[Stage Direction]
Third and fourth reports of special committee on war expenditures-Mr. Fournier (Hull).


Mr. J. S. ROY (Gaspe):: Mr. Speaker, under standing order 31 I wish to move the adjournment of the house for the purpose of discussing a definite matter of urgent public importance following further developments of a very grave nature. What I want is an immediate secret session of the house to discuss certain grave events which have occurred within the past few' days in the St. Lawrence, about which this house should be fully informed. I cannot give details in open session because it would give information to the enemy, but my information leads me to believe that there is reason to fear that persons responsible for the protection of our coastal waters have been negligent in their duty.


Mr. SPEAKER:: There is a degree of
urgency in the motion made by the hon. member, and I should prefer that the hon. member have the leave of the house to make the motion. Standing order 31 reads:
(1)	Leave to make a motion for the adjournment of the house (when made for the purpose of discussing a definite matter of urgent public importance) must be asked after the ordinary daily routine of business (standing order 15) has been concluded and before notices of motions or orders of the day are entered upon.
(2)	The member desiring to make such a motion rises in his place, asks leave to move
[Mr R. B. Hanson.]
the adjournment of the house for the purpose of discussing a definite matter of urgent public importance, and states the matter.
(3)	He then hands a written statement of the matter proposed to be discussed to the Speaker, who, if he thinks it in order and of urgent public importance, reads it out and asks whether the member has the leave of the house. If objection is taken, the Speaker requests those members who support the motion to rise in their places and if more than twenty members rise accordingly, the Speaker calls upon the member who has asked for leave.
Is there any objection on the part of the house?


Right Hon. W. L. MACKENZIE KING (Prime Minister):: The government of course is responsible for holding a secret session or for withholding it. The responsibility rests on the government. Therefore the government should in the first instance have the information at its disposal in order that it may be able to decide whether it is in the interests either of the House of Commons or of the country that a secret session should be held at this time. I would ask the hon. member if he has spoken to the Minister of National Defence for Naval Services (Mr. Macdonald), or to the Minister of National Defence (Mr. Ralston) who is acting for him at the moment in his absence, in regard to those matters which he wishes to have discussed in secret session. If he has not, I suggest that it would be preferable for him to make known the nature of the subjects -which he wishes to have discussed so that the government may decide, wisely and in the light of the circumstances themselves, whether or not a secret session should be held.


Hon. R. B. HANSON (Leader of the Opposition):: I desire to support the request
of the hon. member for Gaspe (Mr. Roy). I have heretofore I think observed all the caution that would be expected of one in my position with respect to matters of this kind. But since this matter was adverted to in the house I have received numerous communications of a startling nature from a part of the province of Quebec with relation to what has taken place in that province and1 in the coastal waters thereof. I have been assured that there is a large measure of authenticity in the statements that have come to me-


Georges Parent: I am sorry to interrupt the hon. gentleman, but in the first place the motion is not debatable.


Richard Burpee Hanson: I do not
wish to debate the motion, Mr. Speaker; I was just answering an observation made by the Prime Minister, if I may be permitted.

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Georges Parent: I hesitate to interrupt the hon. leader of the opposition, but in the first place the hon. member for Gaspe is asking leave of the house to discuss the motion for adjournment. Leave to move the adjournment to discuss a matter of urgent public importance must first be obtained from the house, and any remarks subsequent to that would be in order. In the meantime the question before the chair is whether the hon. member has the leave of the house to introduce his motion.


Richard Burpee Hanson: With
respect, may I just make this statement in answer to an observation made by the Prime Minister. The government should have before it the information which the hon. member has. I was about to say that I had attempted to give the Minister of National Defence for Naval Services on Tuesday last an epitome of the information which had reached me. I wrote him a note asking for an interview, but-through no fault of his, I have no doubt-he did not make that arrangement for me. His secretary telephoned to say that the minister had to go away and would not be back until Friday. Consequently I have not been able to see him, otherwise I would have gone to him personally with a request like this. I make that explanation to indicate to the Prime Minister that there is information which I personally, not through cooperation with the hon. member for Gaspe but on my own account, desired to give to the Minister of National Defence for Naval Services. Therefore I am going to support the request of the hon. member so far as I am able to do so.


Georges Parent: If objection is taken, as
it has been in this case, the Speaker requests those hon. members supporting the motion to rise in their places, and if more than twenty members rise the speaker calls upon the member who has asked for leave. Those supporting the motion will please rise.
And more than twenty members having risen:


William Lyon Mackenzie King: Before the
hon. member speaks, may I make perfectly clear the position I took in addressing His Honour the Speaker. I did not oppose the motion which the hon. member was making, nor did I oppose the idea of a secret session. What I said was that the government would have to assume responsibility either for holding or withholding a secret session, and in order to have the information on which to reach a correct decision I asked) the hon.
member if he had spoken to the minister concerned and given him the facts which would enable the government to reach a decision. That is as far as I went in what I said.


Richard Burpee Hanson: His
Honour the Speaker interpreted that as an objection.


William Lyon Mackenzie King: It was not
intended as an objection.


Joseph Sasseville Roy: I offer my sincere thanks to the house for its support in these circumstances of my request for a secret session in order to discuss these very important events which have occurred and still are occurring in the lower St. Lawrence. I have asked several times for a secret session, mostly since the torpedoing of three ships that occurred a week ago last Sunday. In each instance the Prime Minister, as he has done to-day, and the Minister of National Defence for Naval Services, asked me to give him the information I have. I understand from the Prime Minister that he needs the information in order to make his decision on my request.
First I should like to recall that I have in the past communicated information to the government in regard to this matter, and many times in the house I have asked for some protection, some defence works at Gaspe and on the coast. Since the first torpedoings on May 11 and 12, at the instance of the Prime Minister, I have written letters to the Minister of National Defence, and copies of those letters were sent to the Minister of ' National Defence for Naval Services and the Minister of National Defence for Air. In those letters I was saying this-I shall quote only a few parts. This letter was dated Ottawa, May 15, 1942:
Most of the gasoline and oil stocks are imported down there by boats in ordinary 50-gallon drums. Therefore some measures should be taken to prevent the landing of the submarines for purpose of getting gasoline and supplies. There is no guard whatsoever between Gaspe and Rimouski, a distance of about 250 miles. As it is, it remains a wide open gate for the enemy to perpetrate its depredations.


William Lyon Mackenzie King: May I interrupt to point out to my hon. friend that the house is not in secret session at the present time. If I understand him aright, he is disclosing alleged information which, if true, it might be quite proper to give in a secret session but which I should think it was wholly improper to make public in the manner in which he is doing at the present time. I would not interrupt my hon. friend except to say to him that I think he should give the government what
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information he has or has received, not in a public way, as at present, but in order that we may decide whether or not a secret session should be held. If we refuse the secret session, that would be the time my hon. friend might make his protest.


Joseph Sasseville Roy: Mr. Speaker, as to the first remark of the Prime Minister, I think this communication could not be of any value to our enemies, but if the Prime Minister thinks it might, I am very willing that it shall not be recorded on Hansard. Before sending the Prime Minister the information he desires to have I will say briefly that I have on several occasions given the government information on the situation down there; nevertheless the situation remains as it was. I do not think this is disclosing anything that can be of any help to our enemies: I was saying in this letter that the most urgent need for the time being was to send some bombers to Mont Joli and to Gaspe. I am informed that bombers were sent to those two places only after the last torpedoing. I said at the time that the Germans could make a landing to get gasoline and supplies-[DOT]


Some hon. MEMBERS:: Order.


Georges Parent: I call the hon. member's attention to what has already been said in regard to statements he is now making on matters which might be the subject of discussion in a secret session but certainly should not be discussed now.


Mr. COLDWELL:: On a point of order, I imagine it is very difficult for the hon. mem- ' ber for Gaspe to explain the reasons why he wants a secret session without divulging some of the information he has.


Some hon. MEMBERS:: Give it to the minister.


Major James William Coldwell: Hon. members say "Give it to the minister". I imagine that the object the hon. member has in view is to get the house to understand this information, not the minister. He has already communicated these matters to the minister.


Georges Parent: I was calling the hon. member's attention to the fact that, as has already been pointed out, the statements he is making as to why he is asking for a secret session are such as should not be stated now but rather in a secret session if there is one.
The debate will proceed in the usual way; the hon. member has the floor and is entitled to make his speech without interruption.


Joseph Sasseville Roy: Thank you, Mr. Speaker. The reason I was trying to give this explanation to the house is that this is a matter of 
national urgency. I think it is of great importance that the house be well informed as to the necessity for a secret session. Following the announcement I made last Friday I had to listen to a speech by the Minister of National Defence for Naval Services, which was a rebuke to me. That did not hurt me, but it went out to the house and the country, and might make people believe that I was a sort of traitor. To-day, therefore, I wish to give the reasons why I made that announcement at that time. I was firmly convinced within my soul and conscience that I was performing my duty as a citizen of the country and as a member of this parliament. In his speech, at page 4126 of Hansard, the minister said:
When my hon. friend talks about protecting his constituents, I should like to know what he has ever done to ensure the greater protection of this country, or to add in any way to its defences.
That was why I was trying to place before the house all that I had done in the past.
I do not think his statement was fair; it was an insult to me. The minister is not in his seat at the moment, so that I need not say anything more on that point, but I should like to add this. In the course of the same speech, at the same page of Hansard, the minister also said:
I will say this to the hon. member for Gaspe; had I been in the house on Friday I think I should have felt constrained to rise and ask this house to expunge from the record the statement which he made. Thereby it would not have become a public statement. But he having made it and it having been allowed to stand on Hansard, it of course became public. . . .
At the time I made my remarks the Prime Minister was in his seat, but he did not deem it necessary to take that action. I am disposed to believe that the Minister of National Defence for Naval Services is as careful in his statements as the Prime Minister, but he did not give any evidence of that when he said, a little further along on the same page:
I am not ready to change the disposition of one ship of the Canadian navy for him or all the questions he may ask from now until doomsday.
I do not believe that was a particularly wise statement to make, in view of what is occurring in the lower St. Lawrence.
I am asking for a secret session, Mr. Speaker, in order that the house may be informed as to the seriousness of the situation. Many times, as for example in connection with the Hong Kong affair, the government has given as a reason for refusing a secret session, or refusing to give hon. members information as to the mistakes or

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circumstances in connection with those matters, that information would be given to the enemy. A secret session does not cost anything, and it is a very easy way to give information to hon. members of this house. If the principle for which we stand in this war to-day is good, and is to be supported, this house should not lose sight of the fact that it represents the people, that parliament is responsible to the people, and that the government is responsible to parliament. This parliament should have the right to know what is going on, even though the government or some political party may suffer through the disclosing of information which would not be of advantage to it. I do not think the government should refuse the contribution that can be made by the representatives of the people in this house toward the winning of this struggle. The matters with which I want to deal in a secret session have a direct bearing, I believe, on the issue of the battles now going on, and even on the final result of .this war. I believe these matters are of such importance that the government should grant a secret session, and the information there disclosed will not be made public.


Richard Burpee Hanson: Mr. Speaker, I desire to support the request of the hon. member for Gaspe (Mr. Roy) that some opportunity, at all events, should be afforded to the membership of this house, either in a secret or in a public session, to discuss the position in reference to the St. Lawrence area. I am not asking that it be discussed in public, because I have no idea that the government would assent to any such proposal, having regard to the attitude of the minister and, I assume, of the administration generally in respect to matters of this kind. There are, however, good grounds for asking for a public discussion, and I do not believe a public discussion of this kind would be refused in Britain, having regard to the debates that have taken place in the British parliament with respect to the situation in Libya and elsewhere during the course of this war. Surely this parliament should not divest itself of its privileges and functions, as well as its obligations, any more than the parliament at Westminster does. Since the hon. member for Gaspe has not asked for a public session I shall not stress that point, though I ask the Prime Minister to give consideration to this suggestion when the question is being finally decided.
I now desire to support the hon. member for Gaspe in his request that the government provide an opportunity, by way of secret
session, to discuss the situation in the lower St. Lawrence; what has happened there, what may happen there, and the precautions that are being taken to meet the situation. That opportunity should be granted at the earliest possible day. I am not going to reveal to the house and the country at this time the nature of the communications which I have received.
I do not think it would be the appropriate thing to do, especially since I have not had the opportunity to discuss the matter with the Minister of National Defence for Naval Services as I had hoped. Naturally I have not been able to verify them personally; one would have to travel down to that part of the country in order to do so. I can say, however, that they come to me well authenticated; the information is vouchsafed by two very loyal and patriotic citizens of the province of Quebec, and that information is of such a character and covers such a field as to make me believe that all is not well. That is putting it mildly, both in relation to what has happened and what will happen, and more particularly with respect to what provision is being made against the recurrence of what we know has already happened and of other things which also have happened and which have not yet been divulged. I think the Prime Minister and members of the government will know to what I am alluding.
Therefore I urge on the government, and I assert as a matter of right, that some opportunity should be given to this house to meet and discuss, and cross-examine the minister on, the disposition of certain armed forces in that area which are under the jurisdiction of his department; furthermore, as to certain irregularities which it is alleged have occurred in connection with the operation of at least one arm of the forces in that area-with which I intend to acquaint the minister. These things are of some national importance, and they are very important to that community. I think it would serve a useful purpose to the population of that community if they could know what the exact situation is, and what steps, if any, have been taken to meet it. If adequate steps have not been taken to meet the situation,, then we should be in a position to urge that more adequate measures be taken. Of necessity, without divulging anything I cannot go very much further than that. But the situation has impressed itself upon me as being such that I feel it is my duty as leader of the opposition in this house to ask the government for this facility. It is a duty, I believe, that we owe to the people of that community and to the country at large. I could go along and theorize in a general way with respect to this matter, but perhaps I have
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said enough to indicate what is my own point of view and what I think is the duty of the government in the premises.
Of necessity I cannot vouch for any of the information which is in my possession, because these things come, to one second-hand. It is difficult to verify them. The government has the facilities to verify the stories that have reached me; I have not. It is enough, I think, that in the performance of my duty, on the proper occasion and at the right time and place, I call the attention of the government to the statements which have reached me and ask that they should be investigated- not with the intent of doing any harm to this government; I want to impress upon the Prime Minister that nothing is further from my thoughts. The purpose is twofold: first, that we should know the truth with regard to our defence facilities in that area, and if they are inadequate, something should be done to improve them; second, that there should be instilled into the hearts and minds of the people of the area, who to-day cannot help but be alarmed at what has happened, some sense of security.
I urge upon the Prime Minister that he accede to this request. I shall be glad to lay before the Minister of National Defence such information as I have received, so that he may know what is being circulated in that area of Canada, and so that he may be able to tell us what has happened, not on two occasions but on three.
I am conscious of the fact, and I want to say here and now that I believe, that the first duty of our naval authorities is to protect the international convoys. I am borne out in that view by the thought that so far during the war none of our nationals on the shores have suffered. But after that first duty there is the secondary duty, the defence of Canada. We had a secret session here once before and we were told something of the nature of defences erected on certain parts of the eastern shores and on the western coast as well. With respect to the area in question we know very little. I do not know what is the nature of the defences or what steps have been taken since a week ago Sunday to repair any deficiencies which there may be. At all events the situation is of sufficient importance to warrant my asking the government to give early and affirmative consideration to the request of the hon. member for Gaspe.


Major James William Coldwell: I would like to support the suggestion. I have no authentic information as to what has occurred in this region, but I did listen carefully to the hon. member for Gaspe (Mr. Roy), and one thing which struck me as I
[Mr R. B. Hanson.]
heard him was this: that there were grave fears, I think he said, that in some particulars there was neglect on the part of somebody. If that be true, it is a matter which deeply concerns us, and the hon. member for Gaspe has probably taken the right method in coming to this house and asking for a secret session instead of relying purely on the judgment of the minister. May I say this to the Prime Minister (Mr. Mackenzie King): the fact that we have all tried to cooperate very closely with the government in communicating to them any information of this description we receive, may, in the light of recent events, lead us into the position where the people of Canada will have some reason for believing that matters of public importance do not receive sufficient airing in this parliament.
I urge upon the government that they grant the request of the hon. member for Gaspe. He has risen in this chamber on a number of occasions in an attempt to put his case before the house. He has been handicapped, perhaps, in the use of the English language-which, if I may say so, he is picking up very rapidly- but that makes it all the more necessary for us to give this matter consideration. I believe from what he says, and from his earnestness in the matter, that he has something he wishes to lay before this house which we ought to hear, and even on a motion for adjournment such as this we should not run the risk in open session of giving information to the enemy.


Mr. E. G. HANSELL (Macleod):: This group also favours the suggestion made by the leader of the official opposition (Mr. Hanson) and by the hon. member for Rosetown-Biggar (Mr. Coldwell). While however, the motion is for a secret session to discuss a matter brought up in respect of the St. Lawrence incident, the St. Lawrence territory is not the only territory in Canada which is in extreme danger and which should be discussed in this house. I have in mind the Pacific coast, and particularly the progress which has been made by the Japanese on the northern tip of this continent. I am not so sure that work on the Alaska highway is progressing as it should. These are things that we should know and I join with the other members in urging that the government give careful and complete consideration to the holding of a secret session.
Time and time again people have come to members of parliament with certain information that was complete news to us and which was found afterward to be true. If there are any persons in Canada who should have full knowledge and be informed first of these

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things, it is the people's representatives who sit here in parliament. I am not maintaining that this secret session should be thrown open for the discussion of every detail in respect to our war effort, because that would mean that we would be here forever. But there are some matters that should be dealt with. I have in mind the report of the Hong Kong commission. The letter from Colonel Drew was not tabled, and I am not going to criticize the Prime Minister for that. Perhaps he took the right course, but I think it can be said that this letter from Colonel Drew is quite public. The press has been most courteous in not publishing it, but copies have been sent around. If the report is discussed in this house in open session, many of the things in that letter are bound to be brought out.
There is quite a pressure being exerted for the opening up of a second front. It is all very well to say that that is Mr. Churchill's responsibility, but to use the Prime Minister's own words, we are in this war side by side with Great Britain and we must take the responsibility for any victories and also the responsibility for any defeats. The government are not the only ones responsible to the people in this respect. If the worst should come to the worst, the people will ask private members as well as the members of the government what we knew about it and what we did about it. I suggest that the secret session be open for the orderly discussion of certain important matters in respect to our part in the present war. If it is in order, I would move an amendment to the motion, that it should include not only the subject mentioned, the St. Lawrence incidents, but these other subjects. I move:
And that any matter in respect to our part in the present war be also subject of the discussion at the said secret session.


Mr. MACKENZIE (Vancouver Centre):: Such an amendment obviously would be out of order. It is an amendment to a motion to adjourn the house to discuss a matter of urgent public importance. Citation 240 of Beau-chesne's parliamentary rules states that a motion of this type must be restricted to a specific matter of recent occurrence. The amendment moved does not have anything to do with a matter of recent occurrence. It is simply an attempt to alter the scope of the secret session.


Mr. FAIR:: The amendment is not yet before the house.


Georges Parent: A motion to adjourn the house is not amendable; therefore I must rule the amendment to the motion out of order.


Mr. T. L. CHURCH (Broadview):: I should like to make a few remarks on the question raised by the hon. member for Gaspe (Mr. Roy) and his motion that this house should adjourn under standing order No. 31 for the purpose of discussing a matter of urgent public importance and that a secret sitting be held to inquire into the sinkings in the St. Lawrence. In my opinion there is no necessity for a secret sitting. The house should be told the facts in public. This house was warned by the Prime Minister of Great Britain and by Mr. Menzies, the able former prime minister of Australia a year ago of the grave danger to the dominions, and especially to Canada, because of the failure of the Washington conference. That conference not only got rid of our defences on land, sea and in the air; it got rid of our friends as well. Urged by Canada Britain threw away her fleet and Canada refused to go into an empire shipbuilding	plan in	1937.What	are the	facts	about this	situation?The danger in the Atlantic, which culminated in the	sinkings	that	are taking	place	waspointed	out to	our	representatives at	the
imperial conference in 1937, and since the war began. They were told of the grave danger to the dominions in case war should come. War always comes like a thief in the night. The stand taken in 1937 by Canada was absolutely inconsistent. What are we to hold a secret session about? There is nothing that should be held from the people or the press. The people of Canada have been given less information about this war up to this hour than the people of any other dominion. Mr. Curtin and Mr. Menzies and Sir Keith Murdock pointed out the grave danger to Canada, New Zealand and South Africa because of the lack of a fleet. You threw away your fleet and you cannot collect another in less than twenty-five years. Canada was one of the dominions that talked pacifism and the league, refused to arm, urged Britain to reduce the number of her capital ships from seventy-five to fifty and to change the definition of capital ships, and to provide for a smaller navy and a reduction of naval estimates to nothing. The result has been that Great Britain is unable to look after the Atlantic or the Pacific as she did on the seven seas.
On March 21, 1939, I urged the government to give the people the facts as to the great peril we were in, and urged rearmament. There is no secrecy about these St. Lawrence sinkings. They are known in Washington. Washington has announced them publicly; the Prime Minister of Great Britain used to
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announce them, and the admiralty used to announce the sinkings in the Atlantic from time to time. I pointed out to the house on the date I mentioned that Germany and Italy and also Japan had submarines that could cross the Pacific or the Atlantic without refueling. These submarines could sail up the St. Lawrence and possibly blow up the citadel and cause untold damage because of the lack of defences in this country and our lack of a fleet. The people have been kept in the dark, and this is no time for a secret session. If a secret session is held, I do not intend to attend it. It will amount to nothing, like the last one.
Information as to our grave peril should be given to the people of Quebec and all Canada before it is too late. The people of that province have not been given the facts. I raised this question two months ago. I asked the Minister of National Defence for Naval Services, who should be in his seat to-day because that is the place for him to be in the dying days of the session, to give us some information on our naval defences, if any. The courage and heroism of the men who work and sail on all seas and in the St. Lawrence river and in the gulf is most magnificent. The Canadian navy is upholding the best traditions of the great British navy which has done so much for us and the civilized world. The information which the government has had since 1937 on our need of naval aid has been refused to this house while we have been in session. We are asked to hold a secret session. I asked the Minister of National Defence for Naval Services three months ago about conditions on the St. Lawrence and Atlantic coasts where our brave friend General de Gaulle and his fleet were guarding our shores and the islands off Newfoundland. A leading paper published in New York, the Nation, one of the ablest newspapers in the United States, gave all the particulars right after last December, and the minister and the government must have known. The French admiral was here in Ottawa conferring with him and others, and told all he knew about it.
He warned them as others did, and as I did, of the grave danger in the St. Lawrence and on the Atlantic from the present state of the navy and the submarine menace, the merchant marine and the British fleet. Our life lines to Britain are in the Atlantic. They may yet be broken, and they are likely to be broken in the St. Lawrence and all around the maritime provinces. They got the British admiral out of Halifax, and under the empirewrecking statute of Westminster agreed to look after our shores and three miles out

from the shore. We have always been dependent upon the British fleet to protect our shores ever since we have been a country, and that is the case to-day. After Dunkirk, had it not been for Britain, we would have had the enemy all along the Atlantic seaboard and up the St. Lawrence river long ago. But the British fleet stood in the way, to which we contributed before the war practically nothing. Had it not been for the British fleet we would long ago have had to settle with the axis powers.
So far as this motion is concerned, the people want the truth. They are sick and tired of getting their information second-hand about the war from Great Britain and the British Broadcasting Corporation and United States channels, while in Canada the government refuse to tell us anything and if it were not for the activity of the press we would know nothing. There is no censorship in Britain. The newspapers there publish what they like. We have seen the results of censorship in this country within the last few days. *
We as a country are to blame for not having taken steps before the war to protect the St. Lawrence and our own country. Our nation borders on the Atlantic and Pacific oceans and we should take steps to protect ourselves. We knew the condition of our navy before the war. Warning was given in 1938 about the danger to the St. Lawrence and the maritimes. But what did Canada do? Canada would not adopt the Jellicoe report or start building ships, depending on Washington, and pacifism and the Monroe doctrine. I admit that the late minister of national defence did bring up the navy question in 1937, 1938 and 1939. At that time Canada's navy, according to a return which the minister brought down, consisted of a total of less than 10,000 tons, about the size of one tramp steamer. It was not his fault.
What a secret session can do, I do not know. It will amount to nothing. What did the Minister of National Defence for Naval Services tell us the other day? He did not tell us a thing that could not have been obtained from the newspapers. He talked about secrets to the enemies when they know it all long ago. If we in the House of Commons are to be treated as an absentee house, let us know it. I warned this house on March 21, 1939, of the grave danger to the St. Lawrence if war came. I urged that the people should be given the facts and the truth. As Mr. Chamberlain said, where the people are not given the facts and the truth, but only as much as their rulers permit them to

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know, that nation is in grave danger, and will have to take the consequences for its lack of preparedness.
I see no advantage to be gained by passing this motion. It will accomplish no good. We have had too much secrecy altogether since the war began.
Mr. JEAN-FRANQOIS POULIOT (Temis-couata): Mr. Speaker, as a private member of this house and as a member who has the honour to represent a constituency in eastern Canada lying alongside the great St. Lawrence river, I feel that I am bound to-day to con-gratulatae the hon. member for Gaspe (Mr. Roy) upon the stand that he is again taking for the defence of that part of the country which he represents along with myself.
Some time ago, after the observations made by some of our hon. colleagues from British Columbia, the government agreed that the house should sit in special secret session to discuss war matters. We were all at one in supporting this request made by our colleagues from British Columbia, and now that another part of this country is threatened I hope that members from British Columbia and the other provinces will give to members representing eastern Canada the same opportunity as was given to them some time ago.
A secret sitting is essential, for the very reason that it is impossible to get any information on naval or military matters because the war ministers are always using the pretext that if such information was given it would be of some use to the enemy and therefore, they say, it cannot be disclosed. In a secret sitting the same objection would not exist.
I hope that if we sit in camera there will be no long speeches and no repetitions of what has been said by other members, but that each member will be bound to disclose the information he has in his possession, and it will also be his duty to question the war ministers about the military, naval and air protection that we have in this country.
I am pleased to congratulate all the hon. gentlemen who have spoken before me on this question. The hon. leader of the opposition (Mr. Hanson) has said that the first duty of the navy is to protect international convoys. I admit that that is one of the duties of the navy, meaning by that the British as well as the Canadian navy. But for me, sir, the first duty of all three branches of the armed forces, not only the navy but the air force and the army as well, is to make the waters and shores of the St. Lawrence river safe for navigation. That great river is the artery that carries all the traffic that flows east from western-central Canada and from
the American middle-west, and we cannot allow it any longer to be infested with U-boats, which was admitted to be the case by the Minister of National Defence for Naval Services (Mr. Macdonald) himself just the other day. We have to protect our maritime trade. We have to protect the fishermen in the St. Lawrence river and in the gulf of the St. Lawrence as well as those on the Atlantic and Pacific coasts.
I hold in my hand a news item which was published hot later than yesterday in the largest French daily in America, La Presse, of Montreal. It reads:
(Translation)



TRANSATLANTIC SHIPPING IN THE ST. LAWRENCE RIVER

[Stage Direction]
The recent torpedoings of seagoing vessels in the Gulf of- St. Lawrence have sown panic among ship-owners who are wondering if this route is sufficiently protected to ensure in future the security of vessels bound for Great Britain.
It refers to ocean steamers, meaning by that not only vessels that navigate along the river, but vessels that cross the ocean.
Some time ago, the question even arose of rerouting traffic to other eastern ports and of shipping goods by rail. This would entail, it is claimed, additional expenditure and a loss of time. The interests concerned were hesitant about taking such a step.
In shipping circles, it is claimed that if the Gulf of St. Lawrence were more closely watched, our ships could easily evade enemy submarines.
The permanent interruption of transatlantic shipping on the river, it is felt, would prejudice the war effort and completely paralyse this important ocean trade route.
Moreover such a decision would deny employment to thousands of longshoremen.
At all events, it is up to the British Admiralty to study the situation and take whatever measures are deemed necessary.
I understand that most of the transatlantic vessels are registered in London, as were the Canadian Pacific transatlantic ships. On the other hand one must not forget that the St. Lawrence river is an inland waterway and therefore it is exclusively under the control of the Minister of National Defence for Naval Services, so far as naval matters are concerned. The conclusion of the article that I have read could be translated thus: "In any case it belongs to the British Admiralty to study the situation and to take measures considered necessary".
I do not see how the British Admiralty could interfere with the business of this government and assume control of the defence of the St. Lawrence, an inland waterway. I cannot believe that this government has yet given all our rights to any other country with respect to the sort of defence that is to be
Shipping Losses
[Stage Direction]
organized to protect the St. Lawrence waterway. Of course, in war time there are mutual obligations between allied countries. If this government said, "We are cooperating with the British Admiralty regarding the defence of the St. Lawrence river and its shores", I would agree with them. It is natural that allied countries should help one another and cooperate in protecting and defending themselves. But I find it simply incredible that a decision made by the Admiralty with regard to the defence of the St. Lawrence seaway could possibly for a moment be accepted with closed eyes by this government. I cannot believe it, because that would mean that this government was simply an agent of the government of another country.
We have heard so much about the defence of other countries that it is time for us to think of the defence of our own. At an earlier stage of this session I had the honour to move that the defence of this country should have priority over commitments to any other country, and that is pure common sense. The trouble lies in the fact that the more sensible a thing is the more difficult it is to have it adopted, and there is a reason for that. The reason is that, at the controls in the various branches of the war departments, there are men to whom Canada counts for nothing. That is why we have to take advantage of the rules of parliament to wake up the government, to try to make the members of the government understand that they are not members of any government other than that of Canada. There are some occasions, on St. George's day, on St. Andrew's day, on St. Patrick's day, on St. Jean Baptiste day when we hear speeches about the grandeur of Canada, and what a fine country this is. And we hear a lot about the statute of Westminster, that marvellous instrument through which this country obtained its autonomy. But now we realize that we have gone back to the darkest colonial days and we have to speak louder and louder to awake the government and make them realize that Canada is in danger.
It has been said on the platform many times that Canada was threatened, that the Germans had their eyes on us. What was done for the defence of this country? I am one of those- members who have lost no opportunity to try to impress upon the government the importance of defending this country and making it safe for our good citizens, men, women and children who live in it, and now I hope that the day of awakening and reckoning has come, and that the government will realize that it is not [Mr. Pouliot.l
yet too late to open their eyes and face the situation as it should be faced. I remember reading once an article written by an eminent member of the press gallery, one of the deans of the gallery, whom I will not name. I do not wish to offend his proverbial modesty, but he said of a politician, who is no longer in the political scene, that the mistake he made was in considering that this war was exactly the same as the last one. It is not the same. Conditions have changed, and with the new methods of warfare and the new facilities of transportation the war is nearer to us now than it has ever been.
But there is a psychological consideration that should not be forgotten. Earlier in this session I said that the veterans of the last war had the right to say that they were in favour of conscription for service overseas. They have that right because they have already been preaching by example. They were recalling their exploits, remembering their accomplishments when they were capturing the enemy, when they were destroying or taking possession of his forts. That is natural. Perhaps they are thinking to-day the same way as they were thinking then. I assume so; it is their memory of their past accomplishments that guides them now. It makes them forget that actually the enemy is very near us. They are not so sure to destroy the enemy far from here, because the enemy has already reached our shores. I betray no secret in saying that;
I refer only to the statement of the Minister of National Defence for Naval Services in which he admitted that the facts laid before the house by the hon. member for Gaspe were true. His only complaint was that the statement was untimely.
Well, sir, why should he hide the truth? If there are sinkings in the St. Lawrence it is front page news in United States papers, but the only way for a Canadian citizen to get the information is to buy a United States paper. The censorship of our country is so silly that they prevent our papers from informing the Canadian people of facts that have already been communicated to the people of the United States. If the United States of America were not our allies in this war it might be expected that news of that kind could not be published in this country, on account of our being in a state of war, but could be published in the United States, if the United States were still a neutral country. But since that great country is in a state of war, just as we are here, why do the Canadian people not get the- same information about- Canada as is given to other countries? There is a very good reason why they should. If the veil of secrecy were lifted from facts that should be commonly

Shipping Losses
known, there would be more respect for official news, and when the government denied any news statement that was untrue, the people would be more inclined to believe what they say.
However, I shall not go further into that. I only wish to tell hon. members that I have appreciated the way in which this matter has been approached by all those who have spoken about it and all those who have listened to speeches about it. The times are grave; we realize that. But it is not for the government to decide whether we shall have a secret session or not. It is for parliament to decide, it is for the House of Commons to decide. I would remind the Prime Minister that unless we are to revert officially to the regime of Mussolini, Stalin and Hitler, it is not the government that is supreme; it is the House of Commons, of which the government is only a permanent committee. This is why Mr. Churchill, who boasts of being a child of the House of Commons, has so much respect for his colleagues the private members of the parliament of Westminster, and keeps them informed as to what is going on. At the present time there is a debate of capital importance taking place at Westminster about the merchant marine. Nothing is hidden from the members. It would not even be hidden from the British people if there were not a danger that the facts disclosed there might help the enemy.
I would also be very ready to support the suggestion of the leader of the opposition that a public discussion of those facts should be had, to satisfy the minds of his constituents as well as of mine and of all good Canadian people. Before the war there were many German and Japanese merchant vessels in the St. Lawrence river. Even men-of-war of those enemy countries came to Canada, and very credulous would be the one who would contend that the enemy is not already fully informed about the geography of this country.
Another thing which I shall .mention briefly is the necessity of a cipher code, not only for the Department of National Defence for Naval Services, if they have one, but also for the merchant marine. No departure of any vessel from any point on the St. Lawrence river or from any point on any inland waterway should be disclosed other than by cipher code to those concerned.
I leave the matter with the house. I make a special appeal to the Prime Minister and to his colleagues, and I do tell them that we are ready to cooperate with them provided they show good will regarding the defence of this country, and that they show results. There is no excuse for a repetition of what has happened recently in the St. Lawrence river.
Mr. LIGUORI LACOMBE (Laval-Two Mountains):: I have already supported on a similar occasion the demand made by the hon. member for Gaspe (Mr. Roy) for a secret session, because the information contained in the amendment moved by the hon. member is closely bound up with the defence of Canada. The hon. member has my heartiest support. The representatives of the people who sit in this house are entitled to all possible information in connection with the protection of our shores. Consequently I believe a secret session would be in the public interest, and the government cannot refuse it without assuming an exceedingly serious responsibility. We have taken long hours to discuss the question of one-cent candy. We would be more justified in taking a few minutes to discuss the most important question of the defence of Canada.


Georges Parent: Does the hon. member for Gaspe wish to withdraw his motion?


Joseph Sasseville Roy: I will withdraw it, Mr. Speaker, * but if there are no more hon. members who wish to speak-


Richard Burpee Hanson: Did the Prime Minister say anything?


William Lyon Mackenzie King: I was about to say something, but was interrupted at the time. I might remind the house of the exact question before it. As I understood, the hon. member for Gaspe (Mr. Roy) was granted leave to move the adjournment of the house in order to discuss a matter of urgent public importance, which matter was the advisability of haying a secret session. I am afraid the discussion that has taken place has far exceeded the purpose for which the adjournment was asked.


Richard Burpee Hanson: Not by me.


William Lyon Mackenzie King: My hon. friend the leader of the opposition says it was not by him, but may I remind him that he was the one who started the discussion, and I think he gave to it a scope that was not intended even by the mover. My hon. friend really presented an entirely different request to the government. If I understood him aright the leader of the opposition requested that there should be a public discussion, while the object of the hon. member for Gaspe is that there should be a private discussion. I am afraid that is only too characteristic of what has taken place at times during this session. Many of the hon. members who to-day are asking us to hold a secret session to discuss a national matter yesterday were condemning
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us very strongly for having permitted public matters to be investigated secretly in another place. It seems that no matter what the government does, it is wrong. If we have a secret session we are told that it ought to have been public; if we hold a public session we are condemned for not having held it in secret.


Mr. HOMUTH:: Those are not parallel rases at all.


William Lyon Mackenzie King: If it is not a parallel I am afraid I do not know what a parallel is.


Karl Kenneth Homuth: I believe that.


William Lyon Mackenzie King: I am sure my hon. friend does. However, I just wish to point out that sometimes it is a little embarrassing to know just what it is hon. members really mean when they make certain requests and certain professions. I did say to the hon. member for Gaspe that I thought he ought to give the government such information as he has which causes him to believe that a secret session should be held. I would say to him now that if he has any more information than he has already set out in the letters he has sent to the Minister of National Defence for Naval Services or any other minister, I wish he would let me know, and also I wish he would take care to see to it that this further information is imparted to the Minister of National Defence for Naval Services as soon as opportunity permits. I might say the same to the leader of the opposition, who has mentioned that he has certain information.
I would ask him if he would give that information to the Minister of National Defence for Naval Services. My colleague is not here at the moment, but if my hon. friend is anxious to furnish the information at once he might give it to the Minister of National Defence.


Richard Burpee Hanson: I will try to see the minister to-morrow.


William Lyon Mackenzie King: In regard to the absence from the house at the moment of the Minister of National Defence for Naval Services, my colleague is to-day visiting shipyards at Collingwood and Midland in connection with some of the work of his department, official business of first importance in relation to problems which are confronting the nation at the present time. That is the reason for his absence to-day, but I am informed that he will bn back to-morrow, and perhaps at that time my hon. friend will see him and give him such information as he possesses. I do submit

that it is necessary for the government to have that information before we can say whether or not a secret session should be held.
May I point our further that I am not aware of any requests having been made until this afternoon by hon. gentlemen opposite for a public discussion of this particular matter, or any other matter relating to defence, beyond such discussion as we have bad already. After listening to what has been said this afternoon it might be thought by someone visiting the house or reading its proceedings, that the government had been seeking to prevent a discussion of the situation in the St. Lawrence, or the situation on the Pacific coast, or the situation in relation to the Alaska highway, or in connection with some other defence matters; 'but no request for anything of the kind has been made until this afternoon. As hon. members know very well, there are opportunities time and again in connection with the business of the house when these particular matters can be discussed.
Further in regard to the question of holding a secret session may I say that this secret session is requested because certain ships have been torpedoed in the St. Lawrence. May I remind the house that a very large number of ships have been torpedoed off the coast of Nova Scotia. May I also remind the house that this country has been attacked on the Pacific coast. And may I say further that it will be a very great surprise if further occurrences of the kind do not take place at any time, on either coast, and I think our country must expect those possibilities. Indeed, the government has had them in mind all along and has been doing everything it is possible for the administration to do in anticipating situations of the kind and in seeking to meet them. But the question we must ask ourselves is whether each time a ship is torpedoed off one or other coast, or some other act of war takes place, it is to be the duty of the government to hold a secret session of this house in order to discuss that particular situation. It is for this reason that I say the responsibility is upon the government to decide whether the circumstances warrant a secret session, or whether it is better that these events, as they take place from time to time, should be discussed in open session as far as it may be advisable and possible so to discuss them. After all, the government has to ask itself with respect even to secret sessions whether some things can be said or should be said in a secret session that cannot be said or should not be said in an open session. There are certain matters that of course can be discussed better in a secret session than in an open session; but

Shipping Losses
there are many matters in connection with which any information, if it can be given at all, certainly should be given in an open rather than a secret session.
I have nothing further to say than that the government, when it gets this additional information, will carefully consider it and will advise the house as to what it thinks advisable in the matter. I should not like to conclude, however, without taking very strong exception to a reference made by the hon. member for Temiscouata (Mr. Pouliot) to some of the heads of the war departments of Canada as he described them, who, if I got his words aright, he said were not at all concerned with Canada.


Mr. POULIOT:: Hear, hear.


William Lyon Mackenzie King: I would be
ashamed to say, "hear, hear" if I were my hon. friend.


Jean-François Pouliot: Opinions are free.


William Lyon Mackenzie King: Opinions may
be free, but I am afraid that the opinion the public will have of my hon. friend for condemning public servants who are doing their utmost to defend this country and defend freedom, will not be such as will meet with his own approval. I say this because, while I do not claim it is necessarily a part of my duty, though I believe it is, certainly it is the part of chivalry that someone should defend public servants who are not here to defend themselves, but whose whole lives and time are being spent in helping to defend those of us who are in this House of Commons, our country and the freedom which we enjoy.


Jean-François Pouliot: Why do you not speak
in that way to the slackers in uniform who infest militia headquarters?


Richard Burpee Hanson: Just a
word. The Prime Minister attributed my request as based on the theory of one incident. I tried to put it on a much wider basis than that. The whole position down there, I think, ought to be discussed-.


Joseph Sasseville Roy: I should like to say a few words, if I may, in reply to what the Prime Minister has said.


Georges Parent: Only with the unanimous consent of the house.


Ian Alistair Mackenzie: It is withdrawn.


Joseph Sasseville Roy: No, I have not withdrawn. I understood wrongly at the time. The Prime Minister has said, Mr. Speaker-


Georges Parent: The hon. member is not entitled to reply, and he cannot speak a second time. Is the motion withdrawn?


Joseph Sasseville Roy: I ask that it stand.


Georges Parent: Does the hon. gentleman understand? He is not entitled to reply, nor can he speak a second time. I understood that the hon. gentleman was asking leave of the house to withdraw his motion.


An hon. MEMBER:: No.


An hon. MEMBER:: He said yes.


Georges Parent: Perhaps the hon. member who has made the motion does not understand. He is not entitled to reply; therefore he cannot speak a second time.


Mr. BLACK (Yukon):: May I suggest that an amendment has been moved?


Georges Parent: It was ruled out of order. The hon. gentleman is not entitled to reply, or to speak a second time. I am asking him now if he is withdrawing -his motion.


Joseph Sasseville Roy: I say no, Mr. Speaker.


Georges Parent: Mr. Roy moves, seconded by Mr. Lacombe, the adjournment of the house for the purpose of discussing a definite matter of urgent public importance. Those in favour of the motion will please say "aye".


Some hon. MEMBERS:: Aye.


Georges Parent: Those opposed will please say "nay".


Some hon. MEMBERS:: Nay.


Georges Parent: In my opinion the nays have it. On division.


Some hon. MEMBERS:: No.


An hon. MEMBER:: A registered vote.


Georges Parent: Before putting the motion I think I Should say that is a very unusual vote. I am informed that in the history of this house a vote on a motion such as this has very rarely been taken. The motion is for the adjournment of the house and if it should carry the house would adjourn until to-morrow at three o'clock. It is unusual for the Chair to make such a statement, but I think under the circumstances I may be forgiven for having done so.
42S0
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Mr. BLACK (Cumberland):: I was paired with the hon. member for Halton (Mr. Cleaver). Had I voted, I would have voted for the motion.



QUESTIONS

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

Mr. HAZEN:: 1.	Of the total number of contracts awarded and commitments made by the Department of Munitions and Supply on Canadian and United Kingdom account, from July 14. 1939, to June 30, 1942, how many were made with persons and companies in, (a) the province of New Brunswick; (b) the province of Nova Scotia; and (c) the province of Prince Edward Island?
2.	What are the names and addresses of the persons and companies with whom such contracts were made and commitments entered into in New Brunswick, Nova Scotia and Prince Edward Island; what is the nature of the goods and services contracted for in each case; what was the amount involved in each contract or commitment; and how much has each person or company been paid to June 30, 1942?


Mr. HOWE:: Mr. Speaker, this question asks for a breakdown between provinces of contracts placed by the Department of Munitions and Supply. I have on two or three occasions explained to the house that it is impossible to do that accurately, due to the fact that orders are often placed in provinces other than where the work is done. I have also stated that it was not the policy of the department to divide the work between provinces, and therefore the question cannot be answered.
Mr. HANSON (York-SunbupQ: We can understand that it is not the policy to do what

Questions
the question suggests, namely, to divide contracts between provinces on a geographical basis. But the object of this question is to find out how much or how little of war contracts have been placed in the maritime provinces, and we want to know that.


Clarence Decatur Howe: My interest is to get the war materials.


Richard Burpee Hanson: We understand that, but we have a duty to our constituents.


Clarence Decatur Howe: Well, you carry on.


Richard Burpee Hanson: I shall.



MUNITIONS AND SUPPLY-ARMOURED VEHICLES

['You have got your\nanswer.']
Clarence Decatur Howe: Mr. Speaker, this question deals with a number of inquiries that could not be answered without violation of all censorship regulations. It asks for the thickness of armour-plate on tanks, the fire power of guns, and so forth. It makes certain insinuations which are wholly incorrect and with which I should like to deal, but it is quite impossible for me to deal with any of them without violating the censorship regulations.



Mr. GRAYDON:: 1.	How many British children have immigrated to Canada from Great Britain since war was declared in each of the years 1939, 1940, 1941, and up to July 1, 1942, (a) under governmental evacuation arrangements; (b) under private arrangements?


Mr. CRERAR:: 1940	1941	Jan. 1,1942, to July 1,1942	Totals1,532	nil	nil	1,5325,054	344	143	5,630434	114	46	758
7,920
Questions


*HONG KONG COMMISSION-COUNSEL
Mr. BRUCE:: -
1.	Was the Hong Kong inquiry held in secret by order in council at the request of the government?
2. If so, when was said order in council
passed?
3.	Were each of the counsel engaged in the recent Hong Kong inquiry asked to submit an account for their services and, if so, by whom?
4.	Did each of the counsel submit an account and were said accounts submitted to the commissioner either directly by counsel or for approval, by the Department of Justice?
5.	"Was an account submitted by Colonel
Drew?	If not, were reasons given by the
commissioner or by anyone else why an account was not submitted and, if so, state the reasons?


William Lyon Mackenzie King: With regard to questions I and 2, I answered both these questions in the statement I made last night. The Hong Kong inquiry was not held in secret by order in council at the request of the government. There was no order passed by the government requesting that it should be held in secret.
As to the rest of the question, it would involve, I imagine, a conference with the commissioner and obtaining such information as the commissioner may wish to give. That part of the question had better be made an order for a return.


Georges Parent: Order for return, subject to the reservations made by the Prime Minister.


MASTER-GENERAL OF THE ORDNANCE-TANK PRODUCTION
Mr. BRUCE:: 1.	Was the recent resignation of Colonel Victor Sifton, M.G.O., from the post of Master-General of the Ordnance, due to any difference of opinion between him and the Minister of Munitions and Supply?
2.	If so, did it have anything to do with the designs or production of tanks?


Clarence Decatur Howe: Mr. Speaker, this is not
really a question but rather a statement of fact. In eveiy newspaper of the country it is stated this morning that the Minister of Munitions and Supply quarrelled with the Master-General of the Ordnance, as a result of which the Master-General of the Ordnance resigned. But the fact of the matter is that the Master-General of the Ordinance and myself have worked together in the greatest harmony since he came to Ottawa. We have visited frequently back and forth. We had a common problem of providing weapons and supplies for the troops. So far as I know there was never anything antagonistic between us, although we had many difficult problems to work out.

Early this week Mr. Sifton called on me in my office to say how much he had enjoyed working with me, and I was able to say the same thing to him. Just why and for what purpose a statement of that kind should be blazoned from one end of Canada to the other is something with which I should like to deal.


Some hon. MEMBERS:: Order.


Clarence Decatur Howe: I also suggest to you, sir, with all due deference, that it is not the kind of question that should be allowed on the order paper of this house, because it attempts to state a fact rather than ask a question.


Herbert Alexander Bruce: I think, Mr. Speaker, that
this is a matter of considerable public importance, because this man was serving his country as a dollar-a-year man.


Mr. RALSTON:: You have got your
answer.



QUESTIONS PASSED AS ORDERS FOR RETURNS


Mr. CARDIFF:: 1.	Has the attention of the government been called to the speeches being delivered throughout Canada by Mr. Graham Spry in relation to India, and defence and foreign affairs?
2.	On this trip, is he representing the government of Great Britain, and has he the authority to represent them regarding India?
3.	With what members of the government has he conferred, and whom does he represent, and by what authority?
4.	Was he engaged by the minister in charge of the National Resources Mobilization Act, and was he authorized to visit sections of Canada to make speeches on this and other subjects? If so, on what conditions, and what allowances, travelling and other expenses have been allowed, and who authorized them?


FIRST AND SECOND VICTORY LOANS
Mr. FRASER (Peterborough West):: 1.	In the (a) first victory loan; (b) second victory loan, what were the office expenses in each of the following cities: Toronto, Hamilton, Ottawa, Montreal, Quebec, Peterborough, Winnipeg, Vancouver?
2.	What were the travelling expenses in each city?
3.	What was the amount paid to canvassers in each city?
4.	What was the amount paid to bond salesmen working in each of the different cities?
5.	Who were the organizers in each of these cities?
6.	What was the amount paid to the organizers in each of these cities, as, (a) salary and expenses, (b) travelling expenses?

Carrier Pigeons


HONQ KONG COMMISSION-COUNSEL
Mr. BRUCE:: 1.	Were each of the counsel engaged in the recent Hong Kong inquiry asked to submit an account for their services and, if so, by whom?
2.	Did each of the counsel submit an account and were said accounts submitted to the commissioner either directly by counsel, or for approval, by the Department of Justice?
3.	Was an account submitted by Colonel Drew? If not, were reasons given by the commissioner or by anyone else why an account was not submitted and, if so, state the reasons?



HONG KONG


[Stage Direction]
On the orders of the day:
Richard Burpee Hanson: I desire to ask a question
either of the Prime Minister in his capacity as Secretary of State for External Affairs, or of the Minister of National Defence. Has the government received any further or recent information with respect to casualties at Hong Kong, and in particular, has the government received any information with regard to those killed, wounded or taken prisoner of war, and those who have died subsequent to the surrender? A report has come to my attention that some such information was received about ten days ago. I should like to have either confirmation or denial of that report.


James Layton Ralston: I can say to my hon. friend that no such report has come to my attention, and I am sure that it would have been brought to my attention immediately had it come in. As the house and the country know, Colonel Frank Clarke, who himself had a son with the Royal Rifles, is in charge of matters connected with Hong Kong, and I am sure that any such report would have been brought to his attention.



AVAIL A3 ILITY FOR PARCELS TO MEMBERS OF THE FORCES OVERSEAS

[Stage Direction]
On the orders of the day:
Mr. KARL IC. HOMUTH (Waterloo South): Has the Minister of Finance inquired as yet into the availability of sugar to put in boxes for overseas?
Hon. J. L. ILSLEY' (Minister of Finance): Yes, I did. I was informed that the sugar ration in England is the same as the sugar ration in Canada, and that there is something extra provided. Therefore it was not considered necessary to provide for any increase in the sugar ration in Canada. I had a memorandum about the matter which is not under my hand at the moment, but that is the substance of it.


[Stage Direction]
On the orders of the day:
Mr. G. K. FRASER (Peterborough West):: Mr. Speaker, on April 20, 1942, I asked the following question:
1.	Has the government purchased any carrier pigeons for use as message carriers?
2.	What action, if any, has the government taken to encourage the raising of carrier pigeons?
The question was answered by the Secretary of State (Mr. McLarty) as follows:
It is not considered to be in the public interest to provide answers to these questions. '
On July 14 an article appeared in the press headed "To take pigeons on sea patrols- can be released to bring aid if plane forced down-Found effective". That was the announcement from the air force headquarters. Is the Secretary of State now in a position to answer the questions I put to him on the orders of the day on April 20?


Hon. N. A. McLARTY (Secretary of State):: Of course the Secretary of State gives such answers as are supplied to him, and I understood at the time the answer was given, if I recollect aright, that the Department of National Defence for Air objected to giving the information. However, I shall be glad to make inquiries, and if there has been any change in the decision I shall advise the hon. member.



REQUEST FOR TABLING OF AGREEMENT SIGNED AT WASHINGTON

[Stage Direction]
On the orders of the day:
Mr. E. E. PERLEY (Qu'Appelle):: I desire to direct to the Minister of Trade and Commerce a question based upon two reports, one appearing in the press and the other a report in the Parliamentary Debates of the British House of Commons on July 2, indicating that the wheat agreement signed at Washington had been discussed there. I quote from the Parliamentary Debates at page 513:
Wheat Discussions, Washington (Agreement)
Mr. Watkins (by Private Notice) asked the President of the Board of Trade whether he is in a position to give any information about the recent discussions at Washington with a view to the conclusion of a wheat agreement?

Provincial Debt Adjustment

The President of the Board of Trade (Mr. Dalton): I am glad to be able to say that the wheat discussions in Washington have been satisfactorily concluded and the text of the agreed documents is available in a White Paper which was presented yesterday.
His Majesty's Government in the United Kingdom have agreed with His Majesty's Governments in Canada and Australia, the government of the United States and the government of Argentina, on the outline of a wheat convention which will later be submitted to a larger conference of the countries interested.
He went on to describe the agreement in detail. My question is this:	Will the minister to-morrow table this agreement recently made at Washington, to which Canada was a party, and at the same time make a statement similar to that made by the President of the Board of Trade in Great Britain describing the agreement? The report in the press to-day is to the effect that three western provincial pools have called a meeting in Calgary to discuss the agreement, and I think this parliament should have the agreement before it.


Hon. J. A. MacKINNON (Minister of Trade and Commerce):: I believe the agreement will be available for tabling in the house to-morrow.


Ernest Edward Perley: Will the minister make a
statement similar to the statement made in the British house?


James Angus MacKinnon: I
shall take that into consideration.



PROVINCIAL DEBT ADJUSTMENT


[Stage Direction]
On the orders of the day:
Mr. J. G. DIEFENBAKER (Lake Centre):: I wish to ask a question of the Minister of Justice. During the past few days representatives of the governments of Manitoba, Saskatchewan and Alberta have, I believe, been in Ottawa in connection with securing the assistance of the dominion government to have enacted legislation to take the place of the provincial debt adjustment legislation in the western provinces. To-day there are many thousands of debtor farmers and other residents of western Canada who are in the position of being subjected to threatened action such as they have not been subjected to in recent years. The situation is a very serious one. Can the minister say whether it is the intention of the government to introduce legislation at this session to take the place of the provincial debt adjustment legislation which has been declared ultra vires by some of the courts.

Hon. L. S. ST. LAURENT (Minister of Justice):	Representatives of the western
provinces were informed yesterday that it was not considered possible to have legislation passed before the adjournment of this session, but that any representations they might have to make as to some other method of dealing with the problem, which they submitted as being an acute and urgent one, would be given very careful consideration.


John George Diefenbaker: Under the War
Measures Act?
Mr. ST. LAURENT: It was suggested that they might consider whether or not they could propose some method that would be satisfactory to them to deal with the situation temporarily under the War Measures Act-


John George Diefenbaker: It is a very serious situation.
Mr. ST. LAURENT: -and my understanding is that the premiers and attorneys general of the provinces retired to discuss the possibility of complying with that suggestion.



WAYS AND MEANS


[Stage Direction]
The house in committee of ways and means,
Mr. Vien in the chair.
The CHAIRMAN:: Resolution 1, part I,
normal tax.


Mr. McGEER:: When the house rose last night I had pointed out that in 1934, before the banking and commerce committee, certain representations had been made, all of which were opposed by the government majority of the committee of that day. May I recapitulate them. They were:
1.	A publicly-owned national central bank.
2.	Removal of the gold reserve limitation on the issue of full legal tender national paper currency.
3.	The control and regulation of the international movement of currency and credit and investment.
4.	The control and regulation of international trade.
5.	The control and regulation of production and prices of goods and services.
6.	The use of taxation to withdraw from circulation any excess of buying power medium of exchange which, not withdrawn, would cause an inflationary rise in prices of goods and services.
In that day every one of these reforms was looked upon as a dangerous innovation. Today every one of them has been put into operation and is operating as an essential

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part of the economy of the nation. I know what it is to pioneer reforms of this kind, but that was not all of the programme we offered. We suggested at that time that with a publicly-owned national central bank, the use of national currency, the greater control of the use of bank credit, deposit money, not only would offer a means of financing greater progress, but could be employed to alleviate the burden of interest-bearing debt. I know all about the dangers of inflation of currency, but the issue of national currency and the control and regulation of the issue of bank deposit money does not of itself involve any disastrous inflationary results. So long as prices are controlled; so long as the flight from the dollar is prevented by the control and regulation of the movement of currency and credit and investment internationally, the actual volume of money in circulation will not of itself do any harm.
I want to draw 'the attention of hon. members to the fact that there is more than one form of inflation that can bring a nation to disaster. One of these forms, I believe the most dangerous and insidious of all, is not the inflation of currency but the inflation of interest-bearing debt. Too much money may be a disaster to some nations; it may be a disaster to some individuals; but I know of no individual ever born who was smart enough to weather the storm of too much interest-bearing debt. Do not make any mistake about the result to a nation being the same as the result to an individual, because after all a nation is nothing but the sum total of the individuals of the nation, and what applies to the individual with regard to debt applies in equal disaster to the nation as a whole. There is one chapter in Adam Smith's "Wealth of Nations" that we have not studied as closely as we might. I refer to his chapter on public debt. He pointed out that in the middle of the 18th century every nation in Europe would come to disaster through its programme of national debt and its policy of funding and refunding debt. He also pointed out that no nation, not even England, could follow the pattern of that economy without coming to the same disaster. Of course I know when men talk of the danger of currency inflation they assume that by taxing and borrowing, which is only deferred taxation, they prevent disruption of the economy through a rise in the level of prices.
When I made these recommendations before the banking and commerce committee in 1934 I did not believe that I originated anything. Every proposal I offered was taken from the Macmillan committee's report, which was filed with the British government in 1931. Dealing
with the problem of controlling prices, that report to the British government said this at page 94, section 210:
... it should be our object to increase the power to exercise deliberate control over the price level; that there is nothing inherently impracticable in this; that with the gradual growth of knowledge and experience, and particularly with the further development of suitable machinery for regular international cooperation, the possibility of such deliberate control should steadily increase; and that we should forward these ends to the best of our powers by being ready to attempt the task and to gain experience by practice.
That is exactly what this government it doing, and I say to my hon. friends of the Social Credit group and to the monetary reformers who are anxious to proceed more rapidly than this government is doing, that since 1934 under the Liberal administration of the Mackenzie King government this nation has gone further with regard to monetary reform and has established a greater advance in bringing money into the service of the nation than any other nation in the empire.
The Minister of Finance (Mr. Usley) says that these proposals to use national currency are not new. Of course they are not new, but let us keep in mind1 some of the problems that this parliament and this nation cannot escape. Just look at the figures of the issues that have taken place since 1938. I take, first, from the Bank of Canada report the issue of deposits by the chartered banks. In 1938 they amounted to 12,892,000,000. By 1942 this had risen to $3,820,000,000, or an increase of $928,000,000 in that period of time.
Let us now take the issue of national currency. In 1938 we had $105,000,000 of active Bank of Canada circulation. In 1942 this had risen to $403,000,000. During that period we have increased our national currency by $297,000,000.
There is, however, another issue. While bank deposits have risen $928,000,000 and Bank of Canada cash has risen $297,000,000, our unmatured bonded indebtedness has risen from $3,315,000,000 to $5,866,000,000, or an increase of $2,551,000,000.
We are told that at the close of the war we are going to refund or repay war savings certificates. Also we are told that we are going to repay the refundable taxes, also that we are going to repay a portion of the excise taxes. These are promises to pay. What are we going to repay with, if we do not come to the use of something other than the issue of debt in addition to the already appalling burden of interest-bearing debt that this nation is carrying?
There is another interesting figure with which every hon. member should be

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acquainted, namely, the total amount of money we have in our savings bank accounts to-day. In 1938 we had $1,630,000,000. In January, 1942, wre had $1,720,000,000, or $90,000,000 more than we had the year before the war. Every dollar of that savings money is available to buy goods with. There is no question about that. But we are told on the advice of experts that when the government borrows by issuing interest-bearing bonds it takes money from the control of the people and transfers it to the account of the government, thus reducing the volume of money available for private expenditure. I can hardly agree with that, even when the transfer is from a savings bank account to the government, because the government gives in exchange for that savings bank account a bond of the government carrying interest, and who in this house will say that any man possessed of a dominion government bond has not a liquid asset which has spending value. To accept such a statement as a fact would be to conclude that dominion government bonds are not liquid securities. There is no such situation in existence to-day. Next to an actual savings account, or a current account in a bank, the most liquid of all assets are dominion government promises to pay. In addition, however, the government not only issues a liquid security to the value of the savings taken over, but adds to it the value of the interest which the bond carries.
We are told also that we cannot issue national currency, because national currency, under our Bank Act, is a reserve upon which the chartered banks can issue bank deposits, as loans and as the means of purchasing securities. Well, has the government no control over the use of Bank of Canada cash as reserves? The government has control over everything else. I am satisfied that the merchant banks of the Dominion of Canada would be more than glad to cooperate with the government in finding some less costly and more efficient way of financing the appalling costs of this war than we are adopting at the present time. The Minister of Finance says that if we dared to issue Bank of Canada cash, our merchant banks, coming into the possession of that money, would be desirous of expanding their bank deposits, increasing their loans and setting in motion the spiral of inflation. I do not believe the banks would take any such attitude, because when I look at the bank cash on hand I find that for a great many years they have had a very substantial surplus of cash. We said, "You can use 5 per cent, as a matter of law." They went us one better and said, "Why, we will hold 10 per cent or more." If anyone wants evidence of good faith on the

part of our chartered banks, I think it is in their record; but should any such condition arise that they were unwilling to cooperate, this parliament and this government, under the War Measures Act, have no less power to control the chartered banks of this dominion than they have to control every other individual, every other corporation and every other business and industry.
I do not want to raise unnecessarily the question of the advice of experts, but I would draw to the attention of the Minister of Finance the fact that when members of the official opposition start cheering anything done by a Liberal government, it ought to become suspect. You know, Mr. Speaker, these reforms that we have brought into effect were never concurred in by that group.


Mr. MacNICOL:: Why, we established the Bank of Canada.


Gerald Grattan McGeer: If you listen to them very long I think they will convince you that you ought to start financing this war with 5i per cent tax free bonds, because that was the method they thought was most efficacious during the last war. We will have none of that kind of nonsense to-day.


Mr. GRAYDON:: One of your own ministers was in that government.


Gerald Grattan McGeer: Of course; there were many misguided people in that government, and we had to have a good taste of it before we knew what it really meant. But the people of Canada have had their lesson, and they will never again go back to that kind of government.


Gordon Graydon: You still have that
minister, though.


Gerald Grattan McGeer: We have not had any 5i per cent bonds out since 1937.


Mr. JACKMAN:: If I may be permitted a question, it seems to me that when the hon. member makes an imputation such as that, someone should rise to refute it. Interest rates throughout the whole world were on a very much higher basis during the last war than they are during this war. I ask the hon. member if that is not so.


Gerald Grattan McGeer: My hon. friend says that in the world at that time interest rates were high all over. Of course they were. That was what brought the whole world to disaster, and that is the lesson that should guide us to continue with our programme of reducing the cost of public finance wherever we can. The experts in the finance department are not always right. I should like to draw the attention of this committee to one historic occasion when a

Income War Tax Act
great chancellor of the British exchequer confessed to the fact that he had been sadly misled by the greatest experts in the world. Speaking in the British House of Commons on April 21, 1932, Mr. Churchill said:
When I was moved by many arguments and forces in 1925 to return to the gold standard I was assured by the highest experts . . . that we were anchoring ourselves to reality and stability; and I accepted their advice. I take for myself and my colleagues of other days whatever degree of blame and burden there may be for having accepted their advice. But what has happened? We have had no reality, no stability.
Continuing, he said:
Is the progress of the human race in this age of almost terrifying expansion to be arbitrarily barred and regulated by fortuitous discoveries of gold mines here and there or by the extent to which we can persuade the existing cornerers and hoarders of gold to put their hoards again into the common stock? Are we to be told that human civilization and society would have been impossible if gold had not happened to be an element in the composition of the globe? These are absurdities, but they are becoming dangerous and deadly absurdities. They have only to be asserted long enough, they have only to be left ungrappled with long enough, to endanger that capitalist and credit system upon which the liberties and enjoyments and prosperity, in my belief, of the vast masses depend. I therefore point to this evil and to the search for the methods of remedying it, as the first, the second and the third of all the problems which should command and rivet our thoughts.
After relegating the gold standard to the place where it properly belongs, and wholly justifying the complete repudiation of the ideas of classical economy and orthodox finance which he formerly championed, Mr. Churchill said that all those rules by which the chancellors of every party, except in war time, were rigidly bound, had now been swept away. How former chancellors would stare! He blandly referred to himself as the last orthodox chancellor of the Victorian epoch, and amidst cheers and laughter appealed to the committee to recognize him as "the last of the Mohicans." Of course we are going to have changes in our economic set-up, and this government will be well advised to pursue the course of reform that it has carried on with remarkable success since 1935. Let not the Minister of Finance or the experts of the treasury board come to the conclusion that the door of human progress in that regard has been closed. We cannot look into the future; but let us go back to the days during the last ten years when some of us were pleading in this house to put the unemployed to work, and when we were told that we had reached the limit of our credit; that to build highways, schools and defence requirements was beyond our ability, that our economy could not stand it. I went across this country
pleading that in the state of the world at that time we should be spending not 130,000,000 or $40,000,000 a year on defence, but that if we were to spend proportionately to what Australia and New Zealand and Great Britain were spending we should be spending $400,000,000 a year. Any man to-day knows that the false economy which denied us the right to go to work during the last ten years has brought a deficit which we shall pay for with human lives and human blood. Do not make any mistake about that.
I want to repeat to this government that I believe democracy can and will survive.
I am confident that we shall go through this terrible trial with success, because I do not believe that 65,000,000 Germans and 70,000,000 Japanese can bring to defeat 80,000,000 Anglo-Celts in the British empire, 130,000,000 of the people of the United States of -America who are united with us as they were never united before, and 170,000,000 Russians who have proved that they can and will fight to the finish. But there can be no continuation of the imposition upon us of the hobbles and fetters which deny to us the use of all the means and all the powers that are at our disposal. I plead with the Minister of Finance and his expert advisers not to close their minds to the value of national currency in this crisis. I believe that Lincoln was right when, in 1839, he declared:
No duty is more imperative on the government than the duty it owes the people of furnishing them with a sound and uniform currency.
Issuing debts is, in my humble opinion, a more dangerous course toward the inflationary conditions which bring disaster than is the issue of a national currency for national service under proper regulation and control.
Twenty-five years after making that statement on the duty of national government to provide the people with a sound and uniform currency, Lincoln wrote a letter on what he thought about national currency in that nation. It reads as follows:
My dear Colonel Dick:
I have long determined to make public the origin of the greenback and tell the world that it is one of Dick Taylor's creations. You have always been friendly to me and when troublous times fell upon us and my shoulders, though broad and willing, were weak, and myself surrounded by such circumstances and such people that I knew not -whom to trust; then I said in my extremity, "I will send for Colonel Taylor, he will know what to do." I think it was in January, 1862, on or about the 16th, that I did so. You came and I said to you "What can we do?" Said you: "Why, issue treasury notes, bearing no interest, printed on the best banking paper. Issue enough to pay off the army expenses and declare it legal tender." Chase thought-
Income War Tax Act

Chase was the secretary of the treasury at that time.
Chase thought it a hazardous thing, but we finally accomplished it and gave it to the people of this republic, the greatest blessing they ever had-their own paper to pay their own debts.
I do not want to stress an issue of this kind in the dying days of the session, but I have not- pressed my ideas upon the house during the last three years. What I do say is, and1 I think every hon. member will agree with me, that we have seen some terrific changes in the twentieth century. We are going to see some more, and I venture to offer this suggestion. While I am not being laughed at and sneered at as I was when I advocated the reforms which have come into being in this nation and others, there are still men who doubt the capacity of democratic government in the twentieth century to control the issue of its national currency to the preservation of the nation, to the service of the nation, and for the progress of the people of the nation. Just stop and think to-day. This budget provides for an enormous programme. Does it do anything for the old age pensioner?


Mr. BLACKMORE:: No.


Gerald Grattan McGeer: Does it do anything for the dependent?


Some hon. MEMBERS:: No.


Gerald Grattan McGeer: Does it do anything for the removal of discriminatory taxation?


Some hon. MEMBERS:: No.


Gerald Grattan McGeer: These are some of the things that the nation must carry on if it is going to justify its right to be looked upon as one of the great democratic, progressive nations of this age. I know it probably would be dangerous to issue billions of dollars of national currency, but could we not issue enough to alleviate the tax on one-cent candies? Are we down to the point that we cannot use our power to create and issue money for the purpose of alleviating some of the needs that go alongside of the needs of war? Yes, Mr. Chairman, I believe that we can do these things, and I believe that if we will put our minds to some of these great problems we can not only finance our full and greater share of the war's responsibilities but strengthen ourselves in the progress of the war and come to the victory stronger and more capable of mastering the problems in a manner which will make the peace worth while.
Do not discard too freely some of the great powers which we possess. Let us not be afraid to venture against the danger of the
fMr. McGe.r.l
accumulation of too much interest-bearing debt. Let us keep carefully in mind that the issue of debts has brought Europe to disaster. Funding and refunding, piling up and pyramiding, brought some of our provincial governments, some of our cities in Canada, to the doorstep of bankruptcy. There must be some way of keeping, within the limits of all the obligations we must assume, a national, provincial and municipal solvency in our nation.


Mr. LECLERC:: It is not very often that I rise to speak in the House of Commons, especially to speak in English. The reason is probably that we French Canadians would be speaking in a language with which we are not familiar. I often think that our English friends speak their language too freely because they make the sessions last much longer than they should. I listened attentively to what was said yesterday, and I agree with those who have said that the Minister of Finance (Mr. Ilsley) has placed as heavy a burden upon the shoulders of the Canadian taxpayer as it is possible to carry. The hon. member for Parry Sound (Mr. Slaght) gave us a good picture of the punishment the people are receiving at the hands of the Minister of Finance. The hon. member demonstrated that the married man, especially the married man with two children, is under a heavy burden. The hon. member did not, however, give us all the picture. I do not consider a family of two children as being a family. If he had multiplied that number by two or three, and made the family four or six, he would have made out a better case.
The Minister of Finance has left children over eighteen years of age out of the picture, but I would remind him that many parents, if they want to give their children a decent education, must support children over that age. More consideration should be given to the man receiving a medium-sized salary who has a family to support. Our war effort is reflected by the taxation imposed upon us. If this taxation makes this clear to the Canadian people in general, especially those who claim that Canada is not making a real war effort, it will have accomplished something. In order to make up for the other speakers, I shall not take up any more of the time of the committee. I urge the minister to give serious consideration to the married man with a medium-sized salary.


Mr. MACDONALD (Brantford City):: I
do not intend to take part in the discussion on monetary reform, or monetary chaos, depending upon one's point of view, but I should like to revert to the subject we were

Income War Tax Act
discussing when, we got into the debate on monetary reform. We were talking about the payment of income tax by officers in our armed forces. At the present time officers in Canada pay an income tax, while officers abroad' are relieved of that burden. Other ranks, both at home and abroad, do not pay an income tax. During this last week I have received numerous letters from wives of officers who are overseas. These women are alarmed at reports which are current to the effect that their husbands' incomes are to be taxed. I trust there is no foundation for the rumour. I do not think the people of this country would receive kindly any amendment to the act which would tax the incomes of officers who are now overseas. There is a feeling that the day is drawing close when these officers will be engaged in an offensive action against the enemy, the thing for which they have been preparing all these years, and it would be a deplorable thing to tax them when they are about to enter upon that offensive. I hope the minister will be able to reassure the country and the wives of these men that the salaries of officers who are now abroad will not be subject to income tax.
I should like to refer to the taxation which is imposed at the present time upon the salaries of officers within Canada. Most of these men are anxious to go overseas, and I understand that every commissioned officer has volunteered for overseas service. It is not their wish that they should remain at home; if they had their way they would be outside Canada at the present time. They are now paying the full tax, and I do not think they should be called upon to do this. They are not in as favourable a position as the man in civilian life. The man in civilian life is carrying on his business as usual and, when the war is over, he will continue in the same way he is going now. But what about the officer in the army or in any of the armed forces? He has broken entirely his connection with his business at home. What has he to look forward to when the war is over? He must start anew, for he will have no business to which to return. Is it fair that this officer should have to pay the same income tax as the man in civilian life?
The man in civilian life enjoys the comforts and conveniences of his home. The officers must face many transportation problems. Most of them are practically keeping up two homes. That is, they must pay the expenses of running the homes which they left, and they must pay the dues in the messes to which they belong. Most men in civilian life have had increases in income since the war started. They have enjoyed either a straight increase
in income because of increased business, or they have had an increased salary or are in receipt of a cost of living bonus. Practically every man not in the armed forces is making more money to-day than he was when the war broke out. When I say he is making more money I do not mean that :his net income after paying taxes is more, but his gross income has increased.
What about the officers in our armed forces? Has there been any increase in their pay since war broke out? There has not. Yet they are being called upon to pay full taxation. I know an officer who before he joined up was getting a large income from professional fees. Of his own free will he left his profession to go into the army where he now holds the rank of captain. Before going into the army he incurred, certain obligations in connection with building a home, and he hoped to pay those obligations from his income. With the pay he now receives from the army he is just able to keep up his home, that is, make the payments called for by the agreement with the building company, supply his wife and family with the necessities of life and pay the present income tax. Under the new schedule he will not, after keeping up his home, have sufficient left to pay his income tax.
I would also remind the minister that at the present time an officer pays income tax not only on the amount of his pay but on subsistence as well. Suppose he makes $3 a day. Is his income tax on $3 a day? No; it is said that he gets a living allowance, and therefore the sum of seventy cents is added to his pay-


Mr. GREEN:: One dollar in some instances.


William Ross Macdonald: My hon. friend says "$1 in some instances." The principle is the same, but I am taking the case of the officer to whose pay is added seventy cents a day for living allowance. He pays income tax, not on $3 a day, but on S3 a day plus seventy cents, or on $3.70. I think that is going a little too far.


Howard Charles Green: And on dependents' allowance too.


William Ross Macdonald: My hon. friend says "on dependents' allowance too"; that that is added to the amount on which the officer pays income tax.


Richard Burpee Hanson: Is it not all income, theoretically?


William Ross Macdonald: not know whether it is the income tax department or the Department of National Defence -has entertained that an officer's food and other things he gets are worth at least seventy cents a day, and although he does not get that seventy cents, he is taxed on that seventy cents. I think he should, in any event, be relieved of that taxation.
It is not only the officers for whom I would make a special plea. I would also bring to the attention of the minister the men who are acting as instructors in elementary flying schools. As members of the committee know, elementary flying schools are now operated by private companies, the instructors being lent by the Royal Canadian Air Force to the elementary flying school. When they are lent by the Royal Canadian Air Force they lose their rank for the time being. Most of them are sergeant pilots and, as members of the committee know, a sergeant pilot does not pay income tax. As a matter of fact, no sergeant in any branch of the service pays income tax. I was going on to say that officers who fly in Canada and are on the general list are also exempt from income tax in the Royal Canadian Air Force, whereas all men who serve on the ground pay income tax. But let me come back to the point I was making. These sergeants who are lent are freed from paying income tax when they are in the Royal Canadian Air Force, but once they join the civilian school as instructors they pay income tax. The increase in the tax will weigh very heavily upon them. If any relief is to be given to officers, I trust that some consideration will also be given to these instructors at the elementary flying schools.
I want to press with all the force I can the suggestion that officers at home should receive some consideration in respect of the payment of income tax. I do not consider that they should pay the same income tax as a man who is not in the service, a man who has not volunteered to save his country but is carrying on his business to-day, true under difficulties, but nevertheless carrying it on, and who, when the war is over, will be allowed to continue to carry on his business, whereas the men in the armed forces will come back to what? They will come back to starting life all over again. I cannot press too strongly upon the minister the fact that these men are serving their country; they are sacrificing greatly, and therefore they are entitled to some consideration.
At six o'clock the committee took recess.
tMr. W. R. Macdonald.]
After Recess
The committee resumed at eight o'clock.


Mr. KINLEY:: First of all let me express my personal pleasure at having again this afternoon been able to see in this house my esteemed friend the hon. member for Van-couver-Burrard (Mr. McGeer). He has returned to us after a long and critical illness, and I am sure that we are all glad to know that apparently he is in such good health and that he has not lost any of his power of self-expression so ably displayed in his speech this afternoon.
Last night he referred to those who are exponents of sound money. It seems to me that that is almost a geographical term in Canada. I believe it applies especially to the maritime provinces. Why that is, it may be difficult to say. It may be because, being poor, we learned the value of money in our youth. Again, it may be that in what is known as the golden age of Nova Scotia we were great traders. We had a great foreign trade; our ships sailed to all parts of the world and brought back the treasures of many lands. Perhaps that had something to do with our opinion on money matters. However, to be referred to as one of those who believe in sound money is not too bad a compliment for anyone to receive, and I hope that we in the maritime provinces are sound on money matters in their application to progress with respect to the needs of the Canadian people.
In our economy in the days of wooden ships, Nova Scotia had many banks; nearly every town of importance had a bank to serve its people. When the days of wooden ships became a passing show the first places to feel the effect were the banking institutions of that province. Some failed and others survived and had an influence on the banking institutions of Canada. While I have no brief for the banks, I believe that our banking system is an object of admiration not only in this country but abroad. When greater countries had chaos in the days of the depression, so far as their banking and commerce were concerned, the banks of Canada nobly survived that depression and performed the services which we knew they would do because of their stability and strength.


Richard Burpee Hanson: It was because the then Prime Minister put the whole resources of Canada behind all our financial institutions.


John James Kinley: That is to his credit.

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Richard Burpee Hanson: Of course it is, but he never got much credit.


John James Kinley: General Sherman, a great United States soldier, said that "war is hell". This country is at war, and perhaps that is the best reason we can give for this extraordinary budget so ably presented to the house by the Minister of Finance (Mr. Ilsley), who comes from Nova Scotia. The virtues of Nova Scotia in financial matters have long been recognized in the dominion. In my memory there have been five ministers of finance in Canada who came from that province. We had Fielding, Maclean, Rhodes, Ralston, and now we have our present Minister of Finance. Without detracting from the virtues of those who have gone before, may I say this of the present Minister of Finance. His speech last night, together with the work he has done since he became Minister of Finance, has convinced us, and I am sure it has convinced the country, that there are still giants in Israel. He is one of the great ministers of finance.
There was some opposition to this budget, but it was not serious. It is the function of the opposition to criticize, and I say this advisedly. The leader of the opposition (Mr. Hanson) who, I believe, was to-day confirmed in his office-I am glad of the fact, because he is a fellow maritimer-has not only the duty but the privilege of criticizing and finding out the vulnerable points in the government of the country. While hon. gentlemen did criticize, they gave abundant praise to the Minister of Finance. They appreciate the work he has done, and1 they believe he is the right man for the job at this particular time.
Some of the criticism, I thought, was pretty small, especially that part of it which referred to the candy being taken from the babies. I was taught when I was young that too much sweet stuff in the form of candy was not good for a child, that it caused decay of the teeth and made the child a subject for the dentist.


Karl Kenneth Homuth: What did you give yours? Porridge?


John James Kinley: Income War Tax Act

mystery where you did not understand it at all. Under such conditions it would be hard for me, a plain business man and a humble member of this house, to say that I understood all the complex theories and problems of finance to-day. The hon. member for Vancouver-Burrard was not so sure this afternoon; he was willing to admit that there are two sides to the question, but last night the hon. member for Parry Sound (Mr. Slaght) was rather sure that he had an easy way to finance this war.
Since this matter is one of more or less mystery, let us reduce it if we can to the simple things of life, so that he who runs may read. While at present I am addressing members of this house, we must remember that we are here for the purpose of informing the country, and that all the people in the country are not as well informed or as alert as members of the house. In the last few days we have been discussing here ways and means, and we have now Bill No. 110 which gives us a lesson on values for duty. In this bill I read this:
Spirits: On every gallon of the strength of proof distilled in Canada, except as hereinafter otherwise provided, nine dollars, and so in proportion for any greater or less strength than the strength of proof and for any less quantity than a gallon.
The value for duty is based on the alcoholic content of the strength of proof. Would anybody suggest that by adding to a gallon of these spirits a gallon of water you would have any more spirits? It is true it might make it more palatable, but you have no more of the intoxicating ingredients than when it was of its original strength. Inflating the money is watering the money. Or, take for instance, a farmer. There is little rain and the pastures are getting dry. Suppose this farmer who has milk customers in Ottawa said, "I have not enough milk from the cows to supply my customers; I will put the can under the pump, pump the can full of water and take it to the city." He has no more milk, but he has more quantity and can supply his customers. If. however, he did that he would be committing a criminal offence and would be brought before the courts. He is doing nothing more than diluting the substance which he is selling to the people.
The hon. member for Parry Sound talked inflation. There are different methods of inflation. Take corporations. A corporation that has a stock structure and waters that stock structure for the purpose of making greater profits, without having other assets, is watering the stock. Watering the stock and watering the money are similar things; one is a creation of good times and the other a

creation of bad times, but they both want something for nothing, something for which other people must pay.
The hon. member for Parry Sound in what was apparently intended to be an intellectual argument on money reform rather descended I thought to the level of a stump speech, because he said in effect that the government was afraid to put extra money into the hands of the people. This is what he said yesterday, as reported at page 4266 of Hansard:
Let me now return to the question of inflation. By inflation is meant that you are putting too much cash in the hands of the people of this country, particularly the working people and the farmers, and the 85 per cent that are termed the very modest earners; you are giving them too much money, and they will go and spend it. Will any of my hon. friends tell me, . . .
Then he exhibited a $100 bill. Well, we will do nothing of the kind. The workingman will have to work for every dollar he gets notwithstanding that it is inflation. Hon. members of the Social Credit group are more frank about the matter. It will be remembered that they were going to give this money away to the people, $20 a month as a bonus-


Some hon. MEMBERS:: Twenty-five dollars.
Mr. KINLEY; Twenty-five dollars a month as a bonus. They never gave it, which is to their credit; but when the hon. member for Parry Sound tries to make a point that the government is afraid that there will be too much money in the hands of the people he is not only doing them an injustice but doing an injustice to himself as a lawyer of great ability. We know that wages are frozen in this country, and he would add to that the indignity of giving the labourers of this country diluted money.
We have heard a great deal about these money schemes that come before us from time to time. Yesterday the hon. member for Parry Sound exhibited a $100 bill, and told us it was a promise to pay. That is true. But if you put that $100 bill in the bank, at the end of the year you can collect a year's interest. Our friends of the Social Credit group issued money too, and I have here-I have had it in my pocket for years-what they call a prosperity certificate, $1. These are the terms upon which this certificate was issued by these money reformers, who would give everyone plenty so that there would be abundance in the country:
The provincial treasurer will pay to the bearer the sum of one dollar on the expiration of two years from date of issue hereof upon presentation hereof, provided there are then attached to the back hereof one hundred and four one-cent certificate stamps.

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In other words, I would have to place 104 one-cent, certificate stamps on this certificate in order to redeem it. This certificate was issued August 5, 1936. If I want to spend it to-day I caDnot; it will cost me 4 cents in order to give it away. We talk about theories, but this is something that was actually done. Then they come and tell us this is the way to finance this country.


Mr. JOHNSTON (Bow River):: You are
certainly doing a swell job for the war. Get on with the war.


John James Kinley: The hon. member for
Vancouver-Burrard said that we went through days of depression.


Charles Edward Johnston: You are
a good example of the whole party.


John James Kinley: I hope my hon. friend is
not angry. The hon. member for Vancouver-Burrard said that there was great distress in Canada during the depression days. That is true. He also said that municipal and provincial governments had fallen down, that they had gone into default and were unable to carry on. That disease did not strike the maritimes. We are referred to as the sound money men of this country, but it seems to me that the disease referred to by the hon. member was not so prevalent in eastern Canada. Yet now we are getting advice from those who have the theory, but not the successful practice, of how to run a country without depending on the government.
This question of exchange is an important matter; and, as I said in the beginning, we in Nova Scotia have had an education in foreign trade. I want to remind hon. members that in our reciprocity agreement with the United States this was considered a matter of great concern and was embodied in article XIII of the agreement, which reads:
If a wide variation should occur in the rate of exchange between the currencies of Canada and the United States of America, and if the government of either country should consider the variation so substantial as to prejudice the industries or commerce of that country, it shall be free to propose negotiations for the modification of this agreement: and if agreement with respect thereto is not reached within thirty days following receipt of such proposal, the government making such proposal shall be free to terminate this agreement in its entirety on thirty days' written notice.
Our financial relations with the United States are most important. We are their best customer. They are our best customer to-day, except for our shipments overseas of war supplies, and it is important that we travel along with the United States and shape our financial policies to conform as far as possible to what they do, so that we may have
harmony, so that we may do business together without disrupting our agreements. Last night the hon. member for Parry Sound rather surprised me when he spoke of inflation. Let us see whom it would help. Let us suppose a man had an income of $50,000, and I assume there are people in this country with such incomes. His tax would be about $30,000. It might be better for the temporary preservation of that income if the minister would raise the money he needs through the printing press rather than by taxing it from the people, for naturally and properly the tax falls heaviest upon those who have the largest incomes.
The hon. member's argument was also subtle with regard to single and married men, especially that portion of it having to do with the refundable portion of the tax. If a man is married, has two children and an income of $3,000, his computed tax is $668, of which $334 is refundable or deductible, making a balance of $334 which he must pay. Thus he is left $2,332 to maintain his family, exclusive of his allowance for insurance premiums, superannuation or mortgage payments. On the assumption that he has insurance to pay or similar obligations to meet which will equal the deductible portion of the tax, his tax is increased by $119 over last year. Under the last budget his tax amounted to $215. A bachelor with an income of $3,000 is assessed $1,064, of which $240 is deductible, which means that, under the same conditions, his actual cost would be $824. Under the last budget the bachelor would pay $622, so that his tax is increased by $202. In private life a man does not get a larger salary when he marries. He is supposed to save while he is single, in order to be able to support a wife when he gets married; and the obligations of marriage hardly depend upon the income tax budget. This is severe and drastic taxation, but it is part of the terrible burden of this war. We must not forget that a bachelor, if he is between the ages of twenty and forty, is called to military service, which is not required of the man with a family.
I regard this compulsory saving as a splendid feature of the budget. If, in former days, a man has been doing the good thing by his family, by taking out insurance and buying a home, he is protected to an extent in these obligations, which he may deduct from his income tax. I believe this compulsory saving will do four things. In the first place it will provide funds for the carrying on of this war. In the second place the people will make fewer demands on consumer goods in this country, thereby freeing men and materials for the war effort. In the third place it is saving for a rainy day, which is always a
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cardinal principle of those who want to succeed. In the fourth place, the money will be invested in the safest possible place. I recall that in the province of Quebec there is an old saying, that in the course of his lifetime each man must eat a certain amount of black bread, and that he had better eat it while he has his teeth. Therefore those who save in their youth are more likely to have plenty in their old age.
We are not so much concerned with our immediate financial conditon. As yet no one has gone hungry or cold; in fact, the mass of the people are better off than they were during the depression, even with these very heavy taxes. The majority of the people of Canada have more money left for themselves than they had five years ago, except in certain exceptional cases, which in themselves prove the rule. Canada is yet able to pay her bills. The United States is the only country that will to-day redeem its obligations in gold. Canada is a gold-producing country; and while it is true that gold has been discontinued as a basis of finance in most countries, if we are going to have an international basis after the war it must be something of value and something which everybody will accept.
It seems to me that Canada, as a producer of gold, might lean a little toward the gold standard. The United States is the one country in the world that will redeem its obligations to-day. It is the one country in the world which will be a citadel of strength to pay the expenses of the war, and around that citadel Canada will be in the most prominent place. Inflation comes from fear and dire necessity, and it is quite possible that a time might come when dire necessity would drive us to the place where we could tide over the situation for a time and prevent immediate disaster, but we would certainly pay the price in the future. This, as indicated by the Minister of Finance last night, is not even thought of.
Let us get back to fundamentals. Let us think of the parable of the talents, a lesson to everybody which should not be easily forgotten. Let us remember that through the tumult of the ages all these questions were discussed and all these theories brought forward, and that it was only countries in despair and not the strong countries of the world which adopted inflation or other methods of merely temporary advantage. Canada is still a strong country. Let us hope that she will long continue to be strong, to carry on this conflict to the end, and that the people will travel that hard road which is the proper road to success. Then, when the time comtes that victory crowns our banners, we shall be sound
fMr. Kinley.]
not only in a monetary sense, but in our body politic, in our ideas, in our constitution, that we shall have preserved them all and go forward to the future with courage and in a spirit of progress, in the way that the people shall direct. Then, I am convinced, this country will be greater in the future than it ever was in the past.


Mr. QUELCH:: I am sure that the hon. member who has just resumed his seat will excuse me if I do not follow the line he has taken. I did not hear very much of what he said, and what I did hear did not make sense. It seems to me that he is one of those museum pieces that have been worshipping at the shrine of the golden bull, and as we know to-day, it is mostly "bull". I believe I would do better if I followed the line taken by some other members of his party, such as the hon. member for Vancouver-Burrard (Mr. McGeer) and the hon. member for Parry Sound (Mr. Slaght).
Before passing on, I might make reference to the "prosperity certificates" to which he refers. I could take the hon. member into Alberta and show him many, many miles of good roads which were built with those certificates, and the people who built those roads received a dollar's worth of value for a dollar's worth of work.
I had not intended to speak at this time, but in view of the fact that the Minister of Finance (Mr. Ilsley) made a few references to this group I should like to present some comments on what he said.
In Hansard, July 15, at page 4270, the minister is reported as having said:
It is all very well for the group in the corner to be talking. There are not a great many people who take them seriously. . . .
I shall not take serious exception to that remark, although I would say to the minister that I find to-day a greater number of people taking interest in monetary reform than ever before. Throughout the country people are asking themselves whether a financial system can be sound which compels people to remain unemployed in times of peace and yet can find billions of dollars in times of war. I do not think our men when they return from the war, or those who are discharged from factories, will be willing to remain in the ranks of the unemployed or on relief just because the Minister of Finance says there is no money available to put them to work.
As I have said, I do not take serious exception to his remark because I realize that the press of this country to a very large extent is owned and controlled by large

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financial syndicates or by individuals of large financial means, and ever since this group came to this house the press have tried on every possible occasion to discredit us and to misrepresent what we have said. In view of the fact that the people throughout the country depend very largely on the press for their knowledge of financial matters, it is only natural that these people should not be seriously impressed by what the press has said that we have said.
In so far as the members of the Liberal party are concerned, of course they are not faced with that difficulty; other ways and means are found of dealing with them. Members of the Liberal party are dissuaded from criticizing the financial policy of the government in this house. We have had plenty of examples of Liberal members in the past criticizing the financial policy of the government for one year, or two years, and then suddenly becoming silent, so that it was not necessary for the press to criticize those members. No doubt, however, from a high sense of patriotism, the hon. member for Parry Sound and the hon. member for Vancouver-Burrard felt obliged to protest a continuation of the government's present financial policy, because they know very well that in its operation since the beginning of the war it has seriously retarded our war effort in many respects. Therefore, no matter what the consequences might be so far as they are concerned, they felt it necessary to rise in their places and criticize the continuation of that sort of policy.
I recall speeches made by the hon. member for Yancouver-Burrard in this chamber during 1936, 1937 and 1938. I believe that in 1938 he made one short speech, which was the last he made on this question until to-day. A statement of his on that last occasion is well worth remembering. He closed by remarking that members of this house should do all they could to guide the Department of Finance out of that swamp of financial ignorance in which it seemed to be lost. Can we blame the hon. member for having made that statement when we recall that from 1935 to 1939 we allowed industry in this country to remain in a state of stagnation; that we allowed half a million men to remain unemployed, roving across this country looking for work; that our shipyards remained idle, and that the defences of this country were not built up in spite of the fact that we knew that Germany, Italy and Japan were steadily arming? Is it any wonder that people lose confidence in a policy which allows a condition of that kind to remain in existence?
From 1934 to 1939 we maintained in this
country a favourable balance of payments averaging $218,000,000 a year. Yet at the same time Germany, Japan and Italy were steadily building up their armaments. In order to maintain that favourable balance of payments we shipped large quantities of war materials to those countries.
The Minister of Finance and his predecessor continually criticized the proposals of this group. I should like to remind the minister that step by step he is having to adopt many of the proposals which we made in the past and which he himself ridiculed. When he becomes so dogmatic in this house he should recall that fact. For instance, I have in mind the matter of price control. I referred to this once before, and the leader of the opposition (Mr. Hanson) has referred to it. When we were urging the greatest development possible of our natural resources and stressing the fact that it would be necessary to have price control in order to prevent inflation, the Minister of Finance ridiculed the idea. He said it would not be practicable to try to put price control into operation; that it could be done only if we had a spy in every grocery store; that we would require a gestapo. To-day we have price control in this country. Therefore I say again that he should not be so dogmatic when he is criticizing our proposals, because it is likely that he will some day be doing the very things he is criticizing to-day.
We have often urged upon the minister the desirability of subsidizing industry so- that it might sell below the cost of production. In the years from 1935 to 1939 we found it very hard to maintain an effective demand against our production, and we urged the government to put the unemployed to work and give industry a subsidy so that it could sell below the cost of production in order to balance consumption with production. The minister criticized such a policy as being crude inflation; yet only the other day in this house he stated that the policy of subsidizing industry to sell below the cost of production was an insurance against inflation. Step by step the minister is having to retract his statements and adopt the proposals that we have urged in the past.
This budget imposes a tremendous burden of taxation upon the people of this country, This group has admitted consistently in this house that it is necessary to maintain heavy taxation during war time in order to make more production available for war purposes. On the other hand it is well to realize that taxation should not be so heavy that the standard of living of the people is reduced to such a point that their efficiency is thereby
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reduced. I believe that in some regards taxation to-day has approached that point. When we read that certain married women are resigning their jobs because they cannot afford to work under this heavy taxation, it looks as though we have increased taxation to the point where we are decreasing the efficiency of the people.
We have always opposed heavy taxation in peace time, because we realized then, as apparently the government only realizes now, that taxation does curtail consumption, does curtail the demand against goods. In peace . time our main problem is to maintain an effective demand against production; our main problem is to find a market for goods so that, naturally, it is not a sound policy to maintain heavy taxation, thereby reducing the demand against goods. But an entirely different situation faces us to-day. When the minister attacks us on the ground that we are opposed to taxation he forgets that there is a war on to-day and that we advocate heavy taxation in times of war.
The minister has stressed the fact that the main purpose of taxation and the sale of bonds is to curtail the spending power of the people, and he has stated that this taxation should be based upon the ability to pay, always keeping in mind the ideal of equality of service and sacrifice. I am of the opinion that this budget definitely defeats that principle. The minister has continually warned this house against the danger of inflation, and yet by this budget he is bringing about inflation in the price of many commodities. The minister has attacked the method of withdrawing purchasing power from circulation by increasing prices, on the ground that that method is not fair, but he is doing that very thing with the war revenue taxes. Not only has he withdrawn purchasing power from the people, but he has imposed a tax of 30 per cent on candies in order to withdraw the purchasing power of our children. I think that must be regarded as a most detestable form of tax.
At the outbreak of this war we stressed the need for equality of service and sacrifice. In September, 1939, we stated that if people could go through this war and maintain their pre-war savings intact, continue to have a decent standard of living and be able to set aside a little for a rainy day, they should consider themselves most fortunate. Mr. Nash, the former minister of finance of New Zealand, expressed similar sentiments when he said that the man who goes overseas should not be any worse off for having gone overseas, and the man who stays home should not be any better off as a result of staying at home.

As a result of the minister's financial policy; as a result of this budget, we find that many people who stayed at home are accumulating large holdings of bonds. It is not equality of sacrifice and service when, on the one hand, you have men going overseas and giving up their lives and, on the other hand, men staying at home and accumulating large holdings of bonds which will be a claim against future production. The hoardings we see across the country are positively nauseating. We see placards saying: "We are all in the front line now; buy more war savings certificates." Is it not insulting our front-line men to suggest that the man who stays at home and buys war savings certificates is in the front line?
If the minister is really sincere in his desire to reduce the purchasing power of the people by taxation and the sale of bonds, I would ask him why it is that the chartered banks should be allowed, to create hundreds of millions of dollars in order to lend money to people in order to buy bonds? If the purpose of the sale of bonds is to withdraw purchasing power from circulation, why do we allow the chartered banks to create money to permit people to buy those bonds, thereby defeating the very thing the issue of bonds is supposed to accomplish? In the past two years the chartered banks have lent more than $350,000,000 to the people for that very purpose ; and since the declaration of war they have lent directly and indirectly, to the government in the neighbourhood of one billion dollars; around $660,000,000 directly, and $350,000,000 through the people.


Mr. ILSLEY:: Has not a lot of that latter amount, the $350,000,000, been paid off?


Victor Quelch: Some may have been, but on the other hand the banks are buying bonds from the people which will largely counteract that. I am satisfied that as this taxation increases, and the burden imposed upon the people becomes heavier, more and more people will be taking their bonds to the banks and cashing them, and at the end of the war, the banks will, I am sure, have very large holdings of these bonds. That happened in the last war, and it will happen in this war, because when you impose taxation to a point where it becomes almost impossible for a person to live, then, naturally, if he has in his possession any bonds, he will have to sell them.
The minister talks about the danger of inflation when we utilize the Bank of Canada. Ever since the declaration of war we have consistently taken the stand, that to the extent that the proceeds from taxation and the sale of war savings certificates fail to provide

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the money which the government requires to meet its expenditures, the Bank of Canada should be utilized. The minister attacks this proposal on the ground that to utilize the Bank of Canada is more inflationary than to use the chartered banks. He gave that reply to the hon. member for Parry Sound last night, and I was very much surprised that the Minister of Finance should again trot out that hoary old reason which his predecessor, Mr. Dunning, used to give when we made this proposal. All that the Minister of Finance is doing when he makes that declaration is this: He is frankly admitting that we have no effective control of the chartered banks to-day because, if we had, they would not be able to expand their loans on the basis of the money issued by the Bank of Canada.


James Lorimer Ilsley: The hon. member knows the answer to that.


Victor Quelch: I do not, and I shall be very glad if the minister will give me the answer.


James Lorimer Ilsley: The hon. member is suggesting that we insist on a 100 per cent reserve so that the cash reserve cannot be multiplied into a greater volume of bank deposits. That is the suggestion, is it not?


Victor Quelch: Yes.


James Lorimer Ilsley: Well, if the chartered banks could only lend as much as their cash reserve, it would mean that they would be conducting business at a loss, because the money would go back into the chartered banks and interest would be payable by the chartered banks to the depositors. The banks would have to discontinue paying interest, and therefore what my hon. friend is suggesting is a tax either upon depositors or upon shareholders, or upon both. If we are going to impose a tax upon depositors or upon shareholders, or upon both, we might just as well impose that tax directly. That would be a much fairer and more straightforward way of doing it than the way he suggests. He is merely suggesting, for that is what it amounts to, further taxation of an indirect kind when he suggests that we insist on a 100 per cent reserve.


Victor Quelch: In the old days when you deposited your money with a bank, you paid the bank for looking after that money, and the people who get this service are the people who should pay for the service. It would not be taxation but a legitimate service charge.


James Lorimer Ilsley: Call it anything you like.


Victor Quelch: But the people who do not have any money in the bank would not have to pay any part of that charge.
I might quote to the minister what Irving Fisher says in that regard but no doubt the minister would reply to me as Mr. Dunning did, "Oh, Irving Fisher!" Mr. Dunning was very much interested in Babson's reports and was continually quoting from them. Let me quote what Babson's have t.o say. In their March 20, 1939, issue, Babson's devote a whole page to advocating the 100 per cent system, and they have this to say:
Lest anyone may think that the 100 per cent reserve system would be injurious to the banks, it should be emphasized that the banks would gain, quite as truly as the government and the people in general. Government control of the money supply would save the banks from themselves-from the uncoordinated action of some 15,000 independent banks, manufacturing and destroying our checkbook money, in a haphazard way.
I realize that that does not apply to the same extent in Canada because we have not quite the same banking situation, but otherwise the statement would apply quite well here.
Perhaps I should quote what Irving Fisher has to say, because, mind you, his proposal was endorsed by a large number of prominent bankers of the United States. This is what he has to say:
So far as this change to the 100 per cent system would deprive the bank of earning assets and require it to substitute an increased amount of non-earning cash, the bank would be reimbursed through the service charge made to its depositors.
Apparently the banks themselves do not take any great exception to such a proposal. As I said to the minister on the last occasion on which I spoke on this question, personally I am not overenthusiastic about the 100 per cent system, but I refer to it because the majority of monetary reformers in the country are in favour of the 100 per cent system. While I agree that it can adequately control inflation, I do not believe that it can adequately control deflation. I am of the opinion that the only fair and sound way to deal with the whole question of effective control is to nationalize the chartered banks of Canada.


Richard Burpee Hanson: Then what would happen?


Victor Quelch: The chartered banks would be under the effective control of the Bank of Canada and would be controlling the finances of the country for the benefit of the people as a whole. In so far as the charge that the
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government would be in the lending business is concerned, the chartered banks would be under the control of the Bank of Canada, and the minister has himself stated that the government does not interfere with the internal administration of the Bank of Canada. Therefore we would not be interfering with the administration of the chartered banks.


Richard Burpee Hanson: How would that bring paradise?


Victor Quelch: The chartered banks have found it profitable to bring about inflation and then deflation, and they have made more money out of that process than out of service charges. It pays them to manipulate prices, and they can make money both ways. When they bring about deflation they can buy stocks at deflated prices, and by bringing about inflation they can sell stocks at inflated prices.	.
I should just like to quote what Mr. Nash had to say in regard to this question. I asked Mr. Nash, formerly minister of finance of New Zealand, when he appeared before the reconstruction committee, this question:
Mr. Quelch: Mr. Chairman, I wonder if Mr. Nash would tell us what method of financing is used when taxation and public borrowings fail to meet government expenditures?
Mr. Nash replied:
Hon. Mr. Nash: Well, the answer is inside a simple statement I made once in introducing the budget. If in connection with the production of the commodities that are necessary for ordinary human welfare the monetary means are not available to link unused resources with unused labour we, as a government, will find the money. We can do that because we are in control of the reserve bank; we can create our own money.
I should like to commend that statement especially to the hon. member for Vancouver East (Mr. Maclnnis), because I remember that some time ago when I was stressing the fact that the Bank of Canada should create money, he took exception and said that in New Zealand they created credit. I pointed out at the time that so far as the Bank of Canada or the Federal Reserve Bank of New Zealand were concerned, it makes no difference whether you use the term "credit" or "money" because they are both legal tender. Mr. Nash in his reply said that in New Zealand they can create their own money; he did not use the term "credit".


Mr. COLD WELL:: Money against consumer goods.


Victor Quelch: There would be no sense in issuing money unless you had the goods to back it up. In peace time we had half a million men unemployed. We had industry 
running only at a small percentage of capacity, and we advocated-it was all that we ever advocated-that the Bank of Canada should issue money to put these men to work, so that the money paid out in these public works would create a demand against the goods which our industries could produce but were not producing. In addition to that, we had a favourable balance of payments of 8219,000,000, and the only reason why goods were not being imported into the country to balance exports was that the importers knew that if they did bring them in they could not sell them. I asked this question of Mr. Towers when he was before the banking committee: In view of the fact that we had a favourable balance of payments to the extent of $200,000,000, is there any reason why we could not issue $200,000,000 and put people to work so that that money paid out would create a demand for imports that had been paid for but not brought in? He said that was a matter of government policy. There was nothing to prevent it, but apparently it was not considered an ideal policy by government.
The hon. member for Vancouver-Burrard said last night that there had been considerable hoarding of gold. That was not altogether the reason, because we had repatriated a great deal of the debt at that time. About twenty years ago a large percentage of the debt was owned externally, and to-day only a small percentage of the national debt is so owned. That is a worthy course to follow, but no country is justified in trying to repay external debt at such a rate that it causes extreme poverty within the country itself. Under such a policy, if we were to utilize the Bank of Canada at all times when it becomes necessary to have a creation of credit-I am advocating it only to the extent that taxation and the sale of interest-free savings certificates might fail to meet government expenditures-the money so created should be created by the Bank of Canada and not by the chartered banks. Not only would the result of that policy be a reduction in debt, but it would mean that our war effort would no longer be restricted. The minister stated the other day that no other nation has adopted such a policy. I have already quoted the statement by Mr. Nash to the effect that when taxation, and the borrowings of the savings of the people fail to meet government expenditures they do create money. Therefore apparently New Zealand is doing the very thing we are advocating at this time. The Minister of Finance made a specific reference to Germany. To make sure that I quote him fairly I will give his exact words, which will be found at page 4271 of Hansard-.

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But Germany at the present time is not relying on this method of financing. Germany has a tremendous heavy taxation load on its people and is borrowing from them to relieve the upward pressure on its price ceiling.
Some time ago I quoted a statement by Dr. Schacht, president of the Reichsbank, that Germany had had a very happy creation of state money for the purpose of developing the resources of the country. That was up to 1939, and I have often wondered exactly what the situation in Germany is to-day, because, no matter how we may dislike the type of government in that country, we must admit that as a fighting nation they are hard to beat. It is interesting to note what type of financial policy has been evalved in order to develop that fighting machine. Let me quote from the London Times. No one will say that is radical. The London Times is an orthodox paper. In the April 2, 1942, issue of the Western Producer there is a quotation from the London Times with reference to Germany, as follows:
"The achievement lias been so surprising that for a long time outside critics were inclined to regard it as an optical illusion." So far, it says, Germany "seems to have had no serious difficulty in financing the war. Nothing is ever heard of the necessity for increasing taxation, compulsory saving, or the issue of enormous war loans. Quite the contrary. Recently one important tax was abolished.
"Public savings banks deposits touched new monthly records again and again. Money is so plentiful that the interest on state loans could recently be reduced. . . . Hitler seems to have discovered the secret of making something out of nothing and to have evolved a system based on perpetual motion." These changes, says the Times, "may well call for drastic readjustments in our established conventions."
"In military matters," the Times goes on, "the French general staff enjoyed a prestige similar to that of our own authorities in finance and business. A hidebound persistence-
I should like the Minister of Finance (Mr. Usley) to take particular notice of that expression.
"A hidebound persistence," continues the voice of doom, "in methods and doctrines which were sound fifty years ago may easily prove as costly in the financial and economic field as in the field of actual war. It might not lose the war; it would almost certainly lose the peace.' "We should study the nazis' achievement," concludes the Times, "prepared to adopt whatever may be useful in it and to take warning from its mistakes."
The leader of the opposition stated that to adopt such proposals as were mentioned by the member for Party Sound would blow the lid off. I should' like to remind the leader of the opposition that, according to the London Times, Germany is using that type of financing and is blowing us off the map foot by foot,
step by step, and that unless we change our ways and change them quickly the Germans are likely to blow the top off us.
The budget faces a deficit of $1,850,000,000.
I am especially interested in knowing how that deficit is going to be met. There is no doubt in my mind that a very large proportion of it will be met by the creation of money, and I am hoping that when that money is created it will be created by the Bank of Canada instead of by the chartered banks. Let me refer to a rumour that is going around.
I know that perhaps the minister will say, "You should not take notice of rumours". Nevertheless, I saw this one in one of the Ottawa papers, and I hope the minister will immediately take steps to refute it. The rumour is that the next issue of bonds will be on the basis of 2 per cent, tax free. Is there any justification for that rumour at all?


James Lorimer Ilsley: I never heard the rumour. It is entirely unauthorized.
Mr.	QUELCII: I	am glad to	hear	the
minister deny that there is any such intention because, if that were done, it would mean that wealthy individuals, in order to evade a very high rate of taxation, could invest their money in 2 per cent, tax-free bonds and escape taxation altogether. It would be a most unjust proposal.


James Lorimer Ilsley: The hon. gentleman need not tell me that.
Mr.	QUELCH: I	am glad to	hear	theminister deny it because very often these rumours we hear have a strange way of materializing. At any rate it was in one of the Ottawa papers	three nights	ago,	the
Ottawa Citizen, I believe. The statement was that it came on good authority, but it was not an editorial. It was a letter written to the Citizen by a certain individual in Toronto who claimed it was based on good authority.
The Minister of Finance does not seem greatly perturbed over the tremendous increase in debt that is taking place at the present time.	It is easy to understand	why	the
minister should adopt this attitude, because the governor of the Bank of Canada, Mr. Graham Towers, has taken the stand that national debt is a national asset. I want to be fair, and therefore I will quote his exact statement. This question was asked Mr. Towers by the hon. member for Vancouver-Burrard (Mr. McGeer):
Q. Is it possible for you to imagine any way by which we are ever going to pay the debt we have got?
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Mr. Towers' reply was:
As the debts of the government are an asset of the Canadian people I do not see much point in the thing, except that, to the extent that the government thinks that the distribution of those assets of the Canadian people

which are its debt-is unsatisfactory, it may take steps to remedy that distribution in any way that lies within the legislative power; in fact, in any way, I suppose-by income tax or succession duties or any other action it cares to take.
Generally speaking, I would agree with that statement. So long as we have made up our minds to continue under the debt-creating system, then national debt can be looked upon as a national asset so long as you have an equitable distribution of that debt. If everyone had the same amount, so that he would have an asset to balance the liability, everyone would be taxed to pay a similar amount to that which he received. Exactly the same thing could be accomplished by wiping the whole thing out.
Unfortunately that is not the situation in Canada. A comparatively small number of people own that national debt which is said to be a national asset. Therefore those few people receive the interest on that debt, while the whole of the people of Canada have to be taxed to pay it. In other words, it is a levy on the whole of the people of Canada in order to pay a comparatively few. This budget makes no attempt whatsoever to rectify that condition.
Let me give a few examples of what might be done. People in the low income brackets should, in my opinion, have the total amount of their tax refunded; single people up to, say $1,000; married people up to, say $1,500 should have the total amount of the tax refunded, thereby giving them a share of this national debt. Where wages are frozen at low levels the wages could be increased in the form of deferred savings, thereby giving those people a share of the national debt. When prices of primary products were frozen at a level below cost of production, the difference between the prices received and the parity price could be made up by war savings certificates, thereby giving the farmers of this country a share of the national debt. If we are going to look upon the national debt as a national asset, surely it is high time we did everything in our power to bring about a fairer distribution of that debt which some people refer to as an asset.


The ACTING CHAIRMAN (Mr. Ross, Calgary East):: The hon. member's time has expired.


Thomas Langton Church: I rise to say something on behalf of the main income tax paying city in the Dominion of Canada, a city which in the 
years before the war paid between 28 and 29 per cent of the total income tax payments of this country. I have a great deal of respect for the hon. gentlemen to my left. They are a very sincere body of men; they have a right to express their views as they have done on many occasions, and they present their ease with some ability.
Let us look at the facts of this budget. Since this income tax resolution has been reached, there has been nothing but a hymn of praise and a hallelujah chorus for the budget. I am one who believes that criticism of the budget is a wise and sensible course to pursue. I do not believe the present Minister of Finance (Mr. Ilsley) is going to make any cuckoo-land out of this country by his budget. Far from it. I come from a city where I saw the sufferings during the last war and this and the long depression among industrial workers. Toronto sent nearly 56,000 men to the great war, and then along came depression and another war. I represent an industrial riding of an industrial city and a city which stands at the top in the dominion as far as payment of taxation goes.
Let us look at some of the principles on which this budget is founded, particularly the income tax part. The minister made a very strong appeal last night in connection with inflation. I say to him that before the people of Canada get through with this budget and with all the boards of control the government have appointed over parliament's head they will have inflation. What is inflation? The high cost of living in war which affects the working class of the country is popularly called inflation by some, although technically it is not. There are many phases and types of it. Speaking as a citizen I wish to say something about the way in which orthodox principles have been upset, not only in finance but in taxation and everything else, by the present Minister of Finance and by the government since this war started. There is nothing orthodox left in our land or any land in the world to-day, either in military affairs on land, sea, in the air or in anything else. The people of Germany believed might is right, but I believe that is wrong. Might plus right is right in my opinion. If we do not win this war, all our talk on inflation and budgets is unimportant. The war is Canada's only business until it is won.
What is the present policy of the government? Canada is no doubt the highest taxed country in the world. We have overgovernment and overtaxation by different bodies, dominion, provincial and municipal, carved out by the fathers of confederation for political, not economic purposes, with the

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result that this country has been suffering an untold burden of taxation without any system of control ever since confederation.
The minister, in his budget, forgets all about it. He forgets that in England the income tax clauses were not raised because they were prohibitive. They have no sales tax there. Sir Kingsley Wood was forced by public [DOT] opinion unwillingly to admit that other sources and ways of taxation would have to be developed during this war. Therefore he has upset all orthodox doctrines in his budget as a result of all orthodox doctrines being thrown into the waste-paper basket by those who believe that might is right. The United States has no sales tax either. A comparison was made by an evening paper the other night of the income tax levies of Canada, Britain and the United States, and they forgot that. They cannot fool the working class of this country.
The two old parties are on trial at the present time with regard to this budget. I am not going to sit silent here. I am a member of the opposition, but I do not represent the opposition; I express my own views.
I believe it is the duty of the opposition to tell the Minister of Finance that he is on the wrong ground, first, last and always, in regard to this system of taxation which, in my opinion, is, for the small man, the retailer, and the wholesale man, nothing but confiscation of property.
The minister has embarked upon a wide campaign and excursion into state socialism and regimentation. Look at the control boards he has appointed here in Ottawa. At a Rotary club luncheon a certain gentleman, Mr. Elliott Little, last Monday announced over the head of this parliament while we are in session a system of control calling up 250,000 men, which has practically abolished parliamentary institutions. The Minister of Labour (Mr. Mitchell) should be interested in that, because he comes from an industrial area himself. The system enunciated by Mr. Little will mean the regimentation of labour all over Canada, with 250,000 men to be found within the next few months. Where will they come from? They will be taken out of industry and trade and made subject to regimentation, with no definition of what is a war industry, with no provision for anyone to replace them, or whether they will help in war work or do a thing to beat Hitler. Then they are going to register the women as well, and we are to have a women's army. Many persons so taken will walk the streets, and with absenteeism in industry will do little. With all these registrations it is no wonder we have a budget like this presented.
Since the war began, we have six or eight or nine different registrations and regimentation for everyone from the time he is born until the time he dies. That is inflation of another kind, which is causing untold suffering in this country, and mostly not for war at all.
I believe too much money is being taken from the taxpayer, and the taxpayer wants to know whether or not all this money is being spent for war purposes. I could name thirty instances of large sums of money, ranging from $1,500,000 to $6,000,000, not spent for the winning of the war. We spent $6,000,000 for the League of Nations. We spent $1,500,000 for the taking of a useless plebiscite, pure political manoeuvring, which has occupied the time of this house off and on since last January.
All these control agencies started off in a minor way. When I asked the minister before Easter about this price ceiling he did not know what it would cost. Then during the Easter recess Mr. Gordon went to Winnipeg and announced that the cost of the ceiling would be $2,000,000. Later on, the minister announced for next year the estimated figure of $50,000,000, or $14,000,000 more than the Tupper government spent in 1S96, the year it went out of office. The Minister of Finance is spending a mint of money like water, with no adequate control and no attempt at economy. I can find no economy anywhere in the budget. You have to see the cause and effect of it all. The victory loans and war savings certificates campaigns cost from a point to a point and a half too much, and I do not wonder at some of the complaints that have been made by my hon. friends to the left. The cost of those loans was too great; the commissions to brokers were too high-entertainments, dinners, hotel and travelling expenses, and all that sort of thing. Too much money is being taken from the taxpayer. In the budget too much money is being charged to income and not enough to capital. The minister and his advisers forget that this generation is suffering in flesh and blood, as the last generation had to suffer in the last war, and I believe that posterity should be given a chance to pay part of the cost of this huge war effort, because they will reap the benefit of it.
This is purely a Washington budget, Mr. Chairman. Let me give you the seven points in the budget of Mr. Morgenthau and Mr. Roosevelt: first, that corporation earnings must be taxed heavily; second, that ceilings on prices must be maintained; third, that remuneration for work done must be stabilized; fourth, that prices received by farmers must be stabilized; fifth, that all
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citizens should buy war bonds and that there shall be compulsory saving-that is where our idea came from, but when these taxes are paid there will be nothing for the people to save-sixth, that scarce commodities must be rationed, and seventh, that buying on credit must be discouraged and repayment of debts and mortgages encouraged. Those are the seven points of the United States budget. They give the objective there for the coming twelve months, in war and in peace, and for civilian workers as well. In our budget, however, I can find no objectives for the coming year. The minister is just spending money right and left, taking too much from those who pay income tax, bringing the low salaried man under it, and creating conditions in industry, trade and commerce, and among retailers and small wholesalers which will bring about wide unemployment in Canada, complete regimentation and the absolute ruin of private retail and wholesale business. Those seem to be the objectives, and that policy also has been announced by the controllers, the sub-controllers, the dreamers and the controllers with schemes, who have been foisted upon the government of this country while parliament was in session, over our heads, and over whom we have no control at all, and who spend what they like.
Who are paying this income tax? It is being paid largely by the industrial workers of the two central provinces. They are the people who are going to be hit again, as they have been hit every time since the war started. First of all you talk about your orthodox methods in the budget, but look at the way in which the government has robbed the municipalities and the provinces of their revenues, by coercion, by seizing the income tax which until 1917 was the exclusive field of the municipalities, and then letting them have part of it back. This government is upsetting the whole basis of confederation. The provinces have had their revenues taken away, and therefore we might as well abolish the basis of confederation itself, and abolish municipal and provincial institutions. There is no such thing as an orthodox method at the present time. A great deal was said yesterday and to-day on the question of money. You would think the battle against Hitler was going to be won in this house by an academic discussion'- it is nothing more-about the functions of money and the basis of credit. Such a discussion is regrettable, because I do not believe any drastic economic changes can be made while the war lasts. I am not one of those who believe in a new utopia to 
come after the war, but I do say that the present banking and economic system of this country has not functioned as it should during the war, which is one reason why it is being criticized so heavily to-day.
I have nothing against the present Minister of Finance. He is a very hard worker and painstaking. I have a great deal of regard and respect for him, though I do not know him very well except as I see him across the floor of the chamber. From what I have seen he has been a very hard working member of the government, though I do not always agree with eveiything he says. It has seemed to me, however, that a lawyer is not the proper person for a Minister of Finance, and there is no disparagement in that because I made the same statement ten years ago. The whole training of a lawyer is against him when he becomes Minister of Finance, because he studies briefs, and he has to rely on his assistants and advisers almost entirely. A lawyer is not trained for the vexed problems of the functions of money or systems of credit. There was one great Minister of Finance, Mr. Robb, who was a working-class man; who, as he said in one budget speech, went to work in a mill when he was eight years of age. He was a very able and painstaking Minister of Finance; he sympathized with those who paid the taxes and labour and the farmer and industry, and did all he could to remedy conditions in the country with regard to both capital and labour. Lawyers are all right in their way, but I think they are out of their proper sphere when they dabble in finance. That has been made evident by some of the lawyers we have seen in this house. Look at England. During the seven years' war, the great Napoleonic wars and the hundred years' war, the two Pitts were not lawyers. Burke and Fox were not lawyers, and they handled financial matters. George Canning, one of the greatest chancellors of the exchequer, who kept Britain out of Europe's wars for fifty years, was not a lawyer, nor Palmerston. John Bright was not a lawyer, Disraeli was not a lawyer. Gladstone, a chancellor, was not a lawyer. Mr. Neville Chamberlain was not a lawyer but a plain business man, nor Mr. Churchill, nor Baldwin, nor Bonar Law-all chancellors.
The country cannot stand these high taxes much longer. Look at the great upward increases that have been made in the income tax schedules. The government seems to have forgotten all about those who are dependent upon others for a living, those who are physically unfit, the halt, lame and blind, the aged people and soldiers' dependents who cannot go on relief. The municipality will not give them relief; the province will not give them relief,

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and it is and always was a federal burden. The dominion should shoulder the whole cost in war time of these people driven to the wall. It should look after the sick and aid the suffering, and not leave that to relatives who have enough to do to pay their own taxes, and who haxe worked hard all their lives.
I am surprised that the present Minister of National Revenue (Mr. Gibson), who represents an Ontario seat, in the Toronto district, does not know these things, and does not protect the toilers and workers of industrial cities like Toronto, Hamilton, London, and Windsor, from this confiscatory budget. I happen to know that when others occupied the office he holds they asserted their rights; they did not allow themselves to be used by a lot of people in another department, that of finance, who are nothing but theorists. That is the trouble with a lawyer in a department like that; he relies too much on his assistants. Here is the budget, and what have we? I doubt if there is one man trained in actual finance in the whole department. There are many men of great ability, like one of the two gentlemen who sit in front of the Min-inster of Finance to-night, Mr. Fraser Elliott, a man whom you could not replace for a great deal of money. These men are among the best officials we have, and I doubt whether there is a higher class of civil servants in any other country. If their more moderate economic views were more generally accepted by the minister of the day, who is there to-day and away to-morrow, we would get a better budget altogether and not an income tax beyond all bounds.
When the tumult and the shouting dies; when the captains and the kings of this financial budget depart; when this new-born financial scheme, this budget, has reached its maturity, what will the harvest be? It will mean that the small retailer will have to quit, that the owner of a little property-a small mill, a few cows, a little store-the dealer and the artisan, the men who have borne the heat of the day and worked all their lives, will, through the inequalities of this budget, be put out of business altogether. I have received many letters in the past few days from Toronto. Here is one from a poor working man, who would lose his job if his name were known:
I am going to lose my home through the new income tax. My boy loses his schooling. Can't you persuade the government to give a larger exemption and to not put the increases in effect till August 1st, instead of making them retroactive to January? I write to you because you are said to be the small fellow s friend.
This is typical of the case of many hardworking men in Toronto who have spent their lives in trying to make a living. During the depression many of them were driven to the wall. Some served in the great war.
I have urged that we should have a fixed date for a budget, as large institutions do; also there should be a committee of ways and means such as they have in Washington. If we had such a committee to consider all these inequalities in the income tax sections of the budget-two pages of them-they would make a better budget, by eliminating inequalities and all that kind of thing, than the budget as presented by the minister. Remember that this war may last seven years. There may be seven war budgets. What are we going to do about it? Is everybody going to work for the government? Is everybody going to have a job at so much a week in the public service by state socialism and complete regimentation? Are all those qualities of thrift, of saving, of initiative which made Canada, those qualities which made this empire great, which raised Britain to the position of the market of the world, which made the United States what it is, which developed Canada in those earlier days when everybody owned some property, the days of Macdonald, Cartier and Laurier, now to be taken away by budgets and controls and sub-controls and all that kind of thing?
There are a great many inequalities, inconsistencies, injustices and cruel wrongs in the income tax and these sky-high resolutions. First, there is the raising of the rates. If you make comparisons with Great Britain and the United States, allowing for overgovernment and its effects on taxation, it will be found that the rates imposed in Canada are the highest that any country has ever paid in the history of mankind. We have a huge sales tax; the other two countries have none. No country can stand it; the taxpayer is going to be driven to the wall and put out of business. I know there has been a great chorus of approval from the press, the paid workers, the victory loan people and others of that ilk, including two or three regiments of paid artillery, cavalry and infantry of control talkers and speakers at luncheons, who are backing up the controls of the present minister and being well paid for it. But in the hearts of the people at home in the constituencies you will find much more knowledge than some of us have who sit here, as to how this budget affects them and will affect their children and their children's children, and the values of property, and property rights which have been rights since the creation of the world. Let me say to the authors of this

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budget that the right to possess private property is not derived from man; it is derived from nature, and the state has no right to abolish it, but only to regulate its use.
Look over this budget and where will you find evidence of economy? One-half of the money is supposed to be used for war purposes, but under this budget things are being done in the name of the war which do not amount to war at all, which do not amount to an iota toward the defeat of Hitler. One has to consider cause and effect in relation to the income tax, and the reasons for it are the unpreparedness of Canada and the mis-judgment, by some who are the authors of this budget, of the whole world war situation.
What is there in the budget for the relief workers, for the aged, the infirm, the physically unfit? Those who have borne the heat and burden of the day are disregarded; and the soldier is the forgotten man of the whole thing. The minister, as I have read his address and special pleading here, has never had sympathy for the soldier. Since I came to this house I never heard him say one good word about equality of treatment for soldiers as compared with civilians. Is it the theory of the budget that a man who enlists loses his civilian rights, his right to adequate pay, while this country is spending four million dollars a day, and is going to spend ten million dollars a day in the coming year-far more in one week than was spent in the whole year 1896? Soldiers' families have to live, and they cannot live properly without a cost-of-living bonus and removal of the inequalities in the pay of the forces.
The minister has forgotten many things m connection with this budget-the housing question, a national fuel supply, a national moratorium, interest reduction, and many other things which would create work so that the toilers could earn a living.
The minister talks about shooting holes through the budget. I can tell you one agency which is doing a lot of shooting holes m the budget-the very people whom the minister represents in this house. He as a minister of the crown is responsible for all these controls and sub-controls and commissions which have been appointed, and these are the people who are shooting holes in the budget and crippling the ability of the taxpayer to provide money for all the schemes which have been proposed in this connection, and are not doing a snap of the fingers to help win the war.
The application of these exemptions omits all consideration for the sick, for those who are physically incapacitated, and there is no use in their going on relief. The minister has not

even considered the ability of the people to pay. Mr. Churchill, not a lawyer, who was himself once chancellor of the exchequer, said on April 13, 1939:
I know very well the patriotism and sincere desire to act in a manner of perfect rectitude which animates ministers of the crown,-
He was speaking about the preparation of the budget.
but I wonder whether there is not some hand which intervenes and filters down or withholds intelligence from ministers.
The people want to know whether all the extra money that is to be raised by these income taxes and the budget is to be spent for war. The people want the money that is raised for the war to go for the war, and not to be diverted to civilian purposes and frittered away so lavishly on price ceilings. They want the war vigorously and effectively carried on, and there would be no objection from a single taxpayer, rich or poor, high or low, if he could be assured that there was going to be an honest dollar expenditure for the prosecution of the war from every honest dollar of taxation raised by this budget.
Talk about the conscription of wealth! This budget will mean that from one-third to one-half of the people who in the last war and in this war have contributed to victory loans and war savings certificates will no longer be able to buy bonds and war savings certificates. The income tax features of the budget will cause widespread unemployment and the utter collapse of many businesses, large and small. It is leading to regimentation and state socialism.
The income tax schedules are unjust and unfair. The whole budget is just a gesture toward state socialism. Talk of the conscription of wealth! I do not know anybody who has any wealth, because the rich man has all his income taken away by this budget, and I do not know where the poor man is going to be after the government has taxed his income as this budget proposes to do. There will be wholesale conscription of the property and income of the small retail merchant. The small retailers and some wholesalers also were told to get out of business by Mr. Little and by Mr. Gordon, when Mr. Gordon was speaking in Montreal and Mr. Little in Ottawa and Toronto. Mr. Gordon warned them that they would have to close up because they could not get the materials, and all that kind of thing. If all this regimentation and control were going to do anything to help beat Hitler, there would not be one word of complaint. But they are not.
Great Britain has passed an act which is contrary to this whole budget. They tried

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unsuccessfully to control business over there, but what are they doing now? The House of Lords has passed a bill called the Pre-War Trade Practices Act to put the small retailer and the small wholesaler back to where they were before and give them a chance to live. The legislation was initiated in the British House of Commons and is now law.
I am a Conservative and have never been anything else, but I tell you this, Mr. Chairman, that the financial system of this country has never been tested as it is being tested now. I am a believer in sound money, but there is no such thing as sound money when Hitler is at the gate. Right is might, is the old saying, but might plus right is right. This budget in itself will do quite a bit to shoot holes through the attempt to check inflation, and inflation is a danger; but by using wrong methods we are defeating its uses and objectives.
National currency has been mentioned. I do not believe that the Bank of Canada is doing what it should do in this war. It could handle lots of this control business without any cost to the taxpayer, instead of the prices and other boards opening up offices all over Canada, with a useless duplication of services by a lot of figureheads, because that is what many of them are. I see some of their work in the riding in which I live. You cannot get a prescription refilled at a drug store. I have had throat trouble for three weeks, and I could not get a prescription refilled at a drug store, without a new prescription, simiply because of this control policy in connection with the retail trade. I tried to get information in the Toronto district about this from one of the department store chiefs who are serving two spheres and two masters in helping to administer this control system, but he referred me to the chairman who would not even reply. You cannot get goods delivered now by a store unless you buy a dollar's worth, but often you have to spend $2 to $2.25 on goods you do not want, in order to get deliveries, and a large number of children who used to deliver parcels from drug stores have been put out of work. That is the kind of control and inflation that goes on unchecked, and then you talk about control.
If a committee of ways and means went into this budget they would find, on checking it over, that half or a third of the money that is to be raised by it will not amount to a snap of the finger in beating Hitler.
We could not qualify as a country under the lease-lend bill, under which help is being given to Greece, Australia, part of France and many other countries. Is there any reason why we should not qualify? After
Dunkirk, for two years the British fleet protected the shores of America, and we could have qualified under the lease-lend bill for a large part of the capital expenditure that is being made. If we were to count up what we are spending to protect America's shores, if she is attacked, the defence board's work was very largely wasted.
Then we have useless embassies, and publicity departments in the United States that are not worth a 5-cent piece. Britain put on a publicity campaign for nearly two hundred years to win over the United States, yet before Pearl Harbour she was the worst hated nation in the world by a section of the people in that country. Had it not been for Pearl Harbour, they would be isolationist yet, and they had the protection of the British fleet for two years, or they, as well as Canada would have had to settle with the axis powers long before this. I have a great admiration for the people of the United States, but I do object to one dollar being spent over there on publicity. It is not necessary. I object to any waste of money on useless publicity and information bureaux in Canada and the United States. No reasonable economy is being practised by the government. On the contrary big-stick methods and scarecrow armaments are being used on the people of this country daily by controllers of all kinds, many of whom talk nonsense with useless duplication and waste.
We in the opposition-I speak for myself- might be better employed if we were offering some constructive criticism of this budget. This budget aims at a socialist state. We over here should show a better understanding of our needs and should tell the country that this is not a budget to win the war but to destroy the present basis of our society. The people of Canada would not object, no matter how heavily they were taxed, if the money was going to the war and to beat Hitler. Our hearts may be sound, but our heads must be weak if we do not criticize this budget. In the long run the whole of Canada will suffer severely from this budget- trade and commerce, the farmer, the retailer, the artisan and everybody else-for years to come.
The income tax schedules are not what they should be, and there are many inequalities. The rich man will be reduced to nothing, and the retailer and the wholesaler will be put out of business. As for the ordinary men like the rest of us we shall have to pay the charges. People will have to get rid of their homes because they will not be able to pay the local taxation, heavy interest charges, insurance premiums and all the rest of it, and the result of it will be ruin in the end unless the
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taxes are levied on a man's net income. Is it any wonder that people want to give up their property? This system of socialistic control is all wrong, and it should be carefully reconsidered by the ways and means committee that should be set up to revise our annual budget. As I said the other night, it would be all right if this control system were going to win the war, but it is not. It is not the doubled rate I am objecting to; it is the fact that we have these controllers and regimentation and the nationalization of labour.
Mr. Elliott Little has been appointed director of national selective service. Who is he, and what training has he for such a task? He has predicted the closing down of non-essential industries so as to release workers for the armed services and war plants. The House of Commons was not consulted about this. He made the announcement before the Rotary club here in Ottawa. Is the Rotary club the House of Commons before which he can go and give an opinion, and give directions to 250,000 workers? No definition is given by him of a non-essential industiy. Who is going to decide whether these non-essential industries can be dispensed with? How is it going to be done? We are just heading for national bankruptcy, confusion, muddle, delay, duplication and waste, and are only going to bring the war closer to our shores, by such a control policy that no one will be sent overseas.
Is it the war policy of the government to control and administer every walk of life and almost every article or commodity of trade and commerce? If so, it will lead this country to disaster and national bankruptcy and will not help the war effort. It is a funny thing that no one on the government front benches knows how many of these bureaucratic boards there are, what amounts they are spending, the number on their payroll from week to week or month to month, what functions they perform and how it is all working out. If it is necessary to win the war, no one will object, but it is not. I say: beware of this evil, this bureaucracy within our gates, with headquarters at Ottawa. What we are to-day urged to accept as a war necessity, we shall be told tomorrow we must accept it as a necessity of peace days. Therefore the mighty host of bureaucrats at Ottawa, their sisters and cousins and aunts, some in military uniform, if you please, to fight Hitler at home, will be always with us. All I can say of most of their controls is, never were there so many who knew so little about so much. The small independent business -man is being faced with ruin and our people are being faced with the loss of their freedom and independence for which the 
democracies are now fighting. In one year Canada has been converted into a totalitarian socialist state without the knowledge of the people or without any authority from parliament. Restraints are being placed upon thrift and upon business being carried on in the traditional policy of free enterprise and individual responsibility. Unless this is checked, it will lead us to trade and commercial ruin, stagnation and, in the end, insolvency amid all these complex controllers and totalitarian maelstroms, with which business is being hamstrung by their overnight social changes and arbitrary conditions which are altogether impossible and foreign to the temperament of the Canadian people and not at all adapted to their circumstances.


Mr. MAYBANK:: I rise chiefly for the purpose of asking one or two questions with relation to matters in the budget, but before doing that I desire to advert to some of the remarks made yesterday evening by the hon. member for Parry Sound (Mr. Slaght). Anything I might say anent the hon. gentleman's remarks will be critical and not laudatory, and for that reason I am glad that he has just come into the chamber.
It seems to be the fashion for members of the opposition when speaking on the budget to say a few words of faint praise for the Minister of Finance (Mr. Ilsley). If you are a member of the same party as the minister, apparently you should go to great lengths to discuss him and possibly make some laudatory remarks about his forbears or any other thing that might be favourable to him. I shall not follow that procedure, because I feel that perhaps enough has been said already. If the minister really believes it-I fancy he pays no attention to it-he must be endeavouring to decide whether to wear his halo with a slant to the right or a slant to the left.
I would, however, say this about the minister. I never witnessed anything which gave me more pleasure than the manner in which he quickly and without hesitation rose in his place and traded punches with the doughty member for Parry Sound. So far as I am concerned-of course, others may differ-were I the referee, the decision would be given unhesitatingly to the Minister of Finance, in respect of style and matter and everything else in connection with that particular little bout. I have never witnessed any person demolished more naturally, more completely, more effectively than the hon. member was demolished by the minister yesterday evening. It partook of the nature of one of those affairs when Joe Louis dealt with one of the white hopes whom he saw in front of him

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for only about thirty-nine or forty seconds; thereafter he had to look down to see him.
I take pleasure in saying this, but I do not say it with any feeling of animosity toward the hon. member for Parry Sound. I have great friendship for him, but he was so far wrong last night and what he was saying was so dangerous that the only possible course open to the minister was to do what he did.


Charles Edward Johnston: What parts are you referring to?


Ralph Maybank: If the hon. member
does not understand me fully, I shall have to explain it by drawing a blueprint for him after the session. In the case of most people it will not be necessary for me to draw a blueprint in order to make myself understood.
I consider that what happened yesterday evening was absolutely necessary. A doctrine of that kind should not be introduced at a time like this, at a time which may prove the most harmful in the history of this country. There is nothing more dangerous than to meddle with our money system at this particular time.


Robert Fair: The foundation is not very
solid, is it?


Ralph Maybank: That may be your
opinion about that. Surely if a person knows that we are in one war with somebody on the outside, he should realize that it is no time to get another one started on the inside. There are always those who are spoiling for a fight, so much so that they will turn round and hit anybody just to have more rows going. As I say, I felt it was necessary for the Minister of Finance to act as he did, and that is the only reason why I am so pleased that he did so.
Probably I shall not go into the merits of the proposals of the hon. member for Parry Sound, but I do wish to draw this to the attention of the committee. Yesterday evening he followed the accepted canons of oratory. He made two or three remarks in order to attract the attention and sympathy of his audience, he carried them along with him while he discussed the sad position of the officer in the army, the married man as opposed to the single man, and so on. He did that in order to bring the crowd under his spell, and then he enunciated his main doctrine.


Richard Burpee Hanson: That is
the creation of atmosphere.


Ralph Maybank: The creation of atmosphere is, I believe, the name of that particular method. At any rate, it was well done, except that if one thought, as one
listened to the hon. member, it became apparent that it was not being so well done. Sometimes one can so lull one's audience that they will not think, and clearly that was the design of last night's performance. This was what struck me, for instance. The hon. gentleman dealt with the cases respectively of a bachelor and a married man, in the $3,000 bracket. He pointed out that the bachelor was taxed $1,064 and the married man $884, and that the difference for the purpose of supporting a wife was $180. He brought it out that what the government evidently intended was that a man should support his wife on. $180, the difference between the tax imposed upon the married man and the tax imposed upon the bachelor. That amounts to 49 cents a day, as the hon. member feelingly pointed out, to keep a wife and supply her with everything she requires. I felt that there was something wrong with these figures. After reading the budget, after hearing the minister make his main speech on it, I knew that I was going to have a more difficult time in my life supporting a wife and two or three kids than I had had before. But, good Lord, I never thought it was quite as tough as that, that I had only 49 cents a day for her, and I could not help [DOT]thinking in consequence, when the hon. member for Parry Sound spoke, that the moment any member of his audience started to think, that hon. member and his argument were lost. He was all right as long as he had a completely thoughtless audience.
In the first place, the bachelor is not taxed $1,064, and in the second place the married man is not taxed $884. Those, of course, are the figures of gross taxation. The married man with two children, he went on to say, is taxed $668, which means that all he is allowed is $396 a year to support his wife and these two children, which is $132 for each of them, and he went on to tell us just what could be purchased with the $132. As I recall, he got it down to the point where it was very doubtful if they could be brought up in the manner in which the Scotch are said to have brought up their children, on porridge and the shorter catechism. Even that was not possible. He did not put it this way, but I felt when he was speaking that he was telling us that we should have to stop giving them even the porridge, and that they would have to get along on the shorter catechism. The shorter catechism is excellent for the intellect, but it does not help the stomach.
The facts of the matter are these. The single man may pay $1,064, but he may pay only $824. If he has life insurance it is easily possible that the man with a salary of
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$3,000 a year would be paying $240 in life insurance, whereupon he would not be paying the sum of money which the hon. member for Parry Sound mentioned. Again, in the case of the married man, he would not pay the sum of money mentioned, $884, but $584. The hon. member made no remark about that at all. Obviously, as it seemed to me once I began to think, he was relying on the thoughtlessness of those to whom he was speaking, or possibly relying-I hope this is not true-on the thoughtlessness of people outside this house to whom the doctrine would be retailed.
Take the case of the married man with or without two children. It is altogether probable that a man on a $3,000 salary is putting away by mortgage payments on his home, or by premiums on insurance policies, the sum of $25 a month, and he is therefore not paying the amount of taxation which has been mentioned, namely, $884, but he is probably paying a tax of $584. The same remarks apply to the married man with two children, with the exception that the figures are a little different. In his case the actual tax would be $668 gross; $334 is taxation, and $334 of it is savings, and if he has that amount of insurance premium or mortgage payments he will not have that taken from him by the government. This means that the man does not have to keep his wife on $180; it means that he keeps his wife and himself on $2,116. If he is already saving $240 he keeps himself and his wife on $2,176. He does not keep his wife on $180, as the hon. member suggested, and I do not know whether he had in mind any particular wife or particular man who would do that. He might, of course, have had his reasoning warped regarding some particular individual, but I can assure him that the generality of men who have $2,176 and a wife, use the $2,176 to support themselves with their wives-their wives with themselves-and they do not allow $180 for the wife and gobble up all the rest of the money, roughly $2,000 for themselves. I am sure the hon. member himself, if he were to find any man attempting to treat his wife in that fashion, would be the first to rush forward to support that wife in an application to the courts that she be given decent alimony. I am sure that if he were to support her in her claim for alimony she would get it in any court, and no court would say that the Minister of Finance had laid it down on behalf of the Canadian government that $180 was enough for a wife.
My only purpose in drawing particular attention to this sort of thing is this. I felt that when the member for Parry Sound goes as far astray as that himself, and endeavours

to lead all the rest of us equally astray on a matter of this sort, it indicates clearly, if he believes what he was saying, that he has what I might term an economic short-sightedness which completely disqualifies him for giving any evidence at all upon any economic question. Any man who, after reading the income tax resolutions that are before us and hearing the speeches, will come to the conclusion and pronounce the doctrine that they spell $180 to keep the wife of a man who has $3,000 a year, is obviously, in an economic sense, myopic. There can be no doubt about it. That of itself seems sufficient to wash out any argument that came after what the hon. member for Parry Sound said in that regard. I think the minister made it quite clear last night that the proposals which the hon. member made are inflationary. You have the hon. member saying that they are not. You can look at the other judgments of the hon. member and estimate him as an economic expert in the light of the sort of discussion that 1 have detailed to-night, and take your choice between him and the Minister of Finance as to whether the scheme that he proposes is inflationary. I am convinced that it is.
The hon. member was relying a very great deal upon our control system. I confess that I had some doubts as to whether we could control prices in this country, even before I heard the testimony, given later, of the Minister of Finance. I have always had difficulty in believing that we can, over a long time, hold down prices by any form of control. I fancy we shall be able to do it for about as long as this war lasts. Of course I do not know how long the war will last, but I do not believe you could hold down prices by a control system for a ten-year period. We may succeed in holding them down fairly well during the war only because there is a war, for if it were not for the war we would not submit to these controls; no democratic people would. But I call attention to Italy with all its control. They have a great deal more control in these totalitarian countries than we have. They do not have all the bother of parliament and that sort of thing. They do not have any expressions of opinion, which are always bothersome to any government. We have not got them blockaded as well as we would like. I have some figures before me- I can give authority to anyone who wants it -showing some of the difficulty Italy is experiencing. The price index of some goods purchased by the farmer is in my hand. It would appear that the farmer in Italy has to purchase a great deal of fertilizer and insecticides. The prices for 1929 apparently are taken as the base. Last year the index figure

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for those articles was 137-4. This year it is 194-7, or a difference of nearly 60 points. I am not very good at mental arithmetic, but that represents a very high percentage of increase. Seed, which is of course highly important to the farmer, cost last year 163-1, but this year has risen to 192-4. Fodder is an article on which the agriculturist of Italy is best off apparently; the price has risen only about five points, from 135-4 last year to 140-2 this year. On agricultural machinery, something about which we of the west have heard quite a bit in this house, last year the price was 246-4 and this year it has become 287-2. Various industrial goods have risen from 222 to 279.
With all the controls they have in that totalitarian country their experience is that prices have gone up in the manner I have indicated with regard to certain basic goods. That in turn is bound-you cannot stop it- to bring about higher prices for other goods, even with all their controls. We can do a great deal with controls, but I am convinced that we cannot permanently or for any long time keep down prices even under the best of circumstances. Italy is a country in which every circumstance is favourable to keeping down prices, yet I imagine those increases will total up to an average of 30 per cent on certain basic articles, which increases will, in turn, affect a great many other articles within a very short time.
I gather that Germany is having somewhat similar difficulties in spite of all her controls. There they are apparently fearing inflation. They are struggling their utmost to keep it down. I hope they fail; we all hope for that. My point at the moment is that they are having trouble. It takes this form. When they hold down prices, people just will not put the primary products on the market, and even with their controls they cannot force people to do so. Last year some 14,000 tons of cherry harvest came on the market as against 60,000 tons the year before. Only 46 per cent of the strawberry crop reaches the market. They have had a new decree recently trying to force these things on the market and have now named minimum quotas in respect of apples.
These totalitarian countries are having all that kind of trouble. Surely, then, we must realize that we cannot rely entirely on controls in this country to keep down inflation. This is no time to try any kind of a "perhaps" scheme in this country. We can keep down inflation only if all things are favourable. We would be mad deliberately to put into operation in this country any kind of scheme as to the inflationary effect of which there is
any doubt. It is all very well for a minority to believe it is not inflationary; they may be right although I am convinced they are wrong, but that does not settle the question.
I wish now to turn to something quite different, chiefly for the purpose of asking a question. I want to ascertain just what the situation is with respect to these compulsory savings. As I recollect, money paid upon a mortgage obviates the need of taking the money from the taxpayer to be refunded to him after the war; that is, payments on capital, not interest. I am concerned to make sure that the instrument which is much in use in western Canada, which operates substantially as a mortgage, namely the agreement of sale, is included in that provision. I know it is not in the wording, but I would draw attention to the desirability of that being done.
I would also call attention to the desirability of not fixing a rigid date for the mortgage, agreement of sale or similar instrument in regard to registration. I think the way in which the minister put this particular doctrine was something like this, that instruments which were registered as of a certain date would be considered. I suggest to him that there might be some revision in that connection, and I will explain the circumstances of certain cases which lead me to make this suggestion. We very often have mortgages arranged for the purpose of building houses. We have not been doing quite so much during the last few months under the housing act, though for a while building in Winnipeg was comparatively brisk under the provisions of that legislation. However, we always do have' a certain amount of mortgage building. I know of several instances of people who have proceeded to arrange for the construction of houses, who have made arrangements for their mortgages and who are relying on progress payments from the mortgage company. Those people have everything arranged, but the mortgages may not yet be registered. Of course they will be registered before the mortgage company will give them any progress payments, but they have gone ahead with their building plans, having made all their mortgage arrangements. People like those are probably in the position now of having to pay something like $40 or $50 a month on their mortgages; yet if you insist on a certain date for the registration of those mortgages, those people simply will not be able to pay the mortgage and the income tax, and I do not know which they would let go. Therefore I think it would be well to take that situation into consideration. I am not suggesting that the date should be changed. I am suggesting that the government should
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accept evidence to prove the existence of a condition such as I have described as of that particular date. Accept some evidence that the condition existed, in addition to the evidence that you are already willing to take, namely the registration of the mortgage itself.


Mr. BENCE:: Would the execution date not be the correct date?


Ralph Maybank: The execution date of any document which established the existence of that condition; that is, the fact that the man committed himself, or any evidence which would definitely show that a man had entered into an arrangement such as I have described.
There is only one other point I should like to mention, and that is a minor matter with regard to insurance premiums. Take the case of a man whose insurance falls due in March. A great many men do not pay promptly, nor do they arrange any loans to take care of the premium. They just let it run for two or three months. Almost always their policies contain extended insurance clauses, or whatever they may be called, under which the policies carry on automatically. Then let us say that in June the individual makes the payment that was due in March. His receipt will not show that he paid the premium; it will show that he repaid a loan. If a man repays a loan on his policy, I do not know whether it is intended that this shall be treated as though it were a refundable payment. If it is, all right; but if it is not, I wish to draw to the minister's attention the fact that many people pay their premiums a little late. They do not make any arrangement for loans when the premiums fall due; they just let it ride, knowing the policies to be all right by reason of the deferred payment provisions. But when they pay the premium they do not get a receipt showing payment of the premium itself; the receipt shows repayment of a loan, because automatically, in the bookkeeping of the company, when the premium was not paid on the due date it became a loan, though no special action was taken by the policyholder to obtain that loan. I submit that in such instances these payments should be treated as payments of premiums, which would relieve the individual of the payment of tax on that portion of the refundable deposit.
I think these are the only questions I had in mind. I thought it well to place these various matters on record at the one time rather than speak three or four times during this discussion.


Mr. NOSEWORTHY:: Mr. Chairman, when I was called out of bed by a newspaper man at one o'clock on the morning following the

introduction of the budget, I unwittingly made the remark that this budget came as close to being a Cooperative Commonwealth Federation budget as anything we could expect from a Liberal government. I think I must have been still asleep when I made that statement, for nothing I have said since coming to Ottawa has brought me so much grief. However, since then I have had an opportunity over two week-ends of discussing the budget with a considerable number of people, with a wide range of incomes, and I am still satisfied that there are several very commendable features in this budget. I am amazed at the spirit of cooperation and stoicism with which the people to whom I have spoken accept this budget. I have heard complaints from very few. Those with whom I have discussed the budget have taken the attitude that we are in this war, that we must win it at any cost, and that we are fortunate if these are the greatest demands that are to be made of us in order to win the war.
I want to commend the minister for the compulsory saving feature, which I think has met with general approbation throughout the country, particularly in view of the deductions which are made possible. There are one or two matters on which, if possible, I would like the minister to give the committee some information. In connection with the deduction that is allowed in regard to repayments of principal under mortgages, it has been called to my attention that a great many people had entered into agreements prior to the date fixed in the regulations, but that these mortgages were not officially registered. I have been asked whether payments made on such mortgages may be deducted. In connection with the returnable portion, or the compulsory saving feature, I have been asked when the deductions that are to be made with regard to insurance, superannuation and so forth, are to be collected. The general impression seems to be that one-third of those amounts will be collected at the source. I have had letters from people complaining that if this portion of their savings is deducted at the source, they are going to be placed in financial difficulties, so that they will be unable to meet their payments. I think there has been a great deal of public confusion over this point, and a public statement should be made at once.
I want to compliment the minister upon fixing a maximum for the returnable compulsory savings part of the tax. I think that maximum might very well have been fixed at $500 instead of $1,000. According to my calculation, a man will need to be in the position of having an income of $10,000 a year before

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he will make that maximum contribution of $1,000. I think the maximum might well have been made $500 instead of $1,000.
I have received some complaint from married men with families. This budget has already been called a bachelor's budget. I have thought of it as being uneugenic. Some nights ago the Minister of Finance spoke of the incentive that is required by industrialists to maintain production. I fail to see any incentive in this budget to encourage the production and raising of children. When you consider that according to the Labour Gazette the index of wage rates since 1939 has moved up from 105-3 to 118-9, or 13-6 points, which figures out at 12-9 per cent, and that the cost of living according to the same records has risen 15-2 per cent; and when you consider further that wages have been frozen at a level which gives wages a lower increase than the increase in the cost of living-


James Lorimer Ilsley: Those are wage rates, not total wages.


Mr. NOSE WORTHY:: According to the
information in the Labour Gazette for May, 1942, at page 633, these wage rates include the cost of living bonus.


James Lorimer Ilsley: That is right, but they are still wage rates. That does not take into account the larger number of hours which they have the opportunity to work.
Mr. NOSEWORTHY':	The wage rates
including the cost of living bonus had risen 12-9 per cent since 1939 as against an increase of 15-2 per cent in the cost of living. When you consider that wages have been frozen at that level and take into account certain other features of this budget, you will see what I mean by the lack of any incentive to raise families.
There are two features of this budget to which I would call the minister's attention and which, I presume, he may have studied already. One is-this may have been intentional on the part of the minister, and it may be good from the point of view of eugenics and from his point of view; I do not know- that there is much more incentive given to the man in the higher-salaried brackets to raise children than there is to the man in the lower-salaried brackets. If you take the difference between what is left to the married man with two children and what is left to the single man, both with the same income, you will find that the married man with two children has, on an income of $1,250, a margin over the single man of $235; on $1,500, a margin of $308; on $1,750, a margin of $366; on $2,000, $386; on $4,000, $446; on $7,500,
$516; on $20,000, $766; and if by any chance a man has an income of $1,000,000, a married man with two children has a margin of $10,000 over the single man. In other words, the lower the married man's income, the smaller the difference between what is left to him after his tax has been paid and what is left to the single man.
There is one other feature which I think is worthy of consideration. We have often heard it said that the thing that matters in taxation is the amount that the man has left after the tax has been taken, but I think it is important that we consider the effect of this taxation upon the income left as compared with the income left after the tax had been levied in the previous year. In other words, it is interesting to note just how much of an adjustment an individual will have to make in his. standard of living as compared with last year by reason of this budget. A man receiving $1,500 a year 'or $30 a week, taking into account the returnable portion of the taxes, will have to step down his scale of living by one per cent from his scale of living of last year. A married man with two children receiving an income of $1,750 will have to adjust his standard of living by 3-3; with an income of $2,000, he will have to scale down his standard of living by 8 per cent, and with an income of $2,500 he will have to scale it down by 13-4 per cent. That appears to me to make a considerable demand for adjustment in one's standard of living.
Those are features to which I think the minister might give consideration. I hope that he will let us know whether he has already considered the effect of the budget in that regard and the income taxation increases on the married man with two children or more.


Mr. SLAGHT:: I had not intended to take part in the debate to-day, but in view of what was said by the hon. member for Winnipeg South Centre (Mr. Maybank), I feel I should say a few words. The bulk of his time before the committee was occupied in a personal tirade, in personal abuse of myself, in delicately veiled sarcasm. I know that at this stage of the session the committee is not interested in any individual's mode of attack, particularly when I suggest that _ in nothing I said did I use any personalities. Apparently the hon. member for Winnipeg South Centre had to base his case against me on the grounds, as he said, that there are those who are always so spoiling for a fight that they will turn round and hit anybody at any time. Another choice morsel was, "he had the crowd under his spell". Then followed an expletive, "good Lord", with which he attempted to drive home his
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argument. I do not know what the practice is in the Winnipeg police court, but I do not think this is the time to introduce into this court, when you have a bad case, the practice of abusing counsel on the other side.


John Ritchie MacNicol: We do not want police court stuff here at all.


Arthur Graeme Slaght: I hope the hon. member who just interrupted me will bear me out when I say that I did not conduct my share of this debate on any such grounds at all. I think it is a pity that hon. members cannot deal with the problem before us more fairly. My hon. friend undertook to make some reference to a man having insurance and so and so, but he did not answer at all what the hon. member who has just taken his seat emphasized, and he probably missed the point of my remarks, as far as a married man with children was concerned. Let me tell him that any ease that I attempted to make out for an alteration was based on the fact that there was discrimination against a married man with two children, having regard to the allowance that was made to him and the allowance made to the bachelor. Surely by this time that has been made pretty clear to everybody else, except the hon. member for Winnipeg South Centre. That is all there is in that criticism; there is nothing more.
We welcome the young Lochinvar from the west, but he should not occupy the time of the committee in abusing another hon. member, in slurring him in that manner. I do not propose to waste the time of the committee in answering such statements. I want to make reference to just one of his bons mots or arguments. I do not know where he got his information, but he took us over to Germany. From what he said I gathered that Germany is having some trouble in holding down prices, and, therefore, because German character, which we have surely found out by this time is filled with selfish trickery and evasion, is not such that they are willing to keep the laws of their country, he is indicating with all that defeatist attitude that the Canadian people are not prepared to keep the laws of Canada with regard to rationing and price control.


Mr. GOLDING:: Some have been fined already.


Arthur Graeme Slaght: Of course they have. In any new law which is as drastic as this there will be some people who will be fined. But if there is another member with a defeatist attitude, as it would appear that there is, let me tell him that I have great faith in the courage, in the honour and in the desire of the 
people of this country in the main to submit to every law that has been imposed upon them. I do not propose to succumb to any such argument as that which has been advanced, although there seem to 'be two members of this house who want to advance it. I do not believe we can assume that in the main the people of Canada are not cooperating and will not continue to cooperate in the effort to win this war in accordance with the restrictions that have been placed upon them. I think it is a silly attitude to take to suggest that in the main the people will not cooperate. My hon. friend interrupts to say that somebody has been prosecuted.


William Henry Golding: The minister told us that last night.


Arthur Graeme Slaght: I heard him, and I heard
the hon. member speak now. Are you prepared to stand up and condemn the people in your riding? Has anybody in your riding been prosecuted? Nobody in my district has been prosecuted. I am not prepared to argue the wisdom or the lack of wisdom in the method by which we raise our money on the basis that we must assume that a black market will prevail, that the people of Canada are crooks and will be ready to disobey the laws of Canada in war time.


William Henry Golding: That is about as sensible as your illustration was.


Arthur Graeme Slaght: My hon. friend is quite
glib with his condemnation of the sensibleness of my illustration, but I have not heard him venture any remarkable expositions as to why a bank with $5 in its strong box should be allowed to write up $100 in credit and take in a bond which will bear 3 per cent interest for twenty years.


William Henry Golding: I have not been converted as you have.


Arthur Graeme Slaght: That is another glib remark. I really cannot get very far in discussing the real facts surrounding this matter if I have to reply to the smart-Aleck interjections that are thrown in in that way. A man will make a greater contribution if I am wrong by rising in his place and discussing the facts and showing wherein I am wrong. I had not intended to say anything until the new Moses appeared on the horizon to lead us out of the wilderness.


William Henry Golding: You made a wonderful
contribution; you are getting better all the time.


Arthur Graeme Slaght: That sort of minstrel
show end-man business is played out in this House of Commons; it does not get us any-

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where; it is not an earnest attempt to contribute to the discussion of a very serious problem.


Richard Burpee Hanson: You cannot have a contribution unless you have something to contribute.


Arthur Graeme Slaght: I leave myself in the judgment of the committee whether the attacks made by the hon. member for Winnipeg South Centre and the hon. member for Huron-Perth (Mr. Golding), whether that kind of interjection and endeavour to destroy the presentation of a problem, is worth-while at this hour of our country's plight. I suggest that it is not. I leave myself, in the light of the personal abuse I have received to-night, in the judgment of the members of this committee, regardless of whether they agree or disagree with the problem that I have seriously endeavoured to present. The minister, whose problem it was to deal with this matter, showed me all the courtesy of debate, and I would have hoped that the side-liners who either got up or were put up to-night to attempt to destroy me would have found it desirable to keep themselves on a similar plane of decency in public discussion.


Ralph Maybank: I rise to make only one remark. The hon. member does not do himself justice in being quite so sorry for himself.


Gordon Graydon: If the civil war has drawn to a close, perhaps I can make a remark or so. I want to get back to the subject which was under discussion, on the question as to wage-earners whose category is under $2,000. These men and women, of course, have to pay unemployment insurance contributions week by week.


James Lorimer Ilsley: Just for accuracy, the limit is not $2,000 now; it is higher than that.


Gordon Graydon: It is $2,500, is it?


James Lorimer Ilsley: I do not think you can set it at any particular figure. There is an order in council, however, raising it. It does not make any difference to the hon. gentleman's argument.


Gordon Graydon: It has no material bearing on my argument, in any event. The point I want to raise is this, and it seems to me important. The government proposes to collect from this wage-earning class that comes within the lower brackets of income, first of all an unemployment insurance contribution, and now, in addition, they have the minimum savings requirement. Does the government intend to combine the procedure by which the contributions and these minimum savings
requirements are to be paid? I know there has been some confusion and considerable complaint raised because there are so many different sources and different channels through which tax collections have to be made. Perhaps we are only in the infancy of a developing scale of taxation with respect to many of these classes; but if we are to proceed on this basis we must make it a little less complicated for the man on the street, the average working man, if you like, because he is faced with the necessity of becoming almost a bookkeeper as well as a worker. He has a book for his unemployment insurance; he will now have to have another book, I assume, in connection with these minimum savings requirements; and with the numerous other deductions which the working man has to have taken off his salary and kept in certain specified positions, it seems that the government might very well take into consideration some simplification of the collection of these minimum savings, along with the contributions for unemployment insurance.
There is another angle to this matter. I wonder if we are dealing fairly and without discrimination with the class which comes within the unemployment insurance category. These men, of course, pay into the unemployment insurance fund, and, subject to certain regulations and conditions appearing in the act and the regulations thereunder, no interest is payable on that amount of money, while under the minimum savings requirement plan 2 per cent is actually allowed by the government. I know the question has been raised in one or two quarters as to the propriety of that, as constituting some discrimination so far as that class of worker is concerned.
While I am on my feet, on the question of the-refundable part of the income tax, would the minister care to say whether that is to be assignable or transferable, or can it be lent upon or dealt with by the person who leaves it with the government? That point has been raised on two or three occasions.


James Lorimer Ilsley: The answer to the last question is no. With regard to the other two, I will take the hon. member's suggestions into account and when we reach resolution 25 they can be discussed.
Mr. HANSON (York-Sunbury); I had hoped that the lengthy discussion, which has now lasted for over six hours, arising out of the speech of the hon. member for Parry Sound, would have ended some hours ago and that we might have made some progress with this resolution. It is now nearly eleven o'clock, and I would ask the committee on both sides of the chamber if we cannot get
Income War Tax Act

away from this speculative exhibition of monetary theories and get down to business tomorrow so that we may make some real progress in regard to this resolution.
Might I just ask the minister, in view of the flow of eloquence and the multiplicity of words to which we have been listening, not to forget that in the course of my budget speech, in the remarks I made on this resolution, No. 1, I asked certain specific questions which I think are of very great importance and which we would like to have elucidated. I hope he will not forget them to-morrow.


James Lorimer Ilsley: I wholly agree. I was a little diffident about asking the committee to curtail general discussion, because the budget debate was very short, and leaders of all opposition parties made reservations of the right of members of their parties to discuss matters rather generally on the resolutions; but I am wholly in accord with the appeal of the leader of the [DOT]opposition to members of the committee that to-morrow, when we start, we take the resolutions up resolution by resolution and apply the rules strictly to the resolutions, and I shall
be prepared as best I can to deal with the matters raised by the leader of the opposition.


Major James William Coldwell: May I say just a word? I think possibly I would have liked to have joined in this general discussion on monetary affairs. We hold very definite views; we believe, of course, that not until you have placed the principal means of production, the economic monopolies, and the financial system under the direct control of -the community can you balance purchasing power with production. But we wished to facilitate the business of the committee and refrained from taking part in the discussion. I am sure -that to-morrow we shall be very glad to cooperate with the minister, the leader of the opposition and the house generally in trying to get these resolutions through as quickly as proper consideration will permit. We shall have some other opportunity to place our economic and financial policies again before the house.
Progress reported.


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