Germany was busily expanding her production to the maximum, the minister's deflationary policy kept thousands of people in Canada idle, although we could have very well utilized the services of those people to build up our defences and increase the production of commodities so that the demand created by the money paid out for the strengthening of our defences would have been satisfied by the goods produced by industry.
So, Mr. Speaker, I would say that those people in this country, in England and in France, who have been guilty of this financial policy of restriction in the face of the great armament production that was going on in Germany, have been more guilty of treachery to these nations than many people who have been actually paid servants of Hitler. There is no question of it. I think we all realize to-day that Germany has gained her successes not by superiority of man-power but through treachery in various forms among the allies. Not the least of those acts of treachery were those policies imposed upon the allied nations under which it has been impossible to expand our production to the extent to which it should have been expanded. We had idle men; we refused them the right to work, while Germany was making every man work to the maximum in building up the greatest war machine the world has ever known. What was the situation here? We had half a million men unemployed. Am I not justified in calling that the greatest act of sabotage Canada has experienced? Those men who have been responsible for our financial policy during the past six years are the grand saboteurs of this country. The other day the hon. member for Parry Sound (Mr. Slaght) said we should hang people guilty of treachery. I said then, and I say now, that we should make sure we hang the right people.
On the other hand it is interesting to note how Germany, a country that was destitute and without capital in 1932, has been able to build up one of the greatest war machines this world has ever seen.


Paul Joseph James Martin: And at what expense to the people!


Victor Quelch: I am going to deal with that.


Paul Joseph James Martin: I do not mean financial expense.


Victor Quelch: I was in England two
years ago, during the crisis of that time, and I met a friend of mine who had just come

The Budget-Mr. Quelch
back from a six weeks' tour of Germany. That was not a Cook's tour; he and his friends took a car and travelled through the country. He said generally speaking they found contentment in Germany. That was in 1938; since then there has been a big change. The standard of living has been reduced very considerably, and I am going to explain why. When I am dealing with the financial policy of Germany, however, I hope no hon. member will think it necessary to rise in his place and ask me if I am advocating fascism or nazism. Our policy is the very essence of nazism. Nazism believes in centralization of power; we believe in the decentralization of power. Nazism believes in the greatest possible regimentation; we believe in the greatest possible freedom. But I would ask this: Just because Germany uses tanks, would it make us nazis if we used tanks also? Just because Germany uses dive bombers, are we nazis if we use them also? When the Prime Minister asks this parliament to grant him dictatorial powers, does that make him a Hitler? Because we have conscription and Germany has conscription, does that make us nazis. Therefore, if Germany has had a sane monetary system in the past few years, I am not advocating nazism, I am sure, if I advocate that we should have adopted a similar financial policy.
I am going to quote from a speech made by Doctor Schacht formerly president of the Reichsbank. This speech was made on November 29,	1938, to the Deutsche
Akademie. It was entitled "The Financial Miracle," and from it I quote the following:
The public finances of Germany were in a hopeless state in 1932. Every increase in tax rates only caused a decline in revenues.
And I would especially refer that statement to the Minister of Finance. Doctor Schacht continues:
Those symptoms of economic collapse were of necessity reflected in an unexampled social distress. A shocking proof of this are the statistics of unemployment, which in the winter 1932-33 exceeded the six million mark and which together with the invisible unemployed amounted to about seven million.
That is the condition which existed in Germany in 1932. In the article Doctor Schacht points out that Hitler called him and told him he wanted to put into operation a financial system which would make it possible for Germany to expand her production to the maximum. Then he goes on:
All government assistance was from the very beginning used to bring about a rise in production, first in a so-called work creation programme through credit assistance for reconditioning, repairs and similar things, and
afterwards through the great armament programme which was steadily expanded. The extent of this programme and of the autohighway construction which was undertaken soon made it clear that these two tasks alone would be sufficient to overcome the existing unemployment, so that the other work creation measures soon became superfluous.
Naturally this work creation and armament-programme could only be set under way by the state and could only be carried out by financing on a large scale. No capital at all was available for this financing. In fact money creation had to be helped along. . . .
The fact that the newly created money would' be covered by newly created goods was not the only point; the type of goods also had to be considered. Simply expressed, the problem was as follows: The credit money, made available for the armament programme, produced a demand for consumption goods, in so far as it was paid out in the form of wages and salaries. However the armament manufacturers deliver military goods which are indeed produced but not consumed. This leads to two conclusions: First, care must be taken that in addition to armament production, a volume of consumption goods is produced which is sufficient for the needs of the population, including all those working for rearmament and, second, the less consumed, the more workers can be allotted to armaments.	[DOT]
The point I bring particularly to the attention of hon. members is that they did not reach maximum production until 1938. Up to 1938 they were expanding their production of war material and consumption goods. Therefore at that time they were able to put forward the maximum war effort, and at the same time maintain a comparatively high standard of living. Then he goes on to say:
Spring 1938 brought a change in our finance policy, because at that time German economy had reached a stage of full employment. As soon as an economy has made use of all available labour and materials, any further credit expansion is not only senseless, but actually harmful. For then newly created money can no longer effect a further increase in goods production but can only bring about competition for the available labour and raw materials; and such a competition must necessarily lead to an increase in prices and wages.


Paul Joseph James Martin: They ultimately disagreed, too.


Victor Quelch: At least we can judge by
results in Germany.


Paul Joseph James Martin: But Doctor Schacht ultimately disagreed.


Victor Quelch: No, I do not think he did. He was placed in a position of even greater importance than the one he held at that time. As a matter of fact, he was promoted because of work well done.


Paul Joseph James Martin: The hon. member must
mean subordinated. It is not correct to say that he was promoted; Doctor Schacht was actually demoted. He was taken out of control.
The Budget-Mr. Quelch


Victor Quelch: He was placed in control
of foreign exchange affecting Germany, Italy and Japan. Surely that is an important position.
If our production were geared up to its maximum capacity, then it would be necessary to increase taxation. But such is not the case tb-day. Our production can be greatly expanded, and to-day we are faced with the difficulty of disposing of a great many of our primary products. To expand taxation ;at this time is bound to mean a restriction in demand against production of primary products. We have lost a number of our markets, and by this form of wholesale taxation, as suggested in the budget brought down by the Minister of Finance, we are just adding to the difficulty of making a distribution of our primary products among our people.
Again I say that if there are certain commodities in Canada which are considered to be scarce, which have to be purchased with foreign exchange, then surely the logical thing to do is to ration those commodities so as to make sure of a fair distribution, rather than cut down the income of all people, and thereby reduce the demand against those commodities which can be produced in abundance. Therefore I say it is not a patriotic budget, but rather one which will actually retard production at a time when we should be expanding production to its maximum.
With these thoughts in mind I move the following amendment to the amendment:
That the amendment be amended by adding thereto the following words:	_
"Furthermore this house is of the opinion that there should have been no increased tax burden placed upon the consumer until Canada attain maximum production of desired commodities or full employment by issuing through the Bank of Canada, currency and credit in terms of actual public need."
I hope the Prime Minister will not take the same attitude to this amendment as to the one moved a few days ago. This amendment I would point out is different. It refers to taxation and production. May I quote at this time what the Prime Minister said only a few days ago respecting the Bank of Canada:
Those who are voting for this amendment are voting to give the government power to relieve itself of all responsibility of financing Canada's war effort simply by passing an order which will enable it to transfer that whole responsibility to the Bank of Canada, an institution which has its home in this city.
And again:
We shall be ridding ourselves of all responsibility for what is required in the way of finance to carry on Canada's war effort, and we shall be turning it over to a single institution which is located on Wellington street not far from these houses of parliament.

How many would agree with that definition of the Bank of Canada? Do we recall the statement made by the Prime Minister in 1935 respecting the need for a Bank of Canada, in order to control currency and credit in terms of public need? To those who remember that statement, what must they think of the definition I have just read? When I heard the Prime Minister's statement the other day I was amazed. As a matter of fact I believe I might say I was thoroughly sickened to think that a prime minister of this country when speaking to the members of the House of Commons could be guilty of such puerile nugacity.
Perhaps hon. members recall what was said last year by the former Minister of Finance about the Bank of Canada. Last year he stated that parliament, through the instruments it had created, now effectively controlled currency and credit, day by day, week by week, month by month; furthermore he stated these instruments were the Bank of Canada and its directors, and that this parliament through the Bank of Canada controlled currency and credit. Yet the Prime Minister states that the Bank of Canada is an institution on Wellington street, and that if we place responsibility of finance in the hands of that institution, we would be evading all responsibility. Yet, I repeat, according to the former Minister of Finance, we control currency and credit through that institution. Undoubtedly we have a definite responsibility for the activities of that institution. Perhaps I might be allowed to quote a few words from a speech made by the Prime Minister on August 2, 1935. He said:
Until the control of the issue of currency and credit is restored to government and recognized as its most conspicuous and sacred responsibility, all talk of the sovereignty _ of parliament and of democracy is idle and futile. To regain for the nation what^ has been lost and to secure a properly constituted national central bank, will continue to be a first objective of Liberal effort.
He said it was a conspicuous and sacred responsibility to control currency and credit through the Bank of Canada, and yet to-day he says it is an institution on Wellington street and if that institution finances the war, we would be evading all sense of responsibility. I do not think the Prime Minister is doing credit to himself or to this government when he indulges in equivocations of that kind.
The budget shows that large sums will be needed in addition to the amounts to be secured by taxation. They may be secured in three ways: by borrowing the savings of the people; by borrowing from the chartered banks, which means monetary expansion; or by borrowing from the Bank of Canada, which

The Budget-Mr. Gillis
also means monetary expansion. If we are to borrow the savings of the people, it will simply mean that this government takes the stand that we are responsible for providing a safe investment for the people. Although we have what might be called a smoke screen by which we try to convince the people that they are financing the war through their purchases of savings certificates, we all realize that the greatest proportion of bond issues will be purchased by financial corporations rather than by the savings of individuals. When we finance by borrowing the profits of corporations, it merely means that we are placing a levy for all time against the people of Canada in order that a tribute may be paid to a small class of society.
On the other hand, we have the power which we should exercise of issuing what money we need through the Bank of Canada. That is what the people believed was the purpose of the formation of this bank. The Minister of Finance may suggest that if we finance in that way it will mean increasing the amount of cash in the tills of the chartered banks, thereby making it possible for them to increase their loans and thus bring about inflation. That charge was made by the former Minister of Finance. I would stress the fact that it would be an easy matter to amend the Bank Act in order to compel the chartered banks to increase their cash reserve requirements, thereby preventing that expansion.
If the minister should contend that the banks could not operate on that basis, that there would not be sufficient profit for them, then I say what I have said before on many occasions: We should nationalize our whole banking system. Personally I am in favour of that. When men who are directors of banks and also directors of industry, have the power to expand their loans up to ten times the amount of their cash, it means that we have given them the power to effect the price level to their own advantage. I do not think that is a satisfactory state of affairs. Credit is a national matter, and it should be controlled absolutely by the people, for the use of the people.


Clarence Gillis: Mr. Speaker, I regret that I cannot conform to the wishes of the leader of the opposition (Mr. Hanson). I feel that I must take up some of the time of the house in an endeavour to place before it my opinion of the budget as well as the opinion of the people whom I represent in this parliament. This budget does not impose many new direct taxes, but the poor of this country must still continue to pay the indirect taxes which
were in effect, such as the sales tax, as well as the new import duty of ten per cent which is imposed upon the necessities as well as the luxuries of life. I have not much to add to the position taken by this group on the budget. This has been made clear already by the hon. member for Rosetown-Biggar (Mr. Coldwell) and others.
It is significant to note that although the income tax exemptions are being placed quite low, the wage-earners and farmers of this dominion still come within those exemptions. This indicates quite clearly how low the income of our people actually is. The income of an average wage-earner in Canada is probably little above the exemption for a single man, namely, $750 a year. According to figures I have seen, the average farm income is even less than that, being about $500. These new exemptions will indicate that many of our people are in receipt of incomes much lower than is required for a minimum decent standard of living. My guess is that these exemptions will cover the majority of our people.
As far as the miners of Nova Scotia are concerned, they have already suffered a serious reduction in their standard of living. Their wages have remained stationary since the outbreak of the war, while, according to information which I have received as recently as yesterday, their standard of living has been reduced by about thirty per cent. I am in receipt of a resolution outlining the views of 5,500 organized miners in that section, and they claim that their cost of living has increased approximately thirty per cent while wages have remained stationary. They have lost that amount of purchasing power which, in the final analysis, is really wages.
The budget also proposes a two per cent income tax against wages. During the depressed days from 1929 to about 1934 the coal company in that particular section, which employs practically all of the gainfully employed men, was in the habit, where a man lived in a company house and purchased his coal from the company, of waiving the rent. During a time when the government of this country and many charitable organizations were providing money for the alleviation of distress caused by unemployment and parttime unemployment, coal and rent bills were piling up against these miners. Work has picked up somewhat since 1934, but these large debts had accumulated and they are now being deducted from the envelopes of the men. I assume from the budget speech that the income tax will be based upon the total earnings of these men and no deductions will be allowed for these back payments. This tax will be assessed against the total wage
The Budget-Mr. Gillis

without allowance being made for the payment of a relief bill, as it were, to the coal company.
It is significant to note that while the income tax is quite steep, a man with an income of from $10,000 to $50,000 still has a handsome income left after all taxes have been paid. However, it is with the corporations of the country that I desire to deal particularly this evening. A few days ago there was an editorial in one of the Ottawa papers to the effect that the big industrialists and financiers had forced France into capitulation. In this great hour of trial, democracy must be made to work so that the morale, faith and determination of our people will remain steadfast in the days that lie ahead. For the common people democracy can be made to work effectively only to the extent that they are given an opportunity to solve their problems cooperatively, only to the extent that monopolies and huge corporations are investigated and controlled by government for the public welfare. If this is done, our own people will be given renewed hope and vigour, and the people now under Hitler's heel will be given a living example of democracy at work.
I have already said once in this house that in my opinion and in the opinion of the people of Nova Scotia, that province is largely in the hands of and dependent on the Dominion Steel and Coal Corporation. But hon. members do not have to take my word for it. In a brief dated March 10, 1934, H. J. Kelly, Vice-President and General Manager of Dosco, stated:
According to the records of the workmen's compensation board, this company and its subsidiaries pay approximately 40 per cent of the total industrial payroll of the province of Nova Scotia in normal times. It is estimated that at least 100,000 people are directly affected by the operations of this company and indirectly the whole population of Nova Scotia is affected.
In company with all the other workers employed in the Dosco mines, I watched the development of the corporation. It received its charter in 1928. In 1930 it took over the properties of the British Empire Steel Corporation and since then it has acquired various other companies and properties. To-day we find that Dosco owns and controls some twenty-six companies. As a result of purchases and financial reorganizations, this monopoly now controls:
Coal mines in Cape Breton county (north and south of Sydney harbour), in Pictou county and in Cumberland county, Nova Scotia.
Iron ore mines, containing about one-sixth of the world's iron ore, at Bell island, Newfoundland.

Steel plants at Sydney and Trenton, Nova Scotia.
Steel car works at Trenton, Nova Scotia.
Shipyards, marine railways, et cetera, at Halifax, Nova Scotia.
Steel fabricating plants and fence manufacturing and steel wire plants at Walkerville, Ontario.
Wire and nail manufacturing plant in Toronto, Ontario.
Rolling mills and steel wire plant in Montreal, Quebec.
Coal docks at various St. Lawrence ports.
Coal shipping steamers.
Railways in Cape Breton and Cumberland counties, Nova Scotia, and a switching and junction railway at Walkerville, Ontario.
Wire, nail and galvanizing plants in Saint John, New Brunswick.
The only large steam electric power plant in Canada, at Glace Bay, Nova Scotia.
Timber limits in New Brunswick and Quebec.
The total assets of Dosco and its subsidiaries at the end of 1939 appear to have been in the neighbourhood of $80,000,000.
All through the years from 1928 to the present, when mines were closed up and families thrown on relief, when the workers were persuaded to accept cuts in wages and had to be satisfied with part-time work, Dosco and its predecessors kept buying up various companies. Thus in 1928 Dominion Steel Corporation bi ught the Peck Rolling Mills.
In 1930-32 Dosco bought the Canadian Bridge Company, and its subsidiaries, and Canadian Steel Corporation from the United States Steel Corporation.
In 1937 it bought Graham Nail and Wire Products.
In the same year Dominion Coal bought the Cumberland Railway and Coal company from Dosco for $1,000,000. I am a worker and cannot be expected to understand the mysteries of modern legal and financial manipulations, but the workers would like to know why it was necessary for the coal subsidiary to buy a railway and co$l company from the parent company.
In 1939 Dosco bought the Sarnia Fence company.
Why were all these purchases made? Who owned these companies formerly? What was their record of earnings and what were the prices paid? It should be remembered that on the board of directors of Dosco are men like Sir Herbert Holt, Mr. G. H. Montgomery, Senator Webster, Mr. J. H. Gundy and Mr. J. A. Kilpatrick, who have their fingers in many industrial and financial pies in this and other countries. I am not saying that Dosco

The Budget-Mr., Gillis
has at any time done anything improper. I do not know. But I do say that we should have more information on these and other transactions. There should be a thorough investigation of the records and history of this monopoly which, according to its own vice-president, affects directly and indirectly the life of all the people of Nova Scotia.
Hon. members may not know that a royal commission investigated part of the situation in 1926. It found many millions of dollars of watered stock in the companies which later became part of Dosco, although it is only fair to say that the Dosco reorganization seems to have squeezed out most or all of the water in the old companies. The same commission also found that the coal company used to sell its coal to sister companies at fire-sale prices, thus reducing the earnings of the coal company and depressing the wages of the miners. According to the report of the Duncan commission in 1932, this improper practice had also been abandoned by that time. The point, however, is that the knowledge that such things were done at one time gives rise to suspicion that other things may have been done since. It is no use indignantly denying it. It is the government's duty to learn the facts and to act on them.
I should like on this question to quote from the Financial Post of March 30, 1935, a statement made by Colonel G. S. Harrington, at that time premier of Nova Scotia. The Financial Post says:
He said that the new issue of $25 par value preferred stoek was "pure, unadulterated water," while the market value of the stock had been manipulated so that large fortunes had been made by "some gentlemen in this province."
"Some gentlemen have made fortunes out of this. It is extraordinarily unfortunate at this time, when labour wants its share in the earnings, that there should be stock manipulation."
I think Colonel Harrington should be an authority on that question because he has taken a great deal of interest in the coal industry in Nova Scotia ever since I have been employed by this company, and I have considerable respect for his judgment in matters of this kind.
In 1938 a royal commission under Mr. Justice Carroll investigated the Acadia Coal company, a subsidiary of Dosco. I wish to quote a few findings and statements of the report of this commission which appeared in the spring of last year, 1939:
Your commissioners readily admit their inability correctly and accurately to dissect or untangle intricate matters of accounting; but this at least may be said, that from the year 1925 until the end of 1932 the Acadia was in a comfortable position financially, and showed a surplus during those years of from $460,219.42
to $1,076,060. That is shown by schedule "B" which apparently means that the company had a balance at credit during those years which amounted to $583,630.25 at the end of 1932. During that period there was paid as dividends on first and second preferred shares of Acadia the tidy sum of $334,770.41. One of those dividends, amounting to $148,382.25, was paid on December 31, 1928, notwithstanding that the profit shown for that year amounted to only $100,976.28.
Schedule "C" indicates some rather startling facts. In 1925, when the loss of Acadia is shown to be $128,469.66, the Scotia company took from Acadia cash to the amount of $1,921.21. In 1932, when the loss of Acadia is shown to be $180,174.38, the Scotia company obtained from Acadia the sum of $724,895.87 cash; and on the 19th of January, 1933, the day that the receiving order was granted against Scotia, that company received from Acadia the sum of $20,000 cash, and on that day the memorandum shows that the Nova Scotia Steel and Coal Company owed Acadia Coal Company a total of $1,703,410.81 . . .
There was nothing illegal from the point of view of authority in the various matters of borrowing the dividend payments already mentioned. In fact it cannot be said there was anything illegal in those transactions from any point of view. Legality of action, however, is one thing, and preserving and safeguarding the industry and all that that implies is quite another thing.
It is therefore the considered view of your commissioners that some legislative action should he taken in regard to the powers of holding companies.
None has been taken.
To some people this story may be just another story of accepted financial manipulation. I know that this story affected human lives. The result was that the entire town of Thorburn became a ghost town and a thousand souls became destitute.
Only to-day, from that particular section, I received a letter from a lady. I should like to read part of it, because it has a bearing on the matter of the manipulations referred to in the report of the Carroll commission:
I am writing to you as' a last gesture of a number of destitute and starving people.
It would be too long a story to try to tell you half, and it is unbelievable in this dear land of ours-what we have suffered since the government took	away	our	employment. Now
there is not even desultory road work-and no direct relief-since three weeks, only for sixteen party people. Over 100 got nothing.

Dozens of committees have gone to Halifax and also to Ottawa. No one will come and no one will listen. We have no one to help us, when all we ask for is work and some way to once more earn our living.
That comes	from	a little mining	sectionwhich was closed as a consequence of the manipulation	which	is	mentioned	in the
report. It is seven miles from New Glasgow; it has no railroad and is practically in the wilderness; the houses are tumbling down;

The Budget-Mr. Gillis
there is no lighting system; and people who have given the best years of their life to the development of the industry are in great distress. In my opinion the enterprise was scrapped by high finance.
I say that the federal parliament is directly concerned in this matter. From 1897 to 1939 this parliament granted to the various companies which were later combined in Dosco a total of about $20,000,000 in bounties, subsidies, subventions and the like. In addition to this direct aid, a large portion of the eight and a half million dollars or so paid to the railways in the last ten years to assist in th'e movement of Canadian coal to central Canada has gone to help Nova Scotia coal. This is an indirect assistance to Dosco, since it widened	its markets at public expense.
These figures still leave out of account the enormous benefits granted the industry through the tariff, tax exemptions and the like. Thus the ten per cent import duty proposed by the present budget will, in effect, act as a subsidy to the coal industry.
I am not arguing that this assistance should not	have	been given	or	should bestopped. I	said	the other	day	that theminers of Nova Scotia appreciate this assistance very much. But I do say that it is the duty of this parliament and the government to	make	sure that	the	assistance
goes to improve the condition of the workers and people of Nova Scotia and that it is not misused for the enrichment of the owners of the industry or wasted through inefficiency. Down to March 31 of this year Dosco had received some 84,407,000 in war orders. Is it not our duty to investigate thoroughly the record of this corporation and its present standing? If the people of Canada are to go on providing public money to assist this enterprise, is it not time they took it over and ran it for the benefit of the workers in it and of the community generally?


Georges Parent: Order. I made a ruling the other day with regard to the reading of speeches. The hon. member is apparently confining himself very closely to his manuscript.


Clarence Gillis: Mr. Speaker, I was simply endeavouring to do what I noticed has been done by almost every hon. member who has taken part in the budget debate. The minister himself, when he presented his budget; the leader of the opposition, and practically everyone who has spoken to-day has, and I think correctly, used notes.


Georges Parent: The other day, when I was making a statement on this subject, the Prime Minister (Mr. Mackenzie King) asked whether it referred to ministerial statements. I said no, that the practice and the custom of the house had been to allow ministerial statements to be read. The leader of the opposition is in somewhat the same position; he to-day was giving a statement which appeared to be on behalf of the group of which he is the leader. No other hon. member who has spoken to-day has used his papers to the same extent as the hon. member who has just taken his seat. I would ask that he desist from doing so.


Clarence Gillis: Thank you, Mr. Speaker. I am endeavouring to make a statement on behalf of the people I represent, on a very complicated question, and the information I am giving is not my own. I have endeavoured to present it through various documents, such as the Financial Review for 1939, the Financial Post, and different sources of information from which I have selected this material. At this particular time I am following closely the information contained in these documents because I do not want to make any statements which are not in accordance with the facts. But I have not any intention of reading my speech so far as it consists of the comments which I intend to make upon these notes.


Georges Parent: I do not think there
would be any objection to the hon. member reading from documents which he wishes to quote, but so far as I have seen, much of that part of his speech which he has been reading has been in the nature of comments on the documents and figures which he has quoted. I would ask the hon. member, when he is quoting, so to state, and then to continue his speech in his own words.


Clarence Gillis: Thank you, Mr. Speaker.
Finally, I want to put on the record what the miners of Nova Scotia have to say about the situation in a brief which their union has prepared and which was presented by the miners to the conciliation board that is sitting at the present time in Pictou county and endeavouring to iron out the situation there. This is what they say:
In determining the amount of wages payable we believe that in the past the human factor has been required to take second place and that profits, dividends, and investment earnings have been given first place, and have been the principal aim and concern of the management. Perhaps that is natural under our economic system, yet we believe that there is need for a change. What is demanded of the workman is his labour, and when he has given that he

The Budget-Mr. Gillis
has cooperated with the owners by giving all that is demanded of him. The workman does not share in the management of the industry, he does not control its policy or direct its destiny, he does not decide what dividends shall be paid, what borrowings shall be made, what expansion or development shall be undertaken; has had no voice in deciding corporate set-up, appointment of managers, or directors, or affiliations with other industries. He gives his labour, others manage the industry. Sometimes an industry fails due to factors over which the management has no effective control and often it fails as a result of bad management. In either case the workman is not responsible for the failure. He has given his labour, he has done what was demanded of him, and having done so, he should be the last to suffer, and he should not be obliged to suffer if his suffering can be avoided by action within the control of the management.
It is said that investors are entitled to a return on their money invested. We cannot agree that that is always so. Often the money invested is surplus money which the owners do not require for the reasonable needs or even luxuries of themselves or their families, they have it to spare and have invested it in order to make more money. Often, too, the money is inherited, money not earned by the investor. We believe that a reasonable living wage for the workman who gives his labour and who needs such a wage in order to get even the minimum requirements of subsistence should take precedence over earnings on such invested capital, and that profits and returns on invested capital should not be regarded as more important than payment of proper wages.
That is the principle which we support. I believe that this is the principle which the people of Canada support. But I know from my own life and from the lives of thousands of other workers in Nova Scotia that the opposite principle has been applied in practice. As a result, the people of my province have no confidence in the corporation which controls them.	,
We must win this war. To win we must have the whole-hearted cooperation of the workers of this country. They are ready and anxious to give that cooperation. But wealth must be made to pay its share. Monopolies should be investigated and controlled. Otherwise they will make fortunes at the expense of the people.
My endeavour in presenting the case as I have at the present time is to bring to the attention of the government and particularly the Minister of Finance a situation that now exists in Nova Scotia. The Dominion Steel and Coal Corporation is a large corporation that controls the destinies of twenty-six other companies with ramifications throughout eastern Canada. Since I have come here, telegrams, letters and resolutions have been sent to me and, I believe, to other hon. members of parliament, demanding that
something should be done in Nova Scotia with respect to an investigation into the management and general financial structure of this corporation. The action now taken by the government for the purpose of probing for a solution is in my opinion misleading and not going to arrive at any permanent solution.
At the present time there are four conciliation boards set up in Nova Scotia, bound by certain terms of reference, beyond which they cannot go. I think the terms -of reference relate to the ability of the respective subsidiary companies of the Dominion Steel and Coal Corporation to pay the wages demanded, on the basis of their earnings for the past year or two. While these conciliation boards may serve some purpose and have done so in the past, in my opinion they are not going to serve any purpose, or will serve very little, at the present time. After thirty odd years of experience working for that corporation and its subsidiaries and dealing with them through the medium of unions and so on, I believe that the people of Nova Scotia generally, not only the miners, have completely lost confidence in the word of the people who head that organization, and are sceptical as to what will come from these conciliation boards. What is now required is an exhaustive survey carried on under the jurisdiction of the federal government into the financial structure of that corporation and labour conditions under its management. The boards that have been set up are in my opinion not able to do that because of their terms of reference.
For the past eighteen months the miners all over Nova Scotia have been endeavouring to come to some understanding with the corporation on the question of wages. We have been signing contracts now for a period of thirty years. In this war effort every endeavour should be made by the company with respect to both signing agreements and carrying them out and pushing that industry to its highest capacity, because coal and steel are necessary war commodities. The steel operations are in just the same position as the coal mining. For the last two years the steel company at Sydney and the workers have been at loggerheads; no agreement, no understanding, spasmodic strikes, lack of confidence and general demoralization. The brief presented by the Carroll commission should have a thorough investigation from the federal government, in view of the fact that the federal government is paying relief to people left destitute by virtue of the manipulations as shown by the commission. For the past six or seven years the people of Nova Scotia have been endeavouring to present their case
The Budget-Mr. Brunelle

before some responsible body that will try to find a solution for a problem which affects practically all the people of Nova Scotia, because steel and coal are basic industries of that province and ramify into every phase of its economic life.


Hervé-Edgar Brunelle: The present debate gives members of this house an opportunity to make general observations, and I wish briefly to avail myself of that opportunity. The budget now before this house is such that if anyone did not previously realize what it means for this country to be at war, he must realize it now. Several new and heavy taxes are imposed; other taxes are increased, and yet it appears we must face a large deficit. And apparently the worst is yet to come. But we must carry on and make the best of the situation. Things that could be said or suggested in normal times cannot be expressed now for fear of hurting someone's tender feelings. But only one thing matters, that is to win the war into which we went voluntarily and of our own accord. However, the present war, terrible though it may be, does not mean, even if we were to lose it- which God forbid-the end of the world. But, I hasten to say, it might mean the loss of some privileges which we cherish very much. Yet, in spite of everything, at the end of hostilities the people in general, and our youth in particular, will expect to live normally and in reasonable comfort. I was pleased to note in the speech from the throne that the government is concerned with post-war conditions. That is why in that speech we have the following declaration:
While the present session of parliament will necessarily be mainly concerned with Canada's war effort, and the measures essential to the achievement of ultimate victory, my ministers are of opinion that, despite what to-day is being witnessed of concentrated warfare, it is desirable, as far as may be possible, to plan for the days that will follow the cessation of hostilities.
In consequence we are to have unemployment insurance, in spite of many difficulties and obstacles which had to be met, and I am sure that the whole country, and the industrial workers in particular, will be very glad of it. Also some legislation has already been passed to assist youth training in conformity with the plan originated by the late regretted Minister of National Defence, the Hon. Norman Rogers, while he was Minister of Labour. But I think it is apropos to remark here that our Canadian young people must prepare themselves to earn their living, must equip themselves with special knowledge and particularly with those qualifications which more than ever are needed to enable them to [Mr. Gillisd
compete with others. Ordinary training and education are no longer sufficient in this age of specialization. The young must study; they must learn; they must specialize in some branch of trade, work or science. In so preparing themselves, they will pave the way to their own success, and no one can do this for them as well as they can. Let our youth have confidence in themselves and cease to think of or count on outside protection or influence. The doors of our technical schools are open to them; day and night courses are available. I need not say that the appalling burden of the war will fall on the shoulders of youth or on the next generation.
I can speak only of the province from which I come, but I am afraid that immediate prospects for the employment of our young people in Quebec are not very bright, since up to the present industry has not come close to absorbing those available for employment. It was hoped that the sacrifices required by the war would be to some extent compensated for by additional industrial activity, but so far very few opportunities have been offered our unemployed. Of course the government is not to blame for this lack of industrial activity, which is a matter of private enterprise and individual initiative; but it is a pity that no practical, appealing and up-to-date plan of colonization has been set up in my province to prevent our farmers' sons from flocking to the cities, where they simply increase the number of men out of work. In Canada, a country that we call agricultural, it is not normal to have only about 40 per cent of the people residing in rural districts while 60 per cent live in the cities. I suggest that a conference of the dominion and the provinces be held without delay in order to devise a real back-to-the-land movement and a plan to keep on the land those already there, and to place more farmers' sons on new land under more favourable conditions.
I am deeply concerned with the youth problem, and I ask that every effort be made by the appropriate authorities to encourage the reopening of plants which in many instances have been closed since 1930. Some industries are working seven days a week but still have parts of their plants closed. I would rather pay these companies for employing people on relief than continue the payment of direct relief to these people. In order to encourage the sons of our farmers to take up new land, I suggest that eastern farmers should receive constant attention, particularly at this time when their production is so essential. Unfortunately the war has closed many of our former markets with the result that the prices of some agricultural products have fallen. This situation is liable to get worse

The Budget-Mr. Brunelle
but, as I said in the beginning, we realize now what it means to be at war. No doubt this dislocation of our foreign markets was inevitable, but in my opinion something should be done for our eastern farmers. For instance, there is plenty of feed grain in western Canada being sold at very low prices; yet when that grain is transported to the east our farmers must pay very high prices for it, because of the high cost of transportation. Railway rates on grain sold to eastern farmers by western farmers should be considerably reduced. Since the war began the farmers in the east have been invited to produce more beef and bacon, the prices of which have not been as good as we expected. I repeat that the loss of our foreign markets due to the war has been the cause of the drop in prices of agricultural products.
Our efficient and capable Minister of Agriculture (Mr. Gardiner) already has done a great deal for the farmers of the east, who are grateful for his efforts to improve their lot. I am sure the Minister of Transport (Mr. Howe) would gladly cooperate with the Minister of Agriculture in reducing railway rates on feed grain from the west. Let the rates cover the cost only. The present rates are almost prohibitive, and in many instances the eastern farmer cannot afford to pay the price demanded for feed grain coming from the west. In view of their past contributions to assist others, I believe the eastern farmers are entitled to the benefit of some little sacrifice on the part of our railways or other groups and classes of our citizens who have profited from those contributions. At present the cost of transporting grain from the west is so high that the retail price of that grain in the east is not at all commensurate with the sales price in the west. Eastern farmers and their organizations should enjoy a lower freight rate at least on feed shipped to them direct.
Before I resume my seat I must touch upon another subject. Last September the sales tax was imposed, as a war measure, on the domestic consumption of electricity. It is not my intention to criticize the tax itself, but rather I would offer a suggestion as to the manner of levying that tax. I submit to the Minister of Finance that the tax is not fair to some taxpayers, inasmuch as certain sections of the country feel that they are being discriminated against. This was a new tax. I am sure the former minister never meant to impose a hardship on anyone or to create an injustice, but in my opinion an injustice has been created. The amount of the tax should be in proportion to the quantity of electricity used. As the law now stands, those who pay the largest tax are not always those
who consume the greatest quantity of electricity. I happen to be president of an electric plant in Gaspe, and a little study has made it clear to me that the present tax on electricity is in fact a tax on the electricity bill whereas, to be fair to all, the tax should be on the quantity of electricity consumed.
The point I wish to make is that while electricity is standard in its nature, there is considerable variation as between the prices of electricity in different parts of the country. It happens that in some instances where the rates of electricity are highest, the people can least afford to pay the 8 per cent sales tax. And irrespective of their means and ability to pay the tax, those people who are fortunate enough to profit by hydro-electric plants, or by municipal electric systems, receive advantages which are not enjoyed by the consumers who live in areas served by steam electric plants, by insulated small waterfalls, or more especially by the big power plants which overcharge the consumers.
To illustrate my point I beg leave to quote from the publication Electrical News and Engineering published in Toronto on March 15, 1940. The quotation is as follows:
Based on the most recent report of the Dominion Bureau of Statistics, the per cent of total dominion domestic consumptions for each province is as follows:
Per cent
Prince Edward Island	 0T
Nova Scotia	 l-6
New Brunswick	 l-2
Quebec	 13-2
Ontario	 58-5
Manitoba	 15-1
Saskatchewan	 1'8
Alberta	 1'8
British Columbia and Yukon	 6'7
Computing the revenue derived from the existing tax from the statistics showing the average monthly bill and the number of consumers as shown in the same report of the Dominion Bureau of Statistics, the proportion of taxes paid by each province is as follows:
Per cent
Prince Edward Island	 4-0
Nova Scotia	 3-9
New Brunswick	 2'9
Quebec	 20-7
Ontario	 45-2
Manitoba	 7'9
Saskatchewan	 4-7
Alberta	 4'7
British Columbia and	Yukon	 9'6
From the above figures it will be noted that Ontario contributes 45 per cent of the total taxes for a consumption of 58 per cent of the total dominion consumption and Manitoba's share of the taxes is only 7-9 per cent for 15T per cent of the total consumption.
It will be noticed that Quebec pay 20-7 per cent of the total tax on electricity, and consumes only 13-2 per cent of the total kilowatt hours of the dominion. I ask the Minister of
The Budget-Mr. Brunelle

Finance to devise a plan whereby the tax will either be placed on a kilowatt hour basis or will follow the block principle, namely, a decrease in the tax in proportion to the increase in kilowatt hours consumed. I feel sure at any rate that the Minister of Finance will find a more equitable way of levying the tax on electricity.


James Layton Ralston: It depends on where one lives. The suggestion made by the hon. member might be complained about, by someone living at some other point, as being inequitable. The view taken depends on where one lives.


Hervé-Edgar Brunelle: That may be.


James Layton Ralston: If one takes it the other way, namely, to tax on the kilowatt hours, then the gentleman using a large quantity of kilowatt hours will complain that the tax bears inequitably upon him. I mention this because the horn, member suggests the tax should be imposed more equitably. Either way it is imposed, some person will feel he has a right to complain.


Hervé-Edgar Brunelle: But if everyone were paying on a basis of consumption of electricity there would be practically no reason for complaint by anyone.


James Layton Ralston: The other man may say that he would like to pay on the dollar basis, and would believe that that is the equitable ground.


Hervé-Edgar Brunelle: Apparently there are two types of justice.
I have refrained from making any comment on the gravity of the war situation, because I believe up to this time practically everything has been said, and what has not been said is deeply felt in the heart of every Canadian.
Suffice it to say with reference to the mobilization measure which has recently been passed that I have never met a person in my constituency, or anywhere else, who has objected at all to the defence of Canada, or to the means to be taken to defend Canada in Canada. I would not need to say this, had I not in previous sessions disagreed with my friends in connection with war measures. But the situation is no longer the same. On the one hand the law itself restricts the compulsory service to the boundaries of Canada, and on the other hand there is an evident danger of attack in Canada.
In my opinion what has taken place in Europe, and the misfortunes of France justify the recent passing of the mobilization measure providing for the defence of Canada within 
Canada. Let every Canadian do his duty. I am prepared to do mine. I am at the disposal of the Minister of National Defence whenever and wherever I may be needed or useful-but for home defence only. I am always opposed, and intend to remain opposed to conscription for overseas service. To foresee and to be prudent is the duty of every representative of the people, and the mobilization measure which has recently been passed is one of prudence.
I have absolute faith in the Prime Minister of Canada (Mr. Mackenzie King). He is, if anyone is, a true Canadian. He is a steadfast and judicious administrator. Moderation, tact and sincerity are qualities he has always displayed in good as well as in bad days, and I am proud to say that no one enjoys to a higher degree or deserves more than he does my confidence and that of the people whom I represent.
I therefore without any hesitation support the budget presented by the government.


Frederick Davis Shaw: Mr. Speaker, in rising to participate in the debate on the budget, it is my desire to make certain definite observations relative to a question which has not been dealt with to any great degree, namely the question of national health. I anticipate that in what I have to say hon. members, irrespective of party, and particularly hon. members belonging to the medical profession will stand shoulder to shoulder with me.
I should like to concentrate my remarks upon national health, and especially as it applies to children. Therefore, in making no attempt to cover the whole field of national health, I may be in a position to be brief. I hesitate to use the word 'brief", because invariably when it is used someone shouts, "hear, hear." As a rule we hear that from an hon. member who has not time to deal with those matters with which he was sent here to deal.
I believe the presentation of the budget last week brought home to the people of Canada as it could have been brought home in no other way a supreme realization of the fact that we are at war. After all, I do not believe that there is anything in the world which will bring people to a complete realization of their responsibilities more quickly than the application of a tax. I am satisfied that we all realize the gravity of our undertaking. We do not want it thought that we have lost sight of the seriousness of the situation. We must above all else comprehend the responsibilities which are ours.

The Budget-Mr. Shaw
Unfortunately I am not satisfied that all hon. members really realize the responsibilities which are theirs.
I should like at this moment to read a short quotation, but before doing so may I say that it is the tendency of many of us to lose sight of the fact that we have more than one battle front. Some of our people, and unfortunately some of the members of this house, think of this war only in terms of what might be taking place in the North sea, in the Mediterranean or along the Magi-not line, absolutely overlooking the fact that the greatest front, the front which ultimately is going to be the most important, is right here at home.' I should like to read an article which appeared on December 2, 1939, on The Front Page of Toronto Saturday Night and which was reprinted in the Canadian Welfare Summary, December-January issue. It reads:
The psychological task of this war is the task of endurance. This is not a time for the whipping up of temporary enthusiasm by preachments of a kind of hatred which even the Germans can only maintain for six months or a year at a time, and which Anglo-Saxons and French are utterly incapable of making the predominant motive of their acts for an even shorter period. It is vital to remember that the spirit of the country as a whole includes, to a much larger extent than we like to think, the spirit of those who, as a result of many causes but chiefly by their sheer ill-fortune and the hostile conditions of a difficult economic era, are dependent on the civilian health and welfare agencies for a considerable part of the food, clothing and housing which are necessary to keep them in spiritual and physical fitness. We have not only to defeat Germany, we have also to defeat a condition at home which prevents a large part of the population from making its proper contribution to the defeat of Germany or to the achievement of any other national purpose. War is at home as well as in the North sea and on the Maginot line. We cannot afford to lose sight of any part of the front.
After reading that article, I felt that it was my duty to deal with the home front. Being engaged in a conflict as we are, it is essential that our people be strong. The strength of a nation, in peace time and more especially in time of war, depends directly upon the health of its people. History has proven beyond all shadow of doubt that when the people of a nation decline to any degree, either mentally or physically, the glory of that nation is short-lived. A statement like that is irrevocable. I think it is high time that we started to take stock with respect to the health of our people. I do not intend to be unduly critical in what I have to say. That is not my purpose. However, if I were to speak without being
critical, it is not likely that I would be here in this corner. Perhaps I may be excused if my remarks become quite critical at times. I do intend to be accurate. I do not propose to recite long lists of statistics, because my experience has taught me that no matter how carefully statistics may be tabulated, they are not always as accurate as we should like them to be, especially when they have to do with a survey of our health situation.
A few weeks ago certain hon. members made some observations relative to economic conditions which existed in certain provinces of Canada. I speak particularly of my hon. friends to my immediate right. Apparently they are determined to put their constituents first and their party last if necessary. During the discussion of a bill which it is hoped will bring a certain amount of alleviation to the distressful sufferings of our agricultural and unemployed people, they dealt in a large measure with the question of health, particularly the health of little children in the different constituencies. They painted a picture which was not unduly coloured, a picture which was absolutely correct. If all hon. members would be really honest, they could paint similar pictures of conditions obtaining in every province in Canada. When the hon. member for Mackenzie (Mr. Nicholson) was referring to the hunger and semi-starvation which existed among the little children of his constituency, the leader of the opposition (Mr. Hanson)-unfortunately he is not in his place but I must say what I am going to say-made this statement:
I am distressed to hear him say that children go to bed hungry. Will he state that at any time during the last ten years, since relief was first instituted by the Bennett government, in September, 1930, anybody in Saskatchewan has starved or has been in actual want? I would be disturbed if that were the case. I know it was not the intention of R. B. Bennett and his government that anybody in Canada should be in want, and I cannot for a moment believe that it is the intention of anybody on the other side of the house since 1935 that anyone shall be in actual want.
Then follows this statement upon which I lay particular emphasis:
I can scarcely credit such a thing.
When I heard the leader of the opposition make that statement, the thought came to my mind, are conditions in New Brunswick, from which province he happens to come, in such a satisfactory condition that he is unable to realize that conditions in a constituency as far removed as Saskatchewan are as they were represented as being? So in order to try to find out what the leader of the opposition was
The Budget-Mr. Shaw

really getting at, I made an investigation into conditions in certain parts of New Brunswick, and I quote what I am going to quote for the simple reason that I wish to show the house that the hon. leader of the opposition should have been able to credit what was said by the hon. member for Mackenzie, and furthermore to show the effect that these economic conditions have upon the health of little children. Let me make clear at once that I am not a member of the medical profession but I have spent over one-third of my life in rural areas, dealing with children, and after listening to the hon. member for Wood Mountain (Mr. Donnelly) the other day, I do not think one has to be a member of the medical profession to comment intelligently on questions of health.
I wish to quote from the report submitted by the Saint John Family Welfare Association after they had made a survey of conditions among two hundred families in the city of Saint John, New Brunswick, from which province the hon. leader of the opposition hails. When I speak of Saint John I have no pick on that city. I simply say to all hon. members: Be honest and you will admit that these conditions are not uncommon in all of our cities right across Canada, and if they are common in all of our cities right across Canada, surely you can believe the agricultural representatives when they say that these conditions are true of the rural areas. What I am going to quote may bring tears to the eyes of the most callous politician; I hope it does. I quote from the Saint John Family Welfare Association's report, which appears in the April-May issue, 1939, of the Canadian Welfare Summary, so this was only a very short time ago:
A great many of the families were living in quarters actually unfit for human habitation; there was also overcrowding, suffering from cold, lack of clothing, bedding, cooking utensils and food.
Now for the hon. leader of the opposition:
There was plain evidence of slow starvation among many adults and little children in this group-
I wonder if he believes it now.

and the ravages of diseases were apparent as attested by their medical and hospital records. Most of these homes were without bed sheets or towels and had less than half enough other bedding.
It would be bad enough if that were all, but that is only the introductory paragraph. It goes on:
Some families had one bed for the family and no mattresses; a large number had exhausted supplies of cooking utensils and in some homes one pot was used for cooking and

bottles for drinking, in .absence of cups. In the remainder of the cases visited, the majority revealed evidence of considerable hardship, with undernourishment, and the results had affected a number of children. In almost every case visited, the family were existing very much below the minimum standard of decent living and without enough food or clothing.
Even that as a second paragraph would be bad enough, but I have more here:
As many cannot pay rent, the result is very bad for both landlord and tenant. The record of evictions and seizures of furniture is particularly disastrous for little children of these families; other phases of acute distress relating to fuel scarcity, worn-out clothing, etcetera, might be given, but only a summary of major conditions can be shown here.
Most housing conditions are squalid and unsanitary; a terrible lack of clothing, bedding and utensils. A large section of those visited had been evicted from three to six times a year. During the past two years, 50 per cent of these families had moved from three to twelve times.
Of the families interviewed, 155 were in receipt of work relief and a great many were destitute and in desperate need.
I might mention that there were 200 families interviewed:
The majority cannot be classed in much better condition.
Slightly over 50 per cent have suffered from ill health and had hospital treatment during the last two years, having had from one to six members of the family in hospital at different times. According to a recent report by the district medical health officer on conditions, this was due because

I point this out particularly:
-"undernourishment, insufficient or inadequate food, acute and chronic illnesses, and poor hygienic conditions, have existed so long a time in the community that they are now presenting a most serious economic problem."
I could go on and on and on. But this, Mr, Speaker, proves that the leader of the opposition, knowing conditions in a city in his own province, should have had no difficulty in realizing the truth of statements made by western members with reference to undernourished and starving children. One of the greatest troubles, shall I call it weaknesses, of many members of this house, is that they do not know what conditions are actually like in their own constituencies or provinces. That is true of many, I feel quite satisfied; otherwise we would not have some of the statements which are made in this house. I was more than surprised when the hon. member for Wood Mountain said-and he was making a deliberate attempt to ridicule the members in this part of the house-"I hear people say, 'Oh, it is terrible the way people are suffering, without proper food'." That statement was made on June 21, as reported in Hansard. I

The Budget-Mr. Shaw
wonder if the hon. member, in view of what I have just read as to conditions in Saint John, realizes now that these men were speaking the truth.


James Layton Ralston: If my hon. friend will
permit me, I have been listening to his address with interest and I would not be one to say that such a statement as he is making should be cut off, but perhaps Mr. Speaker would call attention to the fact that it is contrary to the rules to refer to a previous debate in the same session; my hon. friend should refer to these matters at the time of that debate. I am sure my hon. friend can see that it is difficult for us to retrace our steps over a previous debate, and he can see the reason for the rule. It would reopen entirely a previous discussion which had been closed by whatever vote or other disposition was made of the question.


Frederick Davis Shaw: May I point out, Mr. Speaker, that in making reference to previous statements I am only doing what hon. members have been doing ever since the 16th of May. I am new so far as the House of Commons is concerned. I have tried to learn by watching and listening, and I believe that I am carrying out a procedure in which most hon. members have indulged. I am dealing at the present time with the national health problem. I hope the minister will not say that his budget has no effect upon the health of the nation.


James Layton Ralston: Mr. Speaker, I endeavoured to be as considerate as I could in calling attention to the rule. I do not think the hon. member has any right to suggest that I am not perfectly happy to listen to him as long as he has the right under the rules to speak with regard to the subject matter, but I suggest that my hon. friend should take my suggestion in the spirit in which it was made. I knew that he was a new member. After I had permitted him without objection or interruption to make his reference to previous debates, I did, considerately I think, call his attention to the rule. It seems to me that my hon. friend might accept that suggestion, and I would ask you, Mr. Speaker, to advise him if that is the rule. Then he may go on as long as he likes with regard to the health problem. We are all interested in it. But surely my hon. friend does not attempt to suggest that what I have stated is not the rule. The fact that somebody else did not follow the rule is not, I think, justification for my hon. friend persisting in its infraction. I do not know of any hon. members who have
broken the rule. If I did, I would have felt it my duty to call their attention to the fact if I happened to be leading the house. I think my hon. friend is not taking the suggestion I made in the spirit in which I made it. I do point out that it makes for brevity, accuracy and conciseness in debate if old debates are not reopened, particularly if those who took part in them, and who are now being answered, are not now here.


Georges Parent: 1 wish to call the hon. gentleman's attention to the remark made by the minister. As he has pointed out, no reference can be made to some debate which has already taken place. I understood the hon. member to quote from a statement then made by another hon. member. That is contrary to the rules, and I would ask the hon. member to refrain from doing it.


Frederick Davis Shaw: I bow to your ruling, Mr. Speaker. I shall make it a point to confine myself to my topic.
I was endeavouring to point out the intense suffering which our Canadian people have been going through during the past number of years because of their ill fortune and because of certain conditions over which they had absolutely no control. I contend that it is necessary in view of conditions as we know them to be, that our governments, and especially the minister of national health, give every possible consideration to the matter of national health. We have adult suffering and child suffering; and all in all it has a direct tendency to affect the efforts which we are able to put into the present struggle. It appears to me that we have been more concerned to preserve the orthodox system of finance and economics than to conserve or preserve the health of our people. It is bad enough that adults are called upon to suffer, but consider for one moment the effect which avoidable suffering has upon children. I know it is charged that many adults are not providing the necessities of life for their children and thus not guaranteeing decent conditions of health, and it is contended that these parents are entirely to blame. But our children outnumber the adults by about four to one, and irrespective of what the adults may be, the children are worthy of every possible consideration, in fact they are the best and most lasting assets we have. Everything depends upon those children. May I quote briefly a statement made by Sir George Newman, formerly general medical officer of health for Great Britain:
The European war has given new emphasis to the importance of the child as a primary
Questions

national asset. The future and strength of the nation unquestionably depend upon its education and equipment for citizenship. Great and far-reaching issues have their origin and some of their inspiration in him. Yet, in a certain narrow sense everything depends upon his physique. If that be sound, we have a rock upon which a nation and a race may be built; if that be impaired, we lack that foundation and build upon the sand. It would be difficult to overestimate the volume of inefficiency, of unfitness and suffering, of unnecessary expenditure, and of industrial unrest and unemployment to which this country consents because of its failure to rear and educate a healthy, virile and well-equipped race of children and young people. There is no investment comparable to this, no national economy so fundamental; there is also no waste so irretrievable as that of a nation which is careless of its rising generation. ...
It is my contention that we have been careless of our rising generation.
On motion of Mr. Shaw the debate was adjourned.


[Stage Direction]
At eleven o'clock the house adjourned, without question put, pursuant to standing order.
of the province of Quebec, the Premier of Quebec, the Right Hon. Ernest Lapointe, and other French-Canadian dignitaries?
4.	If there is only one version, does it include those speeches made in the French language, and if not, why not?
5.	What department of the government was in charge of the preparation and the distribution of this film?
Mr. MacKINNON (Edmonton West):: 1.	Yes.
2.	Two versions, French and English.
3.	In the French version there are speeches in French by their majesties and by the premier of Quebec, but it was not found practicable, in a film which had to cover so much ground, to include all the speakers throughout Canada.
4.	The speeches in French by their majesties and by the premier of Quebec are retained in the English version.
5.	The film was produced by the Canadian government motion picture bureau of the Department of Trade and Commerce and distribution was made under the authority of the national film board.
Wednesday, July 3, 1940