QUESTIONS

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

Mr. McCULLOCH:: 1.	Has the Minister of Labour been notified in respect to a lay-off of men at the Allan shaft. Stellarton, Nova Scotia?
2.	How many men were affected by such lay-off?
3.	What caused the lay-off?
4.	What action, if any, has been taken to pay unemployment insurance to these men?


Mr. MITCHELL:: 1.	Yes.
2.	Approximately 400.
3.	An explosion occurred which damaged the shaft making it impossible to continue to work until the damage was repaired. The
provincial mine department is investigating the accident and a report has not yet been received as to the cause.
4. Men whose employment is temporarily interrupted will be paid any benefits they are entitled to under the Unemployment Insurance Act.


JAPANESE NATIONALS-LAND LICENCES
Mr. STIRLING:: 1.	How many licences have been granted by the Minister of Justice pursuant to order in council P.C. 1457 to persons of Japanese race or to Japanese controlled companies, (a) to acquire land: fb) to hold land; (c) to bold crop-share agreements; (d) to acquire or hold any other interest in land or growing crops?
2.	What investigation does the Minister of Justice make before granting a licence pursuant to this order in council?
3.	In which constituencies have licences been granted and how many in each such constituency ?
Mr. ST. LAURENT:
1.	None.
2.	If the person of the Japanese race to whom the land is to be transferred was actually in or ordinarily resident in a protected area in British Columbia at the time of the orders of the Minister of Justice to evacuate such area, the Minister of Justice requires the approval of the British Columbia security commission and of the attorney general of the province in which the land is situate before any licence will be granted pursuant to order in council P.C. 1457 of February 24, 1942. If the person of the Japanese race to whom the land is to be transferred was resident outside of the protected areas, the Minister of Justice requires the approval of the attorney general of the province in which the land is situate. In either case, if the Minister of Justice is not satisfied, he may require an investigation to be made by the Royal Canadian Mounted Police.
3.	Not applicable.


OFFERS OF SERVICE IN WAR EFFORT
Mr. BRUCE:: 1.	Have the names of those who have offered their services to the government in various capacities in connection with Canada's war effort, been kept in files and properly card-indexed as to qualifications?
2.	If so, are these files referred to before special appointments are made?


Mr. THORSON:: 1.	Yes.
2.	Frequent reference has been made to these files. Whenever the civil service commission or any department of government requests information from these records, such information is forthwith furnished.
Questions

UNIFORM COMPANY REQ'd-KHAKI DRILL JACKETS


Mr. ROY:: 1.	Has the government awarded a contract for khaki drill jackets to the Uniform Company Reg'd. of Quebec?
2.	If so, (a) for what quantity, (b) at what price per unit?
3.	Has there been an increase in the initial price of this contract? If so, what was the increase and what was the total cost of the contract?
4.	Who is the owner, president or manager of the company, and where is his office located?


Mr. HOWE:: 1.	Yes. Contract No. A21-B-73, serial 2-110416 was awarded to the Uniform Company Reg'd, on October 16, 1941, as the result of tender. P.C. No. 7777.
2 (a) 135,000 jackets, khaki, drill.
(b) It is the policy of the department not to give unit prices.
3.	(a) No.
(b) Total contract amount, $399,129.45.
4.	It is our information that Mr. Morris Pollack is the president of this company which is located in Quebec city, Que.


CONTRACTS TO CANADA PACKERS
Mr. CASTLEDEN:: What is the total value of all contracts let to Canada Packers by the government from September 30, 1939, to March 31, 1942?


Mr. HOWE:: 


$13,257,544. NATIONAL FILM BOARD-IRVING JACOBY
Mr. ROSS (Souris):: 1.	Is Irving Jacoby now in the employ of the national film board?
2.	If so, in what capacity?
3.	On what date was he appointed to his present position?
4.	What in detail are the duties he performs?
5.	Is he in receipt of a yearly, monthly or weekly salary or is he employed on a fee or commission basis?
6.	Is he a British subject and, if not, of what country is he a national?
7.	What is the total amount he has received, (a) in salary, fees or commissions, and (b) for travelling expenses from the date of his appointment to his present position to the present date?
8.	Before he was employed in this present position what steps, if any, were taken by the national film board or its officers to ascertain whether any Canadian-born British subject with appropriate qualifications and experience was available to fill the position now occupied by Mr. Jacoby?
9.	On whose recommendation was Mr. Jacoby appointed to his present position, and was the approval of the national film board sought prior to his appointment?
10.	Was the position now filled by Mr. Jacoby established with the approval of treasury board prior to his appointment?

11.	At any time, was Irving Jacoby associated directly or indirectly with the Film Centre, London, England, while the present government film commissioner was chairman of that organization?
12.	Is he now associated with an organization in New York city known as the American Film Centre?
13.	If so, in what capacity?
14.	Is the present government film commissioner associated in any capacity with that organization?
15.	If so, in what capacity?


Mr. THORSON:: 1.	Yes.
2.	Film producer and liaison officer in respect of groups of films produced by the national film board, which require assistance and cooperation with United States organizations in New York.
3.	Appointed for duties outlined in answer to question 2, February 28, 1942.
4.	Acts on behalf of the national film board in respect of production needs, and as liaison officer respecting personnel, supplies, and laboratory needs in New York; in addition acts as liaison officer with the various civic, state and federal government agencies in New York, and such additional duties as the government film commissioner might specify.
5.	Weekly salary basis.
6.	(a) No; (b) United States citizen.
7.	(a) $650 UH. funds; (b) None.
S. None. Mr. Jacoby's wide experience in documentary film production and his intimate knowledge of personalities and of production, distribution and equipment companies in New York make him of invaluable assistance to the national film board. His previous production experience on behalf of the national film board at the Canadian government motion picture bureau between December, 1939, and July, 1940, familiarized him with Canadian needs and methods. The post he fills is one which requires a familiarity with persons and organizations, private and governmental, in New York which only one long active in the film field in New York could be expected to possess.
9.	(a) Government film commissioner; (b)
No.	[DOT]
10.	No.
11.	No.
12.	No.
13.	See answer to question 12.
14.	No.
15.	See answer to question 14.


AIR OBSERVER SCHOOLS
Mr. POWER:: Mr. Speaker, in order that the matters to which I wish to refer may be in proper sequence, I should like to file and have inserted in Hansard answers to certain questions which were put to me by the hon.

Questions
member for Lake Centre (Mr. Diefenbaker) on May 12, at pages 2357 and 2358 of Hansard during the course of the discussion on the war appropriation bill. Copy of these replies has been handed to the hon. member for Lake Centre, and I may say that he has no objection to the questions and answers being placed on Hansard.. It is a long series of questions which were put to me, and I undertook to reply to them. I think it would be just as well if they could be placed on Hansard in the section dealing with questions and answers.


Mr. HANSON (York-Sunbury):: Would the minister indicate their purport?


Charles Gavan Power: They deal with civilian air observer schools.


Richard Burpee Hanson: Yes, I know, but what is the effect of the answers?


Charles Gavan Power: They cover many pages.


Richard Burpee Hanson: Do they not indicate that the statements of the hon. member were in the main correct?


Mr. POULIOT:: That may be discussed afterwards. The practice is very good.


Mr. HOMUTH:: Who is running this house?


Mr. SPEAKER:: With the consent of the house the questions and answers will be inserted in Hansard.
(The questions and answers follow):
1.	How many air observer schools are in operation in Canada?
Ten schools.
2.	Where are said schools located?
No. 1-Malton, Ont.
No. 2-Edmonton, Alta.
No. 3-Regina, Sask.
No. 4-London, Ont.
No. 5-Winnipeg, Man.
No. 6-Prince Albert, Sask.
No. 7-Portage la Prairie, Man.
No. 8-Ancienne Lorette, Que.
No. 9-St. Johns, Que.
No. 10-Chatham, N.B.
3.	Are any of the said schools owned or operated by the government or the Royal Canadian Air Force?
No.
4.	What companies operate each of said schools ?
No. 1-Dominion Skyways (Training) Ltd.
No. 2-Canadian Airways (Training) Ltd.
No. 3-Prairie Flying School, Ltd.
No. 4-Leavens Bros. (Training) Ltd.
No. 5-Winnipeg Air Observer School, Ltd.
No. 6-Prince Albert Air Observer School, Ltd.
No. 7-Portage Air Observer School, Ltd. No. 8-Quebec Airways (Observers) Ltd. N|o. 9-Dominion	Skyways (Observers)
Ltd.
No. 10-Northumberland	Air Observer
School, Ltd.
5.	What is the capitalization of each of said companies ?

6.	When did each of said schools commence operation?
No. 1-27th May, 1940.
No. 2-5th August, 1940.
No. 3-16th September, 1940.
No. 4-25th November, 1940.
No. 5-6th January, 1941.
No. 6-17th March, 1941.
No. 7-28th April, 1941.
No. 8-30th September, 1941.
No. 9-7th July, 1941.
No. 10-21st July, 1941.
7.	Who is the manager, assistant manager and secretary-treasurer and/or treasurer in each of said schools, and what salary does each receive ?
No. 1-Manager, W. A. McLeod, $5,400; Asst. Treas., W. R. Stephens, $2,700.
No. 2-Manager, W. R. May, $5,850; Asst. Treas., W. L. Parr, $3,250.
No. 3-President and General Manager, R. W. Ryan, $6,000; Sec.-Treas., G. T. Connor, $1,300; Assistant Sec.-Treas., R. L. Bamford, $3,000.
No. 4-President, C. R. Leavens, $7,180; Treasurer, D. W. Forrester, $4,000; Secretary, B. A. O'Brien, $600.
No. 5-Manager, D. S. Ormond, $7,200; Asst. Treas., A. M. Olafson, $2,400.
No. 6-Manager, R. Mayson, $5,400; Asst. Manager, A. R. Eddie, $3,600; Sec.-Treas., H. Holroyde, $3,600.
No. 7-Gen. Manager, A. M. Berry, $6,000; Treasurer, J. R. Giles, $3,600.
No. 8-Gen. Manager, G. R. Beck, $5,700; Asst. Treas., S. J. Billings, $3,600.
No. 9-Gen. Manager, W. Woollett, $6,300; Treasurer, G. H. Turpin, $3,300.
No. 10-Gen. Manager, R. H. Bibby, $6,000; Sec.-Treas., A. B. MacKinnon, $4,000.
8.	How much did each of said companies receive every lunar month since it commenced operations as the management fee and what expenditures were made by each under this head for each lunar month since commencement to date?

(a)	$2,700 per fcsar month.
(b)	Lunar month ending (as follows):
23/ 6/40 22/ 7/40 18/ 8/40 15/ 9/40 13/10/40 10/11/40 8/12/40 5/ 1/41 2/ 2/41 2/ 3/41 30/ 3/41 27/ 4/41 25/ 5/41 22/ 6/41 20/ 7/41 17/ 8/41 14/ 9/41 12/10/41 9/11/41 7/12/41 4/ 1/42 1/ 2/42 1/ 3/42 29/ 3/42 26/ 4/42

1.461	71
1.461	60 1,455 16 1,351 68 1,470 12
1.441	16
1.441	16
1.441	16 1,425 06 1,892 24
946 40 1,457 80 1,475 71 1,593 79 1,618 91 1,561 39 1,531 26 1,912 04 1,600 32 1,607 58 1,636 49


$1,749 11 2,039 12 1,913 62 2,150 85 1,989 51 1,992 94 2,036 40 2.056 48 2,016 51 2,021 93 2,284 32 1,738 65 1,672 65 1,708 20 1,774 47 1,716 73 3,526 95 2,020 72 1,930 87 2.126 45 2.274 74 2,247 99 No. 3 $1,892 24 1,876 26 2,101 66
[Stage Direction]
2.748	26 2,076 61 2,172 25 2,165 36 2,210 94 2,592 92 2,990 44 2,895 72
2.748	22 2,902 04 2,686 79
2.023	36 1,966 89 1,934 67 1,956 62
2.023	44 1,950 96 2,176 27
No.4
[Stage Direction]
Period
ending
2/ 2/41 2/ 3/41 30/ 3/41 27/ 4/41 25/ 5/41 22/ 6/41 20/ 7/41 17/ 8/41 14/ 9/41 12/10/41 9/11/41 7/12/41 4/ 1/42 1/ 2/42 1/ 3/42 29/ 3/42 26/ 4/42
No.5 No.6 No.7
SI,833	31				
1,885	23				
2,010	34				
2.053	05	11,745	69	2.197	37	1,796	73	SI,392	862,618	85	2,334	77	1,852	772,509	22	1,954	80	1,915	952,594	95	2,059	95	1,904	832,760	19	2,272	72	1,942	962,589	85	1.934	30	2,084	462,480	74	1,923	40	1,964	461,980	52	1,794	55	2.033	572,009	24	2,187	34	2,053	421,953	83	1,877	53	1,954	441,975	57	1,819	58	2,032	052,770	04	1,838	24	1,932	021,790	82	2.167	28	2,227	95

[Stage Direction]
$1,117	66	SI,272	941,294	11	1,307	29SI,468	09	1,208	55	1,417	671,724	78	1,362	32	1,545	391,689	05	1,652	56	2,303	491.790	33	1,996	14	1,618	341,948	49	2,021	44	1,553	281.631	66	2,232	27	1,491	281,989	58	2,117	82	1,439	822,096	06	2702	COMMONS
Questions

Questions
9.	How much did each of said companies receive for every 24-week period since commencement of operations for operation and maintenance? What was the disbursement for each said period under this head?
No. 1 A.O.S. Dominion Skyways (Training)
Limited
24-week period of
operations-	Received	Disbursed1st 	$148,250	$128,109 052nd 	150.000	147,770 203rd 	159.900	157,582 304th 	212,400	181,839 75No. 2 A.O.S. Canadian Airways (Training) Limited 24-week period of operations- 1st 	...	146.090	112.515 142nd 	147,000	139,213 823rd 	164,700	157,050 50No. 3 A.O.S. Prairie Flying School, Limited 24-week period of operations- 1st 	146,090	126,845 512nd 	150,000	140,652 833rd 	190,000	183,020 38No. 4 A.O.S. Leavens Bros. (Training) Limited 24-week period of operations- 1st 	146,090	127,241 472nd 	152,400	153,738 583rd 	213,800	200,378 96No. 5 A.O.S. Winnipeg Air Observer School Limited 24-week period of operations- 1st 	146,090	125,962 592nd 	170,700	192,807 91No. 6 A.O.S. Prince Albert Air Observer School, Limited 24-week period of operations- 1st 	146,090	148,267 202nd 	191,890	205,985 72
No. 7 A.O.S. Portage Air Observer School, Limited
24-week period of operations-
1st	
148,700	109,998 402nd	
214.500	204,920 89
No. 8 A.O.S. Quebec Airways (Observers)
Limited
24-week period of operations-
1st	 193,030	187,802 57
No. 9 A.O.S. Dominion Skyways (Observers)
Limited
24-week period of operations-
1st	 165,530	151,826 72
No. 10 A.O.S. Northumberland Air Observer School Limited
24-week period of operations-
1st	 173,430	131,521 60
10.	What is the total amount on hand under the head of operation and maintenance at the end of the last 24-week period?
$356,400.61.	1
11.	What percentage does the operating company receive of the proceed on hand under the head of operation and maintenance at the end of each 24-week period? and at the termination of the period provided for under the contract
under which the said companies operate?
*
(a)	None.
(b)	Upon the termination of the contract the operating company is entitled to receive 25 per cent of the net savings, if any, on operation and maintenance-subject to all properties and equipment being returned to the crown in a condition satisfactory to the minister.
12.	What were the profits before payment of taxes made by each of the said companies in each 24-week period (a) when consideration is given to the company's share of the savings under operation and maintenance account? (b) when no consideration is given to the savings under said account?
1	No. 1	No. 2	No. 3	No. 4JtJ	Malton	Edmoflton	Regina	London1 1st Period of 24 weeks	$	$	$	$H Management savings	7,418 29	4,364 85	3,332 72	4,153 85Flying hours' profit	5,750 00	5,320 00	4,999 00	6,347 00*	13,168 29	9,684 85	8,331 72	10,500 85Bonus on savings in opera-	tion and maintenance..	5,035 12	8,393 71	4,811 12	4,712 1318,203 41	18,078 56	13,142 84	15,212 982nd Period of 24 weeks	Management savings	7,627 66	4,045 71	596 40	4,403 38Flying hours' profit	8,318 00	8,157 80	6,105 20	3,801 7515,945 66	12,203 51	6,701 60	8,205 13Bonus on savings in opera-	tion and maintenance..	1,182 45	1,946 80	2,336 79	Dr. 334 6517,128 11	14,150 31	9,038 39	7,870 483rd Period of 24 weeks	Management savings	7,221 15	3,780 28	2,729 63	2,617 00Flying hours' profit	4,519 35	3,550 40	3,406 50	3,101 3511,740 50	7,330 68	6,136 13	5,718 35Bonus on savings in opera-	tion and maintenance..	1,204 43	1,912 37	1,744 91	3,355 2612,944 93	9,243 05	7,881 04	9,073 61
4th Period of 24 weeks
Management savings		6,350 92
Plying hours' profit....	3,313 10
9,664 02
Bonus on savings in operation and maintenance..	6,390 06
16,054 08
[Stage Direction]
No. 5 Winnipeg	No. 6 Prince Albert	No. 7 Portage la Prairie	No. 8 Aneienne Lorette	No. 9 St. Johns	No. 10 Chatham$ 3,601 85 5,344 50	$ 4,055 34 4,202 60	$ 5,106 17 2,903 80	$ 5,947 60 3,018 40	$ 7,568 66 2,996 35	$ 6,734 88 2,438 458,946 35	8,257 94	8,009 97	8,966 00	10,565 01	9,173 335,031 85	Dr. 544 30	9,675 40	1,306 86	3,425 82	10,477 1013,978 20	7,713 64	17,685 37	10,272 86	13,990 83	19,650 431,284 53 3,300 50	4,663 30 3,168 20	4,230 04 3,701 95	4,585 03	7,831 50	7,931 99	Dr. 5,526 98 Dr. 3,523 93	2,394 78	Dr. 941 95	4,307 57	10,326 77	2704	COMMONS
Questions

Questions
13.	Do any of the said companies operate directly or indirectly as subsidiaries of other companies? If so, give particulars?
No. 1 A.O.S. Malton, operated by Dominion Skyways (Training) Ltd. subsidiary of Canadian Pacific Air Lines, Limited.
No. 2 A.O.S. Edmonton, operated by Canadian Airways (Training) Ltd. subsidiary of Canadian Pacific Air Lines, Limited.
No. 3 A.O.S. Regina, operated by Prairie Flying School, Ltd., was subsidiary of Prairie Airways, Ltd.-now independent.
No. 4 A.O.S. London, operated by Leavens Bros. (Training) Ltd. sponsored by Leavens Bros. Air Services, Ltd.
No. 5 A.O.S. Winnipeg, operated by Winnipeg Air Observer School, Ltd. subsidiary of Canadian Pacific Air Lines, Ltd.
No. 6 A.O.S. Prince Albert, operated by Prince Albert Air Observer School, Ltd.-an independent company.
No. 7 A.O.S. Portage la Prairie, operated by Portage Air Observer School, Ltd. subsidiary of Canadian Pacific Air Lines, Limited.
No. 8 A.O.S. Ancienne Lorette, operated by Quebec Airways (Observers) Ltd. subsidiary of Canadian Pacific Air Lines, Limited.
No. 9 A.O.S. St. John P.Q., operated by Dominion Skyways (Observers) Ltd. subsidiary of Canadian Pacific Air Lines, Limited.
No. 10 A.O.S. Chatham, N.B., operated by Northumberland Air Observer School, Limited -an independent company.
14.	Did any of the said companies make payment of any sums to a parent company out of the moneys received from the government as management fee? If so, (a) what are the names of the said companies? (b) What was the total amount paid by said companies to the parent company?
The following operating companies have paid to their parent companies, out of the fixed management fee, the amounts set opposite their names to cover the estimated cost of procuring skilled personnel (both flying and ground trades) exercising general supervision, supplying certain extra tooling equipment, as well as to reimburse travelling and legal expenses and to cover secretarial duties, vide, evidence submitted before the parliamentary committee of enquiry.
No. 1 A.O.S.-Dominion Skyways (Training) Limited, §12,000.
No. 2 A.O.S.-Canadian Airways (Training) Limited, §11,000.
No. 3 A.O.S.-Prairie Flying School, Ltd., $2,500.
No. 4 A.O.S.-Leavens Bros. (Training) Limited, $10,500.
No. 5 A.O.S.-Winnipeg Air Observer School Limited, §8,500.
No. 7 A.O.S.-Portage Air Observer School Limited, $6,000.
No. 8 A.O.S.-Quebec Airways (Observers) Limited, §3,500.
No. 9 A.O.S.-Dominion Skyways (Observers) Limited, $5,000.
15.	What undivided profits if any remain in the hands of the said companies as the last statement or report given to the government?
Answered by No. 10.
16.	What profit per flying hour is provided in the agreement between the government and each of the said companies? Has any reduction thereof taken place? If so on what date and does such reduction apply and is it being accepted by all the said companies?
The contract originally provided $1 profit per flying hour. As increased pupil population demanded increased flying hours, the profit was reduced to 35 cents per flying hour, effective as from 1st June, 1941. All companies volunteered reduction and contracts were amended accordingly, on 6th October, 1941.
17.	Was reduction from $1 to 35 cents per hour recommended by war expenditure committee incorporated in new agreement?
Answered by No. 16.
18.	When were new contracts drawn up? Answered by No. 16.
19.	Is there any control over the profits of these companies?
Answered by No. 16.
20.	On what dates were the 6 companies now owned by C.P.R. taken over from original companies?
Canadian Pacific Air Lines Limited completed the purchase of the controlling interest of the holding companies on 19th December, 1941.
21.	Was there a new A.O.S. contract drawn up in April, 1942?
No.	.
22.	Do shareholders get a 5 per cent dividend? Companies are authorized to pay 5 per
cent per annum on subscribed capital.
[Stage Direction]
Questions as Orders for Returns


Mr. WINKLER:: 1.	How many training schools are there under the Royal Canadian Air Force?
2.	Of these, how many are located in centres possessing other war industries, and what are the names of these centres?
3.	Have any bonus or consideration or anything in the form of services been offered by civic corporations to the government in order to assist or induce the construction of air training centres?
4.	If so, what are these and where?


RECRUITING AND MILITARY TRAINING IN SASKATCHEWAN
Mr. BLACKMORE:: 1.	How many men have been recruited for the army in the province of Saskatchewan during the present war?
2.	How many soldiers of the active Canadian army are being trained in Saskatchewan in 1942?
3.	What was the maximum number of soldiers being trained in Saskatchewan during each of the years 1939, 1940 and 1941?


MEMBERS OF PARLIAMENT SENT OUTSIDE CANADA
Mr. SHAW:: 1.	Were any members of parliament sent outside of this country by or for the dominion government since the beginning of this session?
2.	If so, who were they? Where have they been sent? How long have they been away from this country ? What were their duties, remuneration, living allowances and travelling expenditures ?


Charles Gavan Power: I should like to make an inquiry of the hon. member who is asking this question. Does he intend his question to cover members of parliament who are overseas with the armed forces? In any case the question will be passed as an order for return, but I should like to know whether the hon. member wants that information.


Mr. SHAW:: I did not have that in mind when asking the question.


Charles Gavan Power: It will be passed as an order for return with the limitation that it will not include members of parliament who are overseas with the armed forces.


Frederick Davis Shaw: Yes.


CANADIAN ARMY-CONDITIONS IN DETENTION BARRACKS
Mr. CHURCH:: 1.	What action is the government taking with regard to conditions at detention barracks of those who belong to his majesty's forces in Canada and are any improvements to be carried out in the near future?

2.	Will any departmental investigation be undertaken as to treatment, training, accommodation and feeding of these soldiers while under sentence in military prisons and detention barracks?



NATIONAL FILM BOARD


Mr. FRASER (Peterborough West):: 1.	Is Wesley Greene employed by the national film board?
2.	If so, in what capacity?
3.	When was he first employed by the national film board?
4.	In what capacity?
5.	On what date did his present appointment commence ?
6.	Is he a citizen of the United States of America?
7.	At the time of his first appointment, was he the owner or part owner and/or manager of either the College Film Center or the International Film Center or both?
8.	Are these two organizations, or either of them, engaged in the commercial enterprise of selling and distributing films in the United States?
9.	Is he still associated with the ownership and management of either or both of these organizations?
10.	If so, in what capacity?
11.	At any time since the first engagement of Wesley Greene by the national film board have either the College Film Center of Chicago,
111., U.S.A., or the International Film Center of Chicago, 111., U.S.A., been engaged in the sale or rental of copies of films produced by the national film board?
12.	At any time was either of these two organizations granted any form of exclusive rights to sell and rent copies of films produced or released by the national film board in any part of the United States?
13.	Are either of these organizations now engaged in the sale or rental of copies of films produced by the national film board, and do they, or either of them, now enjoy exclusive rights to the sale or distribution of copies of such films in any part of the United States?
14.	Between August 1, 1941, and January 31, 1942, did Wesley Greene make his headquarters in Chicago, 111., U.S.A.?
15.	During that time, or any part of it, was he directly associated with the management of the College Film Center or the International Film Center?
16.	Between August 1, 1941, and January 31, 1942, was he in receipt of a regular monthly or weekly salary or fee from the national film board?
17.	If so, what was the amount?
18.	In addition to any such salary or fee, did he, during this period, receive any commission on the sale or rental of copies of films produced or released by the national film board?
19.	What was the total amount paid to him
by the national film board for travelling expenses between August 1, 1941, and January 31, 1942?	J
20.	Was he in receipt of living expenses while in Ottawa during this period?

Questions as Orders jor Returns
21.	If so, what is the total amount paid to him?
22.	On what date did he enter Canada to accept his present position?
23.	Did he enter Canada as an immigrant or as a United States citizen accepting employment in Canada?
24.	Was he granted a permit to enter Canada as a United States citizen to accept employment ?
25.	If so, on what grounds and for what period?
26 Before such permit was granted, what steps, if any, were taken by the immigration authorities to ascertain whether any British subject, resident in Canada, with appropriate experience and qualifications was available to fill the position which Wesley Greene entered Canada to accept?
27.	Was the position of supervisor of film distribution of the national film board established prior to the appointment of Wesley Greene ?
28.	If so, on what date?
29.	If previously established, was this position filled prior to the appointment of Wesley Greene ?
30.	If so, by whom and at what salary or fee?
31.	When did the previous incumbent of the position cease to be employed and for what reason ?
32.	Has the previous incumbent of the position of supervisor of film distribution been reemployed by the national film board and, if so, on -what date was he first so reemployed, in what capacity and at what salary?
33.	Is the employment of Wesley Greene temporary ?
34.	If so, for what period?
35.	If not temporary or for a stated period, is it the intention of the national film board to advertise the position and fill it by competitive examination or will the board seek authority to confirm Wesley Greene in the position either permanently or for an indefinite period without affording others who may possess the appropriate experience and qualifications an opportunity to qualify for appointment?



CANADIAN ARMY-OFFICERS

Mr. CASSELMAN:: 1.	How many of the officers on the reserve list at the outbreak of war now hold commissions in the Canadian army?
2.	Of the above how many are, (a) active army, (b) reserve army?



VICTORY LOANS-PICTOU COUNTY, N.S.

Mr. BLACK (Cumberland):: 1.	What were the (a) salaries, (b) commissions, (c) expenses, incurred in Pictou county, Nova Scotia, in connection with each of the last two victory loan campaigns?
2.	To whom were such payments made?
3.	What was the total amount subscribed in Pictou county, Nova Scotia, in each campaign?



ADJUTOR SAVARD

Mr. FRASER (Peterborough West):: 1.	What position did Adjutor Savard hold with the R.CA.F. overseas?
2.	What were the duties of that position?
3.	What were his qualifications for that position?
4.	What salary and/or pay and allowances did he receive?
5.	Is he still connected with the R.C.A.F.?
6.	If so, what duties is he performing?
7.	What salary and/or pay and allowances does he receive?
8.	Did he complete the duties for which he was sent to England?
9.	If so, why has he been brought back to Canada?
10.	What results, if any, were achieved by his mission in England?
11.	Has his position overseas been fitted by the appointment of any other person?
12.	If so, by whom has it been filled?


Mr. FRASER (Peterborough West):: What is the total amount -which has been paid to Adjutor Savard from the public treasury for any duties performed by him for any department of the government since October 23, 1935, specifying the amount paid by each department and the services rendered in each instance?



NATIONAL FILM BOARD


Mr. MacKINNON (Kootenay East):: 1.	How many films have been produced for the national film board by Walt Disney Productions, Inc., of Hollywood, California?
2.	What is the name of each such film, its length and its total cost including all positive prints supplied to the national film board?
3.	For what government department or governmental organization was each such film produced and for what purpose?
4.	What government department or governmental organization defrayed the cost of each such film and from what vote or appropriation was the cost of each such film defrayed?



SIR EDWARD PEACOCK AND SIR ARTHUR SALTER

Mr. POULIOT:: 1.	Was the hon. Minister of Finance in Ottawa on or about June 25, 1941?
2.	If not, was there at the time an acting Minister of Finance?
3.	If so, was it the hon. Minister of National Defence?
4.	If so, did he meet either Sir Edward Peacock or Sir Arthur Salter, or both, around that time?
5.	Were Sir Edward Peacock and Sir Arthur Salter also met on that or on other occasions by the hon. Minister of Munitions and Supply in United States or in Canada, or in both countries?
2708	COMMONS
__________Motions for Papers



MOTIONS FOR PAPERS


Mr. NICHOLSON:: For a return showing plans, specifications and other details prepared by national housing administration, with a view to building staff houses and prefabricated houses prior to the incorporation of Wartime Housing Limited.



PENSIONS-MERCHANT SEAMEN AND SALT-WATER FISHERMEN

Mr. GILLIS:: For a copy of all correspondence, telegrams, recommendations, orders in council and other documents passing between the Department of Pensions and National Health and the treasury branch, relative to the inclusion of merchant seamen and salt-water fishermen under the terms of the Canadian Pensions Act.


Mr. ILSLEY:: It has not been the practice to include interdepartmental correspondence in returns brought down to the house, and I shall have to take exception to the part of the motion calling for such correspondence.


Georges Parent: Carried with the reservation stated.



NATIONAL FILM BOARD-A. G. MCLEAN

Mr. STOKES:: For a copy of all correspondence, reports or other documents in the possession of the Minister of National War Services, the Minister of Trade and Commerce, the Deputy Minister of National War Services, the Deputy Minister of Trade and Commerce or any other official of either department, the Prime Minister, the Minister of Mines and Resources, the civil service commission or any official thereof, the national film board or any official thereof, with reference to the appointment, assignment or loan of A. G. McLean to the position of secretary and controller of the national film board.


Mr. THORSON:: There would be a limitation as to documents that may be privileged communications; otherwise there is no objection to the motion passing.


Richard Burpee Hanson: What particular privilege would attach to anything like this? It simply calls for correspondence with referehce to the assignment or loan of a, particular person to the position of secretary and controller of the national film board.


Joseph Thorarinn Thorson: There might, for example, be communications between the minister and his deputy, or vice versa. Communications between departments relating to the assignment or loan of Mr. McLean might be quite in order.



NATIONAL FILM BOARD


George Henry Stokes: For a copy of all rulings made by treasury board since November 1, 1940, on the question 
whether the National Film Board Act gives authority for employment of staff without prior approval of the establishment by treasury board and also on the question whether the National Film Board Act should be interpreted as applying to persons employed casually for the duration of individual projects and not to any person continuously employed.


Joseph Thorarinn Thorson: Stand.


Richard Burpee Hanson: Why
does the minister ask that this motion stand? If there is a ruling of the treasury board, we should have it. It is a public document.


Joseph Thorarinn Thorson: My understanding is that rulings of the treasury board may be privileged. Minutes of the treasury board may not be.


Richard Burpee Hanson: I dissent
from that. A ruling of the treasury board is a public document.
Motion stands.



GOVERNMENT FILM COMMISSIONER

Mr. ROSS (St. Paul's):: For a copy of all reports made by John Grierson to the government or any minister or official thereof prior to his appointment as government film commissioner.



HONG KONG COMMISSION-GEORGE DREW

Jean-François Pouliot: For a copy of the order in council for the appointment of Mr. George Drew as the representative of the hon. leader of the opposition on the Hong Kong probe.


Charles Gavan Power: Carried.


Richard Burpee Hanson: I should like to make one observation with respect to this motion. Colonel George Drew was appointed not by order in council but by the Chief Justice of Canada, who had asked me to nominate counsel for the inquiry. I have the correspondence.


Charles Gavan Power: I had forgotten. I quite agree with the leader of the opposition that that was the case.


Georges Parent: Dropped.


Jean-François Pouliot: Can a motion be dropped after it has been carried?


Charles Gavan Power: If my hon. friend insists, he will have the report anyway.
Motion dropped.



FUEL OIL


[Stage Direction]
On the orders of the day:
Mr. KARL K. HOMUTH (Waterloo South): In view of the answer given to me by

War Appropriation
the Minister of Munitions and Supply a few days ago with respect to the restrictions on the use of fuel oil, and the subsequent modification of his statement and the protests that I and others have made as a result of the minister's announcement, may I ask him if some time this week he would give the house a complete clarification of the whole order so that people will be in a position to make their own heating arrangements in accordance with the situation as then outlined?
Clarence Decatur Howe: No order as yet has issued from the oil controller's office on this subject, but I expect that an order will issue very shortly. At that time I shall be very glad to make a statement to the house and to clarify the situation as much as possible.



GASOLINE


[Stage Direction]
On the orders of the day:
Richard Burpee Hanson: May I ask the Minister of
Munitions and Supply whether he will reconsider the position with respect to the limitations imposed on the eastern provinces in gasoline rationing? I find that there is a good deal of uninformed criticism-I will put it that way-of the minister's action. I have not joined in the hue and cry after the oil controller because I think I understand the position; but it would be, I think, in the interests, shall I say, of national unity if that situation were corrected as soon as possible. May I ask the minister whether he and the oil controller will give consideration to the fact that the coupon holders have lost 60 per cent of what may be a very limited supply of gasoline left to them? Perhaps, should conditions warrant, some arrangement may be made to make up that loss to the coupon holders.


Clarence Decatur Howe: The	purpose	of	rationing	isto divide available	supplies	of	gasoline	asfairly as possible. The situation in the Halifax refining area permits only a certain amount of gasoline to be available, which in the opinion of the oil	controller warrants thepresent allowance per coupon. I do not know that anything more can be done to divide more fairly,	pending	an	increase	in
supply being available. It has been suggested that we let the coupons stand and allow the dealers to ration. We tried that before rationing came in, and there was a great deal of objection to it from hon. members. It is the only alternative I know of. That would,
of course, mean first come first served, and a great many people would not be able to get gasoline for their coupons. In our opinion the present method is the fairest, and until supplies are more abundant there is nothing very much we can do about it.


Richard Burpee Hanson: Certain
wholesale dealers in the maritime provinces say they have on hand an ample supply of gasoline. It was reported to me that one man had three million gallons in storage.


Clarence Decatur Howe: If that is the case I shall be very glad to take appropriate action.


Richard Burpee Hanson: I will give the minister his name.


Clarence Decatur Howe: I should be glad to have it; but I am confident that no such supply exists. The situation has been canvassed very carefully.



WAR APPROPRIATION BILL


[Stage Direction]
On the orders of the day:
Mr. A. H. BENCE (Saskatoon City):: I wish to address a question to the Minister of National Defence for Naval Services. On May 8 the minister advised the committee, concerning his estimates on the appropriation bill, that he would place on Hansard the amended scale of pay and allowances with respect to the naval services. So far as I am aware that has not been done. Could the minister give us that information? We have similar information already in connection with both the army and the air force.
Hon. ANGUS L. MACDONALD (Minister of National Defence for Naval Services):	I
am glad my hon. friend raised that point. I tabled rates of pay on the date promised, two weeks ago to-day, and it was only this morning that, looking over Hansard for that day and the day following, I observed that this information had not been placed on Hansard. Apparently it was felt that tabling the information was the appropriate way of answering the question, as on an order for return, but I will speak to the Clerks and see that the figures appear in Hansard to-morrow.



BUSINESS OF THE HOUSE


[Stage Direction]
On the orders of the day:
Jean-François Pouliot: As this is Victoria day, sir, may I ask the leader of the house if we shall sit to-night?


Mr. CRERAR:: Yes, it is the intention that the house shall sit.
2710	COMMONS
Petroleum and Naphtha Inspection Act



LABOUR CONDITIONS


[Stage Direction]
On the orders of the day:
Mr. WILFRID LaCROIX (Quebec-Mont-morency): May I direct a question to the Minister of Labour? What have been the results of the intervention of the department in connection with the strike of employees of the Banque Canadienne Nationale in Montreal to secure justice from their employers?
Hon. HUMPHREY MITCHELL (Minister of Labour):: Mr. Speaker, this question was raised by the hon. member for Vancouver East (Mr. Maclnnis) on May 14, when a strike had been called of the employees of this bank. On that occasion I pointed out that a dispute of this kind did not come within the jurisdiction of the federal Department of Labour. However, we have always endeavoured in every way possible to compose differences between employers and employees, and we sent in a conciliation officer in the hope of arranging a satisfactory settlement. He was able to arrange for a conference between the organization and the bank manager; unfortunately the manager was not willing to continue with the negotiations.


Karl Kenneth Homuth: He looked with his glass eye, did he?


Humphrey Mitchell: I do not know*whether he has a glass eye; the hon. member probably knows him better than I do. I said at that time I regretted that in this day and age such a position should be taken, but in view of the lack of authority and jurisdiction on the part of the federal government the matter was one for the government of the province of Quebec to deal with. I do think it is regrettable that the negotiations could not have been continued so that an amicable settlement might have been made of the dispute.



PETROLEUM


[Stage Direction]
Hon. C. W. G. GIBSON (Minister of National Revenue) moved the third reading of Bill No. 2, to repeal the Petroleum and Naphtha Inspection Act.
Richard Burpee Hanson: Mr. Speaker, I understand that in my absence the minister turned a cold and stony eye on the observations I made on a previous occasion with regard to this bill. I assume he considered the matter carefully with the officials of the branch of his

department concerned. I had hoped that they would find some merit in the observations I then made. I still think they had merit. I still believe the day will come when it would be useful to have preserved some of the powers which I suggested should be preserved.
Motion agreed to and bill read the third time and passed.



INCOME AND CORPORATION TAX


[Stage Direction]
Hon. J. L. ILSLEY (Minister of Finance) moved the second reading of Bill No. 16, to authorize the governor in council to enter into agreements with the governments of the provinces of Canada respecting the vacation by the provinces of the personal income and corporation tax fields for the duration of the war.
He said: This bill received its first reading on March 23. There was very little discussion at that time because the house was requested to defer discussion until the bill was in committee on its second reading. At various times, however, the house has had an opportunity of discussing the general principles of the bill.
During the budget debate last year there was some discussion of the general principle. Then again there was discussion when vote 476 of the supplementary estimates for the last fiscal year was passed by the house. During the present session of parliament, various questions have been asked and statements made in regard to the dominion-provincial tax agreements, and the agreements themselves together with the correspondence with the provinces in regard to the agreements have been tabled.
Richard Burpee Hanson: The completed agreements?


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: Not the
draft agreements?


James Lorimer Ilsley: No. I think the complete
agreements have been tabled; in fact I am sure that they have.
Vote 476 in itself constituted authority to enter into these agreements and to make the payments required thereby, excepting any payments arising out of the guarantee of provincial receipts from gasoline taxes. It had been the intention of the government to submit an estimate in each succeeding year for the term of the agreement covering the exact payments to be made to each province including any payments on account of the

Income and Corporation Tax
gasoline tax revenues. It will be remembered, however, that one of the provinces raised the question that while in signing the agreement it would be binding itself for the full term of the agreement, the compensating payments to be made by the dominion would be dependent upon the passing of an annual vote in the dominion parliament. I therefore agreed to introduce the present bill which would give continuing statutory authority to make the annual payments required for the duration of the agreements.
With regard to the general principles, as I have intimated, there has already been a great deal of discussion of the general principles of this bill, and I think the house is wholly familiar with them. This should make it unnecessary for me to make an extended statement at this time. Perhaps, however, I may summarize the essential features of the legislation and of the agreements.
What the provinces are required to do is to vacate the personal income and corporation tax fields for the duration of the agreement, which will run until one year after the cessation of hostilities, although, as the house will remember, provision is made by which any province may terminate the agreement at the end of any fiscal year if notice of its intention to do so is given in writing to the Minister of Finance, thirty days before such date. Income and corporation taxes are carefully defined in the agreements. In general, corporation tax includes any tax or fee the imposing of which singles out for taxation or for discriminatory rates or burdens of tax, either formally or in effect, corporations or any class or classes of corporations or any individual corporation, but excludes certain bona fide and reasonable licences or fees and business or occupancy taxes, and certain other taxes imposed by municipalities. Income tax is defined to mean any tax imposed upon the net income of a corporation or upon the net income or gross income of an individual or partnership, and includes a poll or head tax based on income. In compensation for the vacation by the provinces of these tax fields, the dominion agrees to make certain annual payments and to give as well a guarantee of gasoline tax receipts.
In regard to the annual payments, the house will remember that the provinces were given two options. They might elect either to receive an annual payment equal to the actual cash revenues received by the province from the taxes temporarily suspended during the fiscal year of the province ended nearest to December 31, 1940; or alternatively to receive an annual payment equal to the cost of the net debt service actually paid by the province during its fiscal year ended nearest
to December 31, 1940, not including contributions to sinking funds, less the revenue obtained from succession duties, during the said fiscal year. In addition, the offer I made in the budget provided that such annual payments might be augmented by providing fiscal need subsidies in cases in which it could be shown that these were necessary. This provision is implemented in the agreements which have been tabled in the house. The house will remember that the special amounts paid in recent years to the three maritime provinces and to Manitoba, Saskatchewan and British Columbia and which were voted annually by parliament were discontinued.
Finally, the agreement provides for a guarantee by the dominion of the amount of the net receipts by the province from gasoline taxes during its fiscal year ended nearest to December 31, 1940. I may add that agreements have already been entered into under authority of vote 476 of last year's supplementary estimates with all of the provinces except Quebec. In the case of Quebec, the provincial bill suspending income and corporation taxes and giving authority to the provincial government to enter into the agreement is either still before the legislature or has only recently been passed. It is my intention to sign the agreement with Quebec under the authority of the present bill, when it has been enacted, and when the necessary action has been taken by the province of Quebec, if it has not already been taken.
The bill itself is a simple instrument giving formal authority to the Minister of Finance, with approval of the governor in council, to enter into an agreement along the lines I have mentioned, with the government of any of the provinces of Canada and to make the payments and give the guarantees required. Two or three of the amounts contained in the agreement are incorrect in certain particulars. One of the amounts is incorrect because of a clerical error, and two of the others will have to be corrected to a very small extent by reason of small mistakes having been discovered since the bill was printed. Section 2 gives formal authority to enter into the agreements. It may be said that this section is unnecessary because of vote 476 passed last year, but I think it is desirable to have this formal authority set out in the terms of the statute. The statute is to be known as the Dominion-Provincial Taxation Agreement Act, 1942.
Section 3 provides continuing statutory authority to make annual payments to the provinces equal to the yield of the taxes temporarily suspended by the province, or
Income and Corporation Tax

to the cost to the province of its net debt service in the fiscal year ended nearest to December 31, 1940, with the deduction that I have mentioned. In the case of five provinces, namely, British Columbia, Alberta, Manitoba, Ontario and Quebec, the option selected is the tax option, and the amounts payable are as shown in the bill, except that in the case of Manitoba the correct amount is $5,054,740.92 instead of $5,634,740.92. That is the clerical error which I mentioned. I should point out that the figures shown, like all other figures in the bill, represent the results of a careful audit of provincial books by an auditor appointed by the dominion for this purpose. The other four provinces, Nova Scotia, New Brunswick, Prince Edward Island and Saskatchewan, selected the debt option, and the amount paid to each of these provinces is as shown in the bill. I would, however, ask the house to note the proviso clause at the end of section 3. It will be noted that any arrears of personal income and corporation taxes collected by the province after the close of its fiscal year ended nearest to December 31, 1940, may, in accordance with and subject to the terms and conditions set out in the agreement, be deducted from the annual amount payable to the province. The amounts so deducted are to be paid to the provinces after the termination of the agreement.
The general effect of this proviso is to assure that each province will have revenues accruing to it during the year following the termination of the agreement, and that the revenues during the war years will not be abnormally inflated. It is obvious that after the agreement terminates it may take some little time to get started again the collection of personal income and corporation tax revenues, and were it not for this provision provincial revenues would therefore be unduly low in the first year following the agreement.
Clauses 11 to 15 of the agreement deal with the way in which annual payments are to be made by the dominion, and the terms and conditions under which the deductions are to be made. Reference to these clauses will facilitate an understanding of the precise meaning of the proviso clause in section 3 of the bill.
Section 4 of the bill provides for the payment of fiscal need subsidies during each year of the term of the agreement to the provinces of Nova Scotia, New Brunswick, Prince Edward Island, Manitoba and Saskatchewan. When this clause is under detailed consideration by the committee I shall explain the basis upon which these fiscal need subsidies have been . 
calculated. I may point out however that in considering them the house should remember that the special grants previously voted annually to all the five provinces involved, as well as British Columbia, have been dropped. The amount of subsidy in the case of Nova Scotia should be $325,769.31 instead of the amount printed in the bill, $324,122.10.
Section 5 of the bill is the clause relating to the guarantee of gasoline revenue. The amounts set out after the names of the provinces represent the net receipts from the tax imposed by each province on the sale of gasoline during its fiscal year ended nearest to December 31, 1940, as determined by the dominion audit, except that the amount for New Brunswick should be $2,101,072.01 instead of the amount of $2,104,685.81 as shown in the bill. It is apparent that this section of the bill is going to prove a very important one for all provinces. In view of the increasingly severe war-time restrictions being placed on the use of gasoline and the shortage of rubber for rubber tires I am convinced that were it not for this tax agreement, including this particular clause, several at least of the provinces would inevitably have to face acute financial problems which presumably would have had to be solved otherwise by ad hoc solutions of a less fundamentally sound character.
Section 6 of the bill merely makes the payments to be made to the provinces pursuant to the agreements a charge upon the consolidated revenue fund and payable out of any unappropriated moneys forming part thereof.
Section 7 of the bill provides that the act shall be deemed to have come into force on March 15, 1942.
The bill by its nature is one which can be discussed more satisfactorily in committee of the whole house, and when we get into committee I shall try to answer any questions that may be asked by hon. members.


Richard Burpee Hanson: The Minister of Finance has given us a rather meagre sketch of the provisions of this bill. As the subject is one which demands a great deal of study on the part of hon. members-and I trust they have studied these agreements-I desire to make some brief observations with regard to it, reserving detailed questions, as the minister has suggested, until we reach the committee stage.
It will be remembered that the genesis of this proposal was contained in the Rowell-Sirois report-in much larger form than the present arrangement; but that was its true origin. I assume every hon. member has read that report, especially the part relating to this

Income and Corporation Tax
matter. Hon. members will -recall that in consideration of the assumption by the dominion of the burden of unemployment relief and certain other social security measures, and of the deadweight cost of the provincial debt service, it was recommended in that report that the provinces should relinquish the tax on personal incomes and a multitude of other taxes levied principally against corporations, and succession duties. As hon. members know, the report itself proved abortive, or at least it was so treated that the proposals of the report were not adopted.
Now the minister has tried another scheme which as I apprehend it is not nearly so far-reaching as the recommendations of the Sirois report. But it is a very important matter. It strikes at one of the fundamental principles of our system of confederation. It constitutes a direct encroachment on the heretofore existing taxation rights of the provinces. I have no doubt that by certain of the provinces it has been agreed to with considerable reluctance. So far as my own province is concerned I would say that this agreement will be a benefit to it. The New Brunswick authorities have probably driven a rather good bargain with the minister; but there are some inequities and some inequalities with respect to the municipalities of that province, to which I have alluded on former occasions and to which I shall direct attention briefly this afternoon.
The question of the elimination of the provinces in the field of succession duties has been dropped. I regret that exceedingly. I am not an out-and-out proponent of the centralization theory, but it has its advantages. There should be one succession duty taxation measure in this dominion and one only. But that seems impossible of accomplishment. We have the spectacle in this country of the same dollar being taxed twice, if taxable at all; I could give examples of the same dollar of value being taxed at least three times. Of course that is only justified in the case of the dominion on the principle of necessity. I regret that the minister did not pursue his efforts to persuade the provinces to vacate the succession duty field. But I am aware of the extreme opposition that developed in certain provinces with respect to this important matter; they have looked upon that field of taxation as their own and are not willing to give it up.
These proposals in their present form certainly visualize the principle of encroachment upon provincial rights of taxation and upon the whole matter of provincial autonomy. I do not propose to raise any debate on that point. I know there are two schools of thought in this dominion, and that in some of the provinces provincial autonomy is
adhered to very strongly. But there is no doubt that the vacation by the provinces of the field of direct taxation in relation to incomes of corporations in favour of the dominion is a very distinct change and one more step towards centralization. I do not object to that at the moment, although if it were to be permanent it would deserve a great deal of study at the hands of the membership of this house.
Of course it may be argued that there are compensations. Undoubtedly there are. And I warn the house that the compensations that will be payable under this measure and under these agreements will be very much larger than any that the minister visualized when he made his former statement. It will be recalled that in his budget speech of April 29, 1941, the minister referred at considerable length to his offer to the provinces. In doing so he mentioned the position taken in a budget speech by his predecessor, the present Minister of National Defence. He stated then that after the most careful consideration of all the questions involved, the government had reached the conclusion that the rates of personal and corporation income taxes should be raised by the dominion to the maximum levels which would be reasonable at this time, if the provinces were not in those fields. Their plans were drawn therefore on that basis, and in due course, he said, he would outline proposals to increase the minimum rates of corporation income tax to 40 per cent; to increase the rates of personal income national defence tax. Then he put upon the record what the concrete proposals were, as follows-
-that the dominion will offer to pay each year for the duration of the war, to any province which, together with its municipalities, will temporarily vacate the personal income tax and corporation tax fields either
(a)	The revenues which the province and its municipalities actually obtained from these sources during the fiscal year ending nearest to December 31, 1940, or
(b)	The cost of the net debt service actually
paid by the province during the fiscal year ending nearest to December 31,	1940 (not
including contributions to sinking funds), less the revenue obtained from succession duties during that period.
Then he went on to say:
Such payments will be augmented by appropriate fiscal-need subsidies where it can be shown that these are necessary.
And he made the further declaration-
. . . it is proposed to discontinue the present special grants which are voted annually by parliament.
Income and Corporation Tax

Those are grants arising in the case of the maritime provinces out of the Duncan report and the White report, and special provisions made for the province of British Columbia.


James Lorimer Ilsley: And two others, namely,
Saskatchewan and Manitoba.


Richard Burpee Hanson: Yes; for
the moment I had forgotten about them. Then the minister went on to emphasize that this was not an attempt to get the provincial tax field permanently. I have one observation to make in connection with this latter statement, and it is this, that having regard to the gigantic expenditures the dominion is obliged to make in respect to the war, I see no possibility of our vacating in any degree- at least, if at all, in a very minor degree- the high income tax rates we shall have to pay as the years roll by. We might as well face that situation. And if we are to have these high rates existing-and perhaps extended; who knows?-it would be the part of wisdom, taking the long range view, that some permanent arrangement should be made with the provinces to stay out of this field permanently. I offer that simply as a personal view, speaking on behalf of the taxpayers of this country, who, after all, have to bear the brunt of the whole thing. Of course I have no hope that anything I may say will have any influence in public policy with respect to the provinces. It is unthinkable that we should return to a system under which, on the same income, taxes would have to be paid three times. Such a condition would be unbearable; and it would not be the proper or the just thing to do.
Therefore I suggest to the minister that while he has emphasized -the point that this is only temporary, at least from the federal point of view, we should look forward to its being part of the permanent tax structure of the country. I suggest there should not be a return on the part of the provinces, or of the municipalities through the power delegated to them by the provinces under appropriate legislation, to the collection by them of income and corporation taxes.
I said a minute ago that I thought an examination of the figures would indicate that the minister's previous estimates were low. Without giving effect to the minor corrections which the minister has pointed out to-day-which in respect of Manitoba, by the way, is not so minor, being somewhere in the vicinity of half a million dollars-it will be observed that the total payments to the five provinces which have adopted proposal (a) aggregate $71,316,083.17, while the total payments under proposal (b) to the four provinces which have taken the option of 
servicing of the net debt, less succession duties, is $10,457,124.10, or a total of S81,773.207.27. Then there has to be added a further payment to five provinces, the maritime provinces and the two central prairie provinces of Saskatchewan and .Manitoba, the sum of $3,232,789.32, making a grand total payment of $85,005,996.59. Again there must be added, under a separate section of the bill, on the basis as stated, the amount calculated as equivalent to the net receipts of the province from the provincial gasoline tax during the fiscal year ending nearest December 31, 1940. In that connection the total gasoline tax guarantee is $56,738,519.76, and, as the minister had indicated, it may be much more than that. This makes a total possible commitment out of the dominion treasury of the huge sum of $141,744,516.45.
If hon. members will refer to the minister's budget speech of last spring they will find a table in which it is indicated that the minister estimated a net increase in dominion revenue, in a full year, as a result of the changes made-in the income and corporation tax fields, of $90,000,000. That is, the difference between $155,000,000, the yield from increases in existing taxes, and the payments by ways of grants of $65,000,000. or $90,000.000. I suggest to him that the excess of actual payments over the estimate made by him, and the possible expenditures on the gasoline guarantee, have made very considerable inroads into that estimated increase in revenue. Therefore the result will be somewhat disappointing. Of course the whole thing is a war measure, and we are assured at the moment at all events, that it is temporary, that it is only for the duration and that upon giving notice any province may withdraw.
The true test from the standpoint of the taxpayer, the citizen of this country, is the effect upon him. The objective of course is to raise revenues for war purposes. After all, the taxpayer is entitled to some consideration from the point of view of how it may affect him. It never was intended to give him any relief, judging from the increased rates imposed by the federal budget of 1941. From the point of view of the taxpayer there is really no relief; but there is one circumstance to consider. There is only one tax gatherer, only one taxing master, and that is something for which he should be devoutly thankful, even though the amount of money which he has to pay has not been lessened in any degree-indeed has been increased.
I have referred to the policy of centralization. I doubt if the fathers of confederation

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[DOT]ever contemplated that we should go as far as we have gone even with this measure; but the fathers of confederation never contemplated that there would be a war of the calibre and character of the present war, or that the necessity for raising huge sums of money by way of taxation would be so pressing as it is to-day.
I have stated already that I believe the present situation should continue permanently rather than for the duration of the war only. Of course that is something which does not lie directly within the province of this parliament; there are nine legislatures which are parties to this agreement and which would -have to consent.


Mr. REID:: They are doing so nicely that they are not likely to go back.


Richard Burpee Hanson: The hon. member is an optimist. My own view is that the more money these people get the more they want and the more they want to spend, especially if it comes as easy as it does when it comes from the federal treasury.


Thomas Reid: British Columbia is doing well.


Richard Burpee Hanson: There is one quarrel-I will not dignify it by the use of the word "quarrel," but I would like to comment upon the fact that the figure is frozen at the 1940 level. This may raise some difficulty with the municipalities. I understand that in the negotiations with the provinces, -or with some of them at least, the minister was inflexible on that point. I should like to point out to him the injustice of that position as I see it. The 1940 income tax returns for the municipalities of New Brunswick were based [DOT]on 1939 incomes. The war began in September, 1939, and the increase in the national income as a result of war expenditures-I think we can all agree that the great increase in the national income has been largely the result of war expenditures-did not begin to filter down to the individuals who pay income tax until late in 1940 or perhaps in 1941. In my province, where we have no war industry, or no war industry of any calculable amount, very little of the increased national income has filtered down to the taxpayers of the province. I am giving New Brunswick as an illustration, but I believe the principle is much more applicable to provinces which have been receiving a greater portion of the national income than New Brunswick. In that province we are being frozen under this agreement at the 1940 figure, and that is less than justice to the province. The provinces and municipalities had every right to assume that with the increased national income, more would filter into provincial and municipal exchequers as the war proceeded and as the tempo of expenditure increased. That will not be true under this agreement. That position is not reflected in this agreement, and it ought to be.
Some of the municipalities in my province were just beginning to utilize the powers which had been delegated to them by the province with respect to taxation on incomes. Other more settled municipalities, such as the cities, had used these powers for many years.
I have paid income tax ever since I had an income. True the rate was not high, but we have always had to pay income tax. The effect of freezing the figure at the 1940 assessment based on the 1939 income, the prewar income, has been that there is a deficit in the budget of all these municipalities, and presumably of the provinces. It is true that the government is to reimburse the provinces the amount of the frozen figure, but that is not sufficient to take care of the difference between the 1939 income and the 1941 income, or the increase in 1941, or the still greater increase in the 1942 income. "Unless the municipalities are prepared to reduce their services, or to cut their expenditures-my experience in municipal affairs is that the municipalities are very well run, that there is little waste and that expenditures cannot very easily be cut-these deficits cannot be met.


Thomas Reid: Is the amount not made up by the province?


Richard Burpee Hanson: The amount is paid by the federal authority to the province, which in turn reimburses the municipality, but this is based on the 1939 income which is assessed in 1940. In the case of my own city the tax is payable about the middle of the year. If I have made my position clear, it will be apparent that there is a gap there. The result has been that the municipal councils in figuring up their budgets for this year and succeeding years have had to fill this gap. They have gone to the legislature and the legislature has granted them authority to make new imposts. In my province these new imposts have taken two forms. First, there is a householder's tax which in effect is simply an increased tax on real estate. There is no doubt that this tax will bring in money, but I shall not go into the details as to how much it will be. This tax is being imposed by the cities of Saint John and Moncton. It is being placed on visible, tangible property which cannot escape. There is a legal lien against it. I say to the minister that we will have this tax upon our backs as long as we live, or at least as long as the present situation continues. I am not sure that I made my suggestion quite clear. It was that there should have been some flexibility with
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respect to these income tax receipts. In the case of the municipalities, they should be assessed every year. They could be audited eveiy year and then there could be either an increase or a decrease in the amount paid to the municipality, so that they would not have to resort to new imposts and new forms of taxation such as the one I have described.
The other impost is such that every stenographer now must pay a poll tax. Some people may say that that is all right, but the fact is that in my city everybody over twenty-one years of age, other than a housewife or a domestic servant, must pay a poll tax. These people are here to-day and' gone to-morrow; you may get it and you may not. If there is a deficit, what happens? You just heap a little more on real estate. I do not think any hon. member believes we should impose further taxation on real estate. The reasons are obvious. Real estate has always borne the brunt of municipal taxation. During the depression this load increased to such an extent that real estate became a liability instead of an asset. To-day real estate is just beginning to recover the position it held formerly as a good asset, but this new taxation makes its position that much more difficult. I suggest to the minister that if it is not too late the position should be revised.
I tell him frankly that this is my main objection to the bill.
I do not think it is equitable, I do not think it is fair, I do not think it is just, to freeze the amounts that are to be reimbursed to the municipalities, via the provinces, to the pre-war income position-because that is what it is. It does seem to me it would have been quite feasible in working out the mechanics of this thing to have the position reviewed every year so that we might have avoided a fixed impost, from which I feel we shall now never be free. That is the main objection I have to the general principle of this measure.
I want to refer for a moment to certain other features of the bill. The chief point I make against the agreements is the inflexibility of that one position, and I have no doubt that the municipalities have also made their representations. I do not know how far the minister dealt with the municipalities. I assume he saw them, but of course I can understand that he did not find it desirable or convenient to deal with them directly. I want to impress upon him again that it would have been much fairer to the municipalities, and of course much fairer to the provinces, particularly such a province as Ontario with a large income tax revenue, if there had been some flexibility, having regard

to the greatly increased national income which filters down through to all the citizens of our various provinces, so that as the war proceeds and expenditures grow greater they would receive a much larger share of the national income from year to year-unless of course the minister peremptorily takes the view that the increased national income should be taxable only by the federal authority. That may be the proper view to take; it is debatable. But the municipalities and the provinces have their social and other services to keep up and they cannot do it without money. The very fact that there are increased activities in a community make it incumbent upon a municipality to increase its own services and expenditures. Without going into details I can say that nearly all the cities of the maritime provinces have had to increase their police force, for example, and I know that the cost of fire protection has also been increased in some of the municipalities because of the increased tempo of war activity. But in the agreements no regard has been paid to these considerations.
I should like to call the attention of the minister to a few portions of the New Brunswick agreement, and then I shall be through. The New Brunswick agreement, as I have it, was tabled in the form of a draft. The minister says that the completed agreements were tabled in this house, but I am not aware that that is the fact. On April 22, over a month ago, on the motion of the hon. member for Hastings South (Mr. Stokes), an order of the house was passed for a copy of all final agreements entered into between the government of Canada and the government of any province with respect to this matter. This return, so far as I know, has not yet been brought down. I am subject to correction; if the return was tabled, it escaped me. I do suggest that while we should proceed with the second reading of this bill we should not take it up in committee until the minister has laid upon the table copies of the final agreements with the provinces, so that hon. members may study them. After all, hon. members from the different provinces are very much interested in this proposal.
It will take from the federal exchequer possibly $200,000,000 in a given year, and that is no matter of small importance. Aside from the war itself I do not know of any question which demands more study on the part of hon. members of this house than these agreements, and I hope they have given study to them. I will say frankly that I have not analysed completely all nine agreements; I have contented myself with a limited study of the agreement affecting par-

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ticularly my own province. I invite the minister, if he has not already done so, to lay on the table, at the earliest possible day, copies of the final agreements.
I am not opposing the principle of the bill, blit I do say that there are inequalities and injustices. I think on the whole the dominion has done well by the provinces in the amounts it has allocated to them. I sometimes wonder, after all_ the pleas that have been made for retrenchment so that every' dollar may be devoted to the war effort, why it is that some of our provincial governments-not all of them perhaps, but I think this remark will apply to most of them-show not the slightest evidence of retrenchment in what must be peacetime expenditures. Take the little province of New Brunswick with 500,000 people. This year they budgeted for the highest sum in the history of the province, away over $10,000,000. I think Nova Scotia perhaps is just as bad.


Mr. MacNICOL:: Are they going to have an election?


Richard Burpee Hanson: No, I do not think there is an election coming. There are several reasons, I suppose. I should not attribute motives, but I hold this view: there is not the sense of responsibility among provincial governments that there ought to be, having regard to the difficulties of the taxpayers and the financial demands made upon them by this war. Because times are good, because there is a lot of money going through the country as a result of war expenditure, the provincial governments think they might as well have some of it. One of the most disgraceful things in the country to-day is the amount of money the provinces are making out of the liquor traffic. In the little province of New Brunswick in the year 1935 the net revenue from liquor was a little more than half a million dollars. Last year the net revenue of the province from government sales of liquor was away over two million dollars.


Thomas Reid: The people must be buying more liquor.


Richard Burpee Hanson: I sometimes wonder. I am not going to preach temperance here. My principles are pretty well fixed and they are not going to be changed at my time of life. But I read a statement the other day which astonished me. The total budget of the Christian churches of Ontario in a given year was something like ten million dollars, while the drink bill of Ontario was perhaps ten or twenty times that amount-I am not attempting to give the actual figures. Is that a creditable comparison? Governments are in this business
now for the profit there is in it. They ought to cut it down; the hours of sale ought to be limited. In New Brunswick they call it liquor control. It is not liquor control at all. It is liquor monopoly-that is what it is, and you and I, who perhaps do not spend any money in that way, witness the spectacle of somebody else paying what perhaps ought to be contributed to the provincial exchequer. I do not think it is creditable to the country. But that is by way of an aside. I had not intended really to say that at all.
My' experience over a long number of years indicates that the greater the amount of money that is given to a province, the more they will spend, and some of it in a very questionable manner. I am glad to think that the municipalities operate perhaps in a better manner. I have in mind the little city of Moncton, which last year cut down its budget by $80,000, a very creditable performance.
I do not intend to say anything more about this bill. I think it is in pursuance of a compromise policy which the government had in mind having regard to the failure of the Rowell-Sirois report, which the government, I believe, was prepared to sponsor if it got the consent of the provinces. I regret very much that there was failure on the question of succession duties, but that has gone now and it is hardly worth our while to speak of it here.
I suggest to the minister that in dealing with the provinces he was a bit too lenient with respect to the power to impose new imposts. There is a provision in the New Brunswick agreement which leaves the way open for the province to impose new imposts, not of this particular class or kind, but nevertheless permitting annual levies from which I fear the taxpayer will never escape.


Mr. J. H. BLACKMORE (Lethbridge):: Mr. Speaker, since the leader of the official opposition (Mr. Hanson) has spoken as he has, probably something more should be said before this bill passes. The leader of the opposition made three or four remarks with which I personally, and perhaps, a good many people whose views should be heard here could not agree.
First, may I say a word with respect to the need for the taking over by the dominion of the power to tax corporations and the power to tax personal incomes. The leader of the opposition expressed the idea, as I understood him, that never again in the history of Canada would it be possible for the dominion government to recede from this field, that from now on it would be obliged to retain the power to tax corporations and personal incomes; and
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the reason he advanced, as I gathered it, was that there would be so heavy a burden on the dominion government after this war that in order to discharge the burden the government would require so much money that it would be impossible to raise it except by invading provincial fields of taxation.
Now, I readily concede that the leader of the opposition is completely on valid ground when he forecasts that the dominion government will have such a burden of financial responsibility that it will no longer be able to discharge that burden.


Richard Burpee Hanson: I did not
say that or anything like it.


John Horne Blackmore: Well, to what extent am I deviating from the principles which the leader of the opposition laid down?


Richard Burpee Hanson: What I
said was that the necessities of the occasion would compel the federal government to hold on to this type of revenue and, probably, to this amount of revenue. I never suggested that the Dominion of Canada would repudiate its obligations.


John Horne Blackmore: Mr. Speaker, I certainly did not suggest that it would repudiate its obligations. I believe that if the leader of the opposition reads to-morrow in Hansard what I said he will find it very difficult to distinguish between the meaning of my words and the meaning of his.


Richard Burpee Hanson: Then I
misunderstood the hon. member.


John Horne Blackmore: True, the dominion
government will never be able to discharge the responsibilities which it is assuming as a result of the expenditure incident to this war, and the members of this house should be objective enough to face that fact squarely now and govern their behaviour for the future accordingly. I am not suggesting that the dominion government repudiate its debts, but I am raising this question: if the time comes that the dominion government has so many financial commitments that, no matter what means it uses, it will be unable to raise enough money by way of taxation to meet those commitments, will someone tell me what the dominion government will be able to do? Something simply must be done; if the dominion government is to be able to meet its commitments it must find a new source of revenue, which source of revenue must involve a great deal more than invading provincial taxation rights and rendering it next to impossible for the provinces to carry on their responsibilities under the British North America Act.

The leader of the opposition implied, I thought, a few moments ago that the provincial governments were more or less careless in the use of their money. I do not wish to misrepresent what he said, but the idea was that the more money you gave the provinces the more they would spend. Well, in a time like this, when people from end to end of this dominion are needing more social services every day, when they need more money for old age pensions, for state hospitalization, state medicine and a dozen and one other things long overdue in this country, and when you bear in mind the fact that the responsibility for these social services in large measure rests upon the shoulders of the provinces, what can we possibly expect but that the provinces will spend more and more money?
One matter which I hope to bring to the attention of hon. members is that of education. At the present time our provinces do not possess the financial resources with which to support adequately the educational responsibilities resting upon them. Teachers from end to end of this dominion are too poorly paid. Schools are too poorly equipped. We are neglecting our sacred responsibilities to the generations of the future by failing sufficiently to provide for the training of youth. That is only one thing for which the provinces need money.
My own impression from what I have seen is that the provinces are not spending any money carelessly. Theirs is the responsibility for building and maintaining roads. Consider my own province as an example. In Alberta there are 90,000 miles of roads, with not quite 800,000 people to support those roads. When you bear in mind the fact that the people of that province are spread all over it in little communities here and there, to such an extent that they need 90,000 miles of road; when you bear in mind the amount of telephone service, the amount of inspection service for schools, the amount of medical service, and scores of other things which are necessary tb provide adequately for the needs of that province, you can understand how the provincial revenues as they now are are tragically inadequate. Instead of the dominion government endeavouring at this time to invade the provincial taxation fields and take from the provinces some of that which they already possess, the Minister of Finance should be occupying himself with ways and means whereby he could increase their revenues by adding to them supplies of money from the dominion treasury. At once, those who have never looked forward in the matters of economics and finance will say, "Where is the money to come from?"

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The money must come from somewhere, and if this generation of members of parliament lack the vision to see where it will come from, then I do not know what is likely to happen in this country. We may have too great a tragedy long before we are able to elect a number of members with vision. I hope the house will come to see that.
I thought it would be a good thing for members of this house who are interested in the subject if I were to read two or three excerpts from a book which I have here, and which I think every member of the house should read. It is called "Economic Tribulation," and the author is Vincent C. Vickers. It might be well for me to state who Vincent C. Vickers is, in case anyone should not have discovered that up to the present. Let me read from the introduction:
Vincent Cartwright Vickers was born on the 16th January 1879 and educated at Eton and Magdalen college, Oxford. He was a deputy lieutenant of the city of London, a director of Vickers Limited for 22 years, and a director of London Assurance, from which he resigned in January, 1939. In 1910 he was made a governor of the Bank of England, and resigned this appointment in 1919. Later he became president of the Economic Reform Club and Institute.
I should think a record like that would at least entitle this gentleman to respectful attention. His book was published in 1941; there is no doubt it is pretty well up to date. Let me read two or three quotations. I quote first from page 50:
If once we can decide w'hat it is that constitutes the barrier between the producer and the consumer, whilst both remain dissatisfied, we shall have discovered not only the main cause of the world's discontent and of the existing enmities and jealousies among the nations, but at the same time the true road to the peace of the world. If the producers are waiting to produce more, if ships are waiting to carry the goods, if there are railway and transport services wheresoever there is demand for them, then the fault must lie with the consumer. Why does he hold back the trade and commerce and progress of the world and prevent the consummation of a lasting peace by deliberately refusing to avail himself of the good things the world can offer him? The answer is obvious. The consumer cannot afford to buy more. He has not enough money. Let us discard all biased opinions and we shall find it possible only to arrive at one decision, that the health and welfare of the individual, the happiness of the community, the contentment of the nation and the peace of the world are mainly if not entirely a monetary problem.
And Mr. Vickers has not taxation nor borrowing in mind when he speaks of a monetary problem, as will be made abundantly clear by quotations which I shall read further on. At page 65 I read:
Strenuous efforts have been made over some twenty-five years to patch up the money system in an attempt to make it last a little longer, but it has stood and now stands in the way of progress and social betterment, thereby creating universal unrest and a tendency to obtain by force what cannot be obtained otherwise. For the sake of our children let us take warning in time. Let us discard the policy of inaction and pretence and boldly face the fact that it is not the inevitable smoke of the galley stove which assails our nostrils but that a fire is raging in the hold and that the ship of state is in imminent danger.
These words bear particularly on the discussion this afternoon:
Our democratic system and our existing financial system can no longer live together. One of them must give way to the other.
The measure we have before us this afternoon is a move in the direction of reducing the democratic rights of the Dominion of Canada.


John Ritchie MacNicol: Or the provinces.


John Horne Blackmore: Or the provinces; it is the same thing. You cannot think of Great Britain as a democracy without thinking of the democratic rights of the great cities and towns of England, the great counties of England. Wherein lie the true sources of democracy in England? In the towns and in the counties. And wherein lie the chief guarantees of democratic principles in Canada? In the towns and in the provinces. Destroy the autonomy of the provincial governments and you have struck an irreparable blow at democracy throughout the dominion.
I am going to read one more passage, which I think will show just the line along which Mr. Vickers' mind is running, and then I have a comment or two to make. When I have done that I shall have finished. At page 74 I read his suggestions for the future:
1.	State control and state issue of currency and credit through a central organization managed and controlled by the state.
2.	Stabilization of the wholesale price level of commodities. That is to say, a fixed and constant internal purchasing power of money; so that a pound will buy to-morrow what it bought yesterday; an honest pound, not a fluctuating pound. And this can be done by so issuing and regulating the volume of available credit and currency that it shall at all times be adequate to permit of the purchasing power of the consumer being equated with the volume of production; not by limiting the purchasing power but by firstly increasing purchasing power more in proportion to the productive capacity of industry.
May I pause a moment to make this comment. The measure before us is decreasing the purchasing power in the hands of the community.
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An hon. MEMBER:: How?


John Horne Blackmore: By drawing money
out of the provinces.


Mr. POTTIER:: They are getting it back.


John Horne Blackmore: Only a small portion of it. The more you examine it the more you will see the force of what I have said. While the provinces have struck a good bargain, the minister has made a good bargain too. Let me continue with the quotation:
Any additional supply of money should he issued as a clear asset to the state; so that money will be spent into existence and not lent into existence.
Again:
The fluctuating quantity of gold lying in the vaults of the banking system should never be permitted to govern the volume of credit and currency needed by the country.
Again:
The elimination of slumps and booms; and more direct procedure for eliminating unnecessary poverty.
And again:
The abolition of the debt system where all credit is created by the banks and hired out at interest to the country.
I should like to say just a word to the Minister of Finance. I realize how heavily burdened he is, how difficult is his task of guiding this country through this great crisis, and in large measure I sympathize with him. But let me tell the minister and tell this house that the minister can never successfully finance this war so long as he stays with the principles of the debt system of money. He will never create that happiness and union in this country which ought to exist so long as he thinks in terms of taking away from someone what he has, so long as he thinks of reaching out and invading provincial fields of taxation and filching from the provincial governments the means of obtaining the money which they need to discharge their responsibilities to their people. And he will never succeed so long as he thinks in terms of centralizing power at Ottawa. Sometimes in listening to hon. members such as the hon. leader of the opposition I wonder whether they have forgotten entirely that Ottawa was created by the provinces, that the first political organizations which we had in this country were provincial organizations, and that the provinces put Ottawa here to do work for them, not to dominate them, not to render their position impossible.


Karl Kenneth Homuth: Confederation was a mutual arrangement.


John Horne Blackmore: Exactly, but the fathers of confederation never envisaged a time, we may be sure, when Ottawa would grow into a huge colossus threatening the very existence of the provinces.


Karl Kenneth Homuth: They never envisaged a time when we would grow into a nation either.


John Horne Blackmore: I am afraid I do not grasp the significance of that remark. Did they imagine that the confederation when first formed was not a nation?


Karl Kenneth Homuth: No, definitely no, we were not.


John Horne Blackmore: I wonder what the hon. member has in mind. Does he look upon a nation as being an organization of people dominated completely by a central power, or does he look upon a nation as an organization of great units which can pull together?


Karl Kenneth Homuth: Exactly; the latter is my conception of a nation, and that is what was brought about by confederation.


John Horne Blackmore: Then how does the hon. member say that the fathers of confederation did not visualize a nation?


Karl Kenneth Homuth: I say they never visualized a nation that would take the place in the world that Canada occupies to-day. We are now taking a place as one of the most important nations in the world, such a place as the fathers of confederation never visualized; consequently we must take on national proportions, and we cannot do it as long as we are divided provincially.


John Horne Blackmore: There is no need for division provincially. There are eight provinces in this dominion that are as vitally concerned in the conduct of this war as the dominion government is.


Karl Kenneth Homuth: Every one.


John Horne Blackmore: I think we would be safe in saying nine provinces. And these provinces are looking to Ottawa for leadership, not drivership.


Karl Kenneth Homuth: I am not admitting that we are getting leadership from the Ottawa government, but I say we ought to have national unity.


John Horne Blackmore: What I am afraid of is that the Ottawa government is manceuver-ing itself into a position where it can be a driver.


Karl Kenneth Homuth: I agree.

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John Horne Blackmore: Then why all the argument? Let my hon. friend vent his spleen on those he needs to quell.


Karl Kenneth Homuth: There is no spleen to vent between the hon. member and myself.


John Horne Blackmore: There is a way of
managing this dominion without resort to these hurtful and offensive measures. There is no need of such an abomination as was proposed in the Sirois recommendations, to hamstring the provinces of this dominion. There is no reason why every province should not be majestic in the greatness of its autonomy. No province in this dominion desires anything which is not in the interest of the whole dominion, and surely Ottawa ought to be looking only to that which is in the interest of the whole dominion.
It is possible so to organize and manage the finances of this dominion that the provinces can be peaceful and prosperous and happy and strong. But measures such as the bill now before us are not the kind which will produce that desired result. If this dominion is to reach a position where it can discharge its responsibilities with respect to the debts accruing during this war, the dominion government must adopt the principles which Mr. Vincent Vickers laid down, particularly the one with respect to the state control and state issue of currency and credit; the one in which he says that any additional supply of money should be issued as a clear asset to the state, so that money will be spent into existence and not lent into existence; and the one expressed in the words "the abolition of the debt system where all credit is created by the banks and hired out at interest to the country."
In my judgment the minister should be coming to this house asking for authority to establish in Canada a currency commission through which he could issue the amount of money which the goods and services producing and consuming power of this country would support without causing inflation. If he were occupying the time of this house with that proposal he would be dealing with a measure by which a solution of the vexatious problems which confound the people of Canada could be found, and there would be no reason whatsoever for weakening in any respect the autonomy of the provinces or impairing their financial stability.


Mr. J. W. NOSEWORTHY (York South):: I am in agreement with the general principle of this bill. I believe that the principle of having one agent collecting these income taxes and corporation taxes is sound. Moreover I am in agreement with the sentiment ex-



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pressed by the hon. leader of the opposition (Mr. Hanson), that by taking over from the provinces two of their most flexible and expanding sources of income and replacing them by fixed amounts over a period of years we are handicapping the provinces in the field of social service.
The fathers of confederation, to whom reference has been made, very rightly I think gave to the provinces certain powers of taxation. Undoubtedly they never visualized such fields as income tax and corporation tax, certainly not in the immensity to which they have now grown. But they left with the provinces control of certain public services that they must have known would be found to cost the provinces increasing amounts from year to year. To compensate for those services which were certain to become more costly the fathers of confederation left the provinces with certain fields of taxation which also were possible of expansion.
I am thinking particularly of two services in the field of social services, namely, health and education. We take away from the provinces the right to collect income and corporation taxes, the two fields in which provincial income has been expanding in the past. We leave them with the responsibility of taking care of health and educational services, with the result that we are forcing them to sell liquor in order to provide our boys and girls with educations.
Karl Kenneth Homuth: Does the hon. member
want them to stop it?


Joseph William Noseworthy: Stop what?


Karl Kenneth Homuth: Stop selling liquor.


Joseph William Noseworthy: I certainly would
like to see the selling of liquor curtailed during the war.


Karl Kenneth Homuth: Are you against the selling of liquor, or do you want to curtail it?


Joseph William Noseworthy: That is not the
point I am discussing. My point is that when you take away from the provinces their two greatest sources of revenue, sources from which they would probably derive continually increasing amounts, and saddle them with social services, the costs of which increase from year to year, you leave the provinces only two other expanding sources of revenue, those from the sale of liquor and gasoline. For the duration of the war the sale of gasoline will be regulated, so that there is no source of income open to the provinces which can increase in large amounts from year to year, except that derived from the sale of liquor.



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[Stage Direction]
The leader of the opposition quite properly-pointed to the rigidity of the amount to be returned to the provinces, and suggested that a certain flexibility in the amount payable might have been better. I suggest it would have been in the interests of the nation if, when adopting a flexible amount, and taking over these sources or revenue, the dominion had at the same time undertaken at least a partial responsibility for some of the social services which are expanding, and which will continue to expand from year to year.
The hon. member for Lethbridge (Mr. Blackmore) has called attention to the state of education. When our schools open in September four thousand class rooms will be manned by unqualified teachers. Fully 120,000 young people beginning in September will be placed in charge of teachers without any professional training. That circumstance is brought about largely by reason of the fact that the public school teacher can go into a war industry and earn double the amount he or she can earn teaching school. Our educational system is left to be largely the responsibility of local communities. Our provinces are most reluctant to assume more than 10,	12
or 15 per cent of the cost of that public service. The result is that we are getting the type of education that the local municipality is capable of providing.
If in this bill, instead of taking from the provinces this source of revenue and returning to them a frozen sum to replace the amount taken, the dominion government had assumed a certain percentage of the cost of those increasing provincial services, I believe it would have been a proper procedure. After all, these are national services. The type of education a boy or girl gets is surely a matter of national responsibility. The boy or the girl may not remain in the municipality or in the province in which he or she was born. When the boy in adolescence or manhood moves to some other province he becomes the responsibility of that province. He becomes a national responsibility, just as health is a national responsibility. We are finding that out to-day in our enlistment figures, when we take note of the number of young men who in the prime of life are rejected through physical unfitness.
We have long passed the day when the dominion government should have begun to realize that these two vital services are of national importance, and should have undertaken to accept some responsibility for them. That, it is true, is the responsibility of provincial governments, as set out by the British North America Act. But I suggest that in making this financial arrangement with the provinces, under which the sources of revenue
[Mr. Noseworthy.T
are taken over by the dominion, instead of giving a fixed amount of money in lieu thereof the dominion should accept a percentage of the responsibility in respect of those expanding, ever-increasing national services, namely health and education.
Mr. KARL K. HOMUTH (Waterloo South): Mr. Speaker, I do not wish to delay, unnecessarily, the passage of the bill, but one or two things I believe should be said. So often we have heard protests from various provincial governments respecting the inroads the federal authority is making on provincial jurisdiction. It is quite true we are doing that. But after listening to the last two speakers one is almost led to the belief that they are advocating the taking over of all the services by the federal government. They say at least that we ought to pay more for this and ought to pay more for that.
We are now in a period of war. The minister of lands and forests in any province has practically nothing to say about the administration of his department, because the sale of timber, the cutting of timber and everything in that connection is under the jurisdiction of the timber controller, an officer of the dominion government. I am not one who says that we should do away with provincial governments; but if we are going to ask the federal government to take over the responsibilities indicated by the last two speakers, namely, the leader of the New Democracy group, and the hon. member for York South, then we might just as well come to the point where the federal government is going to take everything over. The last speaker referred to the possibility of taking over some of the social services.
Joseph William Noseworthy: The cost of them.


Karl Kenneth Homuth: Well, if you take over the cost you take over the service; what else do you do? The fact of the matter is that if one looks over the various social services in Canada he will find that we have a checker-board system. I was astonished the other day by the replies I received from some hon. members from Saskatchewan when I asked them to give me figures showing the amounts paid under the mothers' allowance provisions in that province. I asked for the information because of comparisons which had been made in my constituency with respect to payments made in Ontario and in Saskatchewan. To my mind the payments in Saskatchewan were absolutely inadequate, but perhaps to the minds of those in Saskatchewan they were adequate.


Alexander Malcolm Nicholson: What minds?

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Karl Kenneth Homuth: Those who put it through, or who brought it into force.


Alexander Malcolm Nicholson: They cut their garments to suit their cloth.


Karl Kenneth Homuth: It is time we did that in a great many instances. If we have not the cloth we should try to get it. We get it for war purposes; let us get it for paternal legislation. When we begin to compare things we find that we have a checker-board system across the country. Some provinces have not the social legislation that other provinces have.
So far as this bill is concerned I consider it to be a war measure. It may end up eventually as a national measure that will always be in effect, that will always be the law of this country. The various provincial governments, having studied this matter, I hope carefully, have decided to enter into agreements with the Minister of Finance of Canada under which they make certain concessions. I feel that these things may have to be regulated as time goes on. Apparently this is leading eventually to a general federal policy under which the provinces will no longer collect either succession duties or income tax. I believe that all the provinces are asking for is that the responsibilities which are theirs under the British North America Act should be taken over by the federal government and be of no particular burden to the provinces.
While I am critical of some of the provisions of this bill and of some of the arrangements to be made under it, we must face the fact that we are at war. No matter how great a burden it may be upon the provinces, no matter how difficult it may be for them to meet their obligations, for the time being we are at war and we have to do everything we can to win that war. If we do not win the war there will be no succession duties and there certainly will be no incomes. Let us make up our minds to the fact that we will all be enslaved by an enemy who will not care whether we have food or incomes. While there are certain provisions of this bill with which we are not in accord, it is a war measure and so far as we know now will be only for the duration of the war. When the war is over we can debate this measure, we can debate matters of social legislation and paternal legislation and other things which are not only in the minds of members of the Cooperative Commonwealth Federation. The members of the C.C.F. often pose in this house as being the only ones who look after the so-called working people, the farmers and others in this country. We are all Canadians, whether we are industrialists or otherwise, and our sympathies are with Canada. We want to act in the best interests of Canada and in the best 44561-1724
interests of the working people and other classes of people in Canada. That does not rest only with the C.C.F.


Clarence Gillis: Actions speak louder than words.


Karl Kenneth Homuth: Actions speak louder than words, and the people know what we have done.


Mr. NOSE  WORTHY@: You had plenty of time to correct the abuses.


Karl Kenneth Homuth: You certainly have not corrected the abuses either. In spite of the argument that can be made against this legislation I feel that it is in the best interests of Canada and in the best interests of our war effort that it should be passed. When the time comes to have a readjustment of the equalities or inequalities under these acts, it will be after the war. The first essential of this and other legislation must be the winning of the war.


[Stage Direction]
Motion agreed to, bill read the second time and the house went into committee thereon, Mr. McCann in the chair.
On section 1-Short title.
Richard Burpee Hanson: I think the minister will agree that the final agreements have not been tabled and that an order of this house has not been complied with. I do not want to hold up the passage of the bill for the tabling of the agreements, but perhaps the minister can tell us whether they have all been signed.


James Lorimer Ilsley: The agreement with the province of Quebec has not been signed, but all the rest have. I thought that the agreements had been laid on the table, but apparently they were being held up until the Quebec agreement came in so that they could all be tabled at the one time. The draft agreements have been tabled, and in all or nearly all the provinces the draft agreements are schedules to provincial acts and it is not possible to change them. It is the amounts only that are in question at all; all the clauses of the agreements will be in the form of those in the draft agreements.


Richard Burpee Hanson: Are there any special provisions in the Quebec draft, or provisions that differ from those in the Ontario agreement?


James Lorimer Ilsley: In regard to the schedules, they all differ one from the other to a certain extent. I feel sure that the draft agreements that are on the table show those differences. There are minor variations as between the provinces, especially with regard to municipal
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taxes. I do not expect the committee to take in the significance of those variations, but specifically, at the end of appendix B-


Richard Burpee Hanson: To which agreement?


James Lorimer Ilsley: There is an appendix B to each agreement. Appendix A is a list of the acts that are to be repealed by the provinces, and appendix B is a list of the acts that are to be retained by the provinces. It is not an exclusive list in either case; it is a list of acts which it is submitted should be retained, in the case of appendix B, and a list of those which it is submitted should be repealed, in the case of appendix A. There are some general words at the end of appendix B in the Quebec case which differ slightly from the words of appendix B in the Ontario case.
Mr. HANSON (York-Sunbury); What is the significance?


James Lorimer Ilsley: It is a complicated question. The words at the end of appendix B in the Ontario case are these:
and the following enactments-
It will be borne in mind that I am talking of a list of enactments which are to be retained unrepealed by the province:
.(a) any enactment heretofore or hereafter passed which provides for the imposing of any fine or penalty for any act or omission or for the' costs of any action or prosecution;-


Richard Burpee Hanson: That is in violation of some provincial statute?


James Lorimer Ilsley: Right. It goes on:
(b)	any enactment heretofore or hereafter passed which singles out municipal corporations, any boards or commission exercising the powers of a municipal council, boards of education or boards of school trustees for the payment of any amount; and
(c)	any enactment heretofore passed as a private act and any enactment which is unrepealed and is not consolidated in any of the revised statutes of Ontario, which prescribes or. fixes the- assessment of or taxes payable by any corporation for the purposes of municipal taxation.
The words at the end of appendix B in the Quebec case are:
and to the extent that taxes or licence fees were imposed thereunder on April 1, 1941, any other enactment of the province providing for the imposition by a municipality of taxes or licence fees other than income taxes, unless such enactment is enumerated in appendix A.
It is just about impossible without an hour's exploration of these differences to make their significance apparent.
[Mr. Ilsley.l


Richard Burpee Hanson: I suppose that under that wording a long list of licence fees is retained to the municipalities?


James Lorimer Ilsley: That is right.


Richard Burpee Hanson: Are they in the nature of income tax or corporation tax?


James Lorimer Ilsley: They are not in the nature of an income tax. Whether or not they are in the nature of a corporation tax depends upon how you look at it. It is a matter which was discussed between the provinces and the dominion in every case. There is nothing hidden from any province as to what is happening in another province. The local situation varies to some extent as between provinces. The net result is not significantly different in these two provinces.


Richard Burpee Hanson: They would vary in every province?


James Lorimer Ilsley: Oh yes. It must be borne in mind that if taxes still continue to be imposed by municipalities in a province they are not bought out by the dominion. If there is a slight difference of treatment; if a $500 licence fee is left in force in one province and nothing is said about a $300 licence fee in another province, it simply means that we did not pay as much money in the one case as in the other. It is not a matter of very much importance. I do not pretend that these appendixes are uniform in wording. It is a highly detailed matter. There are thousands of tax-imposing jurisdictions, or at least hundreds, and in the provinces of Quebec and Ontario, thousands, with all kinds of local variations. The situations in these two provinces in substance are approximated to one another pretty closely, but the treatment is not identical.


John Ritchie MacNicol: Have all the different
variations in thousands of cases been thoroughly studied by the departmental experts?


James Lorimer Ilsley: Oh, yes. I would not say
that we have examined the situation in every municipality, but a tremendous amount of work has been done in examining the municipal taxation situation in the provinces where it exists, and that goes for the provinces east of British Columbia.


Richard Burpee Hanson: The correspondence would indicate that a good many specific requests were made for special consideration and that in a good many cases the minister gave in to these requests. I have studied the correspondence wdth New Brunswick. They wanted to maintain certain things there, and the minister consented to their maintaining them. The same would be true, I suppose, with respect to the other provinces?

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James Lorimer Ilsley: Yes.


Richard Burpee Hanson: Therefore, while each agreement varies in detail it follows the general form and substance, and the details are different to meet particular exigencies that have arisen?


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: What
payments have been made to each of the provinces in respect of the last fiscal year ended March 31 last? Have payments been made to any or all of the provinces in respect of these agreements?


James Lorimer Ilsley: I will give the committee a
list of the payments that have been made. All these payments have been charged to the appropriation for the last fiscal year because no authority exists for charging anything to this year's appropriation.


Richard Burpee Hanson: Under
the supplementary vote for last year?


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: That was for $45,000,000, was it not?


James Lorimer Ilsley: Yes, $45,000,000. The payments by provinces that have been made are: Prince Edward Island, $689,502.20; Nova Scotia, $1,300,000; New Brunswick, $2,112,51686; Quebec, nothing.


Richard Burpee Hanson: New
Brunswick has received over half its amount?


James Lorimer Ilsley: Yes. The other payments were: Ontario, $2,896,403.95; Manitoba, $2,306,467.84; Saskatchewan, $2,887,458.11; Alberta, $2,055,911.87; and British Columbia, $6,872,182.49.


Richard Burpee Hanson: How
much of the two million dollars odd which has been paid to New Brunswick has been passed along to the municipalities? I know that in the agreement there is an undertaking by the province to pay to the municipalities, but the agreement is silent as to when. It seemed to me that that was a weakness in the agreement because the province may hold the money for four months after they receive it or they may not pay it until it suits them.


James Lorimer Ilsley: I am not able to say what amounts, if any, have been paid out to the municipalities of New Brunswick. On the general question as to how far it is this government's responsibility to see that payments are made to the municipalities, the view was first taken by myself that that was not any part of our duty at all, that we would leave that entirely to the provincial governments, depending upon their own sense of
fitness to pay the municipalities as and when they thought the municipalities ought to be paid. Certain provinces wished the matter left in that way. I know one province expressed the view that the municipalities were their creatures, that they could and should be allowed to deal with the municipalities and that the dominion government should not intervene at all. In the case of New Brunswick we provided, I believe, in the agreement or by a schedule that certain amounts were paid to the province for the account of the municipalities.


Richard Burpee Hanson: Yes.


James Lorimer Ilsley: It is provided in that agreement that a certain amount will be paid for the account of the municipalities.


Richard Burpee Hanson: I think
there is an undertaking there that they will do it.


James Lorimer Ilsley: Yes. It is in clause 10:
which sum-
That is the sum payable to the province.
-includes the sum of $1,384,410.23 payable to the province on account of the said municipalities computed as set out in appendix DD.


Richard Burpee Hanson: Is that the only clause referable to that? I had an idea that there was a covenant or something in the body of the agreement whereby the province agrees to pay these amounts to the municipalities, but I cannot put my hand on it at the moment.


James Lorimer Ilsley: No.


Richard Burpee Hanson: It does not go beyond that?


James Lorimer Ilsley: No.


Richard Burpee Hanson: Of course, the clear intent and meaning of it is that the province shall pay it, and I have no doubt they will in their own good time. The minister stated the principle, and I do not think there can be much objection to it. Certainly the municipalities are the creatures of the provinces, and in all the dealings we have had in days gone by between the dominion and the provinces in respect of the municipalities the federal government has always taken the position that it could not deal direct with a municipality. I do not know whether there have been exceptions to that, but I am not questioning the decision taken by the minister. I do think, however, that care should have been taken-and I believe that the provincial governments, if properly pressed, would have agreed to this-that if, as and when the money was paid, the propor-
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tion would be handed over to the municipalities. The suggestion in my part of the country is that the province intends to hold the money for four months. I do not know how well-founded that is, but of course it means interest on overdrafts. Some of the municipal officers of the city of Saint John- are here to-day, and, coming up in the train last night, they pointed out that if they have to wait for four months for $500,000, when their assessment is paid now or very little later, it will mean a substantial sum in interest to them. The department was, I think, a little lax in not providing that the money should be immediately paid over to the municipalities. However, the minister takes the view that, the municipalities being the creatures of the provinces, the provinces must be left to deal with them, and perhaps that is the proper attitude for the federal government to take. I am not going to question it. But the municipal officers are fearful that they will not get their money as soon as the province gets it.


Mr. BOUCHER:: Does the Ontario agreement contain a provision similar to the New Brunswick agreement, that a payment shall be made to the province, earmarked for the municipalities?


James Lorimer Ilsley: No; the New Brunswick agreement is the only one which contains that clause.


Thomas Reid: Can the minister give any information as to what will be the probable gain to the dominion under this agreement?


James Lorimer Ilsley: No; I cannot do that.
I listened with interest to the figures given by the leader of the opposition. He quotes a passage from my budget speech of about a year ago in which I estimated the additional revenues realized from the higher rates of income tax to be $90,000,000.


Richard Burpee Hanson: The net gain.


James Lorimer Ilsley: The net gain, $90,000,000; and we are paying to the provinces a little under $85,000,000. The figure given by the leader of the opposition included a $500,000 overerror in the case of Manitoba.


Richard Burpee Hanson: Yes. I made the figures up before I came here.


Thomas Reid: Can the minister state, apart from any saving by centralization of the collection of taxes in one bureau, what the gain will be, or will he be in a position at some time to tell us? We know what the provinces are getting, and I think it is important to know what the dominion gets.


James Lorimer Ilsley: It will be very hard to break down.


Mr. STIRLING:: I am glad that the hon. member for New Westminster raised that point, because, had he not done so, I was going to raise it. It is quite clear that the dominion government will pay to the provinces $142,000,000 in toto.


James Lorimer Ilsley: Oh, no.


Grote Stirling: That is the total. You add these various payments together and make allowance for the gasoline-


James Lorimer Ilsley: 
Grote Stirling: On behalf of income tax?


James Lorimer Ilsley: Income and corporation taxes and debt services and fiscal need subsidies. That all comes to about 84 J millions; and then we give them a guarantee to keep their gasoline revenues rip to the amount which they were in 1940, namely $55,000,000 or $56,000,000. Practically nothing was due under that guarantee for 1941.


Grote Stirling: Except for this gasoline trouble.


James Lorimer Ilsley: And the amount that will be due for 1942 will depend very largely upon the extent of the gasoline restrictions.


Richard Burpee Hanson: In other words, the gasoline guarantee is not a guarantee of a specific sum of money?


James Lorimer Ilsley: No.


Richard Burpee Hanson: It is a guarantee to take up whatever slack there may be?


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: That is indeterminable?


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: But so far as 1941 is concerned the minister assures us that there will be no payment in respect of that?


James Lorimer Ilsley: About $50,000.


Richard Burpee Hanson: That is a mere nothing. But for the coming year it looks as though there would be a substantial sum paid under that guarantee. You might look forward perhaps to $125,000,000.


James Lorimer Ilsley: I do not think so.


Richard Burpee Hanson: Well,
judging by the traffic on the highways there is not so much gasoline being burnt in my

Income and Corporation Tax
part of the country. I travelled 400 miles on Monday and Tuesday, and you could count the cars almost on the fingers of your two hands. There are hardly any by comparison with the situation a year ago, and I think the situation from that point of view will become progressively better or worse according to one's point of view. If the two-gallon ration is maintained it is likely that practically all motor traffic will disappear. I believe it is well to have that situation cleared up, that the gasoline guarantee is just a guarantee against ultimate loss on the part of the provinces, not a guarantee of any specific sum.


Grote Stirling: Let us not take it that any particular sum is arrived at. I quite understand that the gasoline guarantee is simply a guarantee and cannot now be measured. But I am looking at it from the point of view of what is so commonly called the man in the street. This bill comes before this house as the result of nine agreements arrived at with the provinces with considerable difficulty and after a great deal of work.


James Lorimer Ilsley: Yes.


Grote Stirling: Even to us who sit and talk in this committee it is no easy matter to follow the details; in fact, we do not know the details of the work which has been accomplished in bringing this about. As a member of this house I am asked by a constituent, "Well, the dominion is paying out this sum of money; we quite understand that in future we shall not have to pay provincial income tax; possibly we shall not make certain other payments; but what does the dominion get in benefit in response to this expenditure which it is making, and how will that come on my shoulders?" That is what the residents in any province are asking.


James Lorimer Ilsley: I cannot put any dollar value on it. The dominion is now free to increase its income tax to the level which the people of the country should properly be asked to bear. That may be of very substantial benefit to the dominion as the war years go on. In fact, that has been and is regarded as virtually essential if the dominion government is to finance the war with any degree of efficiency and equity.


Grote Stirling: Releasing money for loans and savings certificates?


James Lorimer Ilsley: No; in taxes. While the provinces were imposing income taxes and corporation taxes, and the municipalities were doing the same, then, whenever a minister of finance approached his budget, he had to examine a variegated picture. He had to
consider the effect upon a taxpayer in Halifax, Vancouver, Toronto, Montreal and so on, and he was restricted and hampered and crippled in dealing with the situation. He would not be if we were in times of peace; not at any rate to anything like the same extent.


Thomas Reid: Was not the argument put up to the provinces that owing to the fact that the dominion government was making large expenditures it was unfair to allow the provinces to take income taxes from expenditures coming from the dominion government? It is therefore most important that it should be known what the revenue is.


James Lorimer Ilsley: That is a second and separate point. But even if there had not been any increase in incomes in the provinces as a result of dominion government expenditures, growing incomes as a result of growing expenditures out of revenues which the dominion has obtained somewhere or another-even if that had not been the situation, nevertheless the government would have been crippled in imposing taxation to too high levels by reason of this irregular and uneven income tax situation that existed from the Atlantic to the Pacific.


Richard Burpee Hanson: The dominion now has the field clear to itself.


James Lorimer Ilsley: It gives a clear field to the dominion and enables the dominion to impose equitable taxation, the same weight on persons with the same capacity to bear that weight, whether they live in Vancouver or in Halifax or in any other part of the country. This sweeps away the debris-perhaps I should not use that word-of all these heterogeneous income taxes and corporation taxes that made it so difficult for us to impose taxes of a proper weight with any equity, and it became important only when taxes became so high. Perhaps I should say it became so important when taxes became so high. It would be important under normal conditions, but it is extremely important in a time of war.


John Ritchie MacNicol: It will equalize taxation throughout the country.


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: We know what the cost is approximately.


James Lorimer Ilsley: Perhaps I may interrupt my hon. friend. The hon. member for New Westminster (Mr. Reid) raises another and interesting point, a very important one, and that is that when the government is spending $3,500,000,000 for war and other purposes, as we shall do this year, in all probability the
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national income is going to be very much greater than it otherwise would be, and the dcminion government are responsible. They have to get, by loans and taxation, money with which to meet that enormous expenditure. From my point of view at least, it is hardly fair to us to be paying out these billions of dollars and increasing the incomes for the benefit of the provincial income tax revenues. It means in the normal course that the provinces will have large and ever larger surpluses and we shall have large and ever larger deficits, and it is perfectly fair to freeze the amount that the provinces get from income tax and corporation tax sources at the level which existed at the beginning of the war. That is one theory that underlies these provincial agreements. It may be that this freezing, so to speak, will prove an advantage rather than a disadvantage to the provinces. It may be that personal incomes and corporation incomes, as a result of price ceiling policies, will not increase as the years go on, and it may be that the provinces are getting more out of this arrangement than they would otherwise, but I do not think so. I think that normally the income tax and corporation tax would rise; the arrangement is fair enough for the proy-inces, as long as they are assured of a pretty heavy return from income and corporation taxes; and the period taken was not unfavourable for the provinces. It is reasonable that they should take that amount and that the dominion should undertake to pay them that; and in view of the income created by enormous dominion government expenditures, which will bring tax returns up as the years go on, I think the taxation on that income should come back for the benefit of the dominion.


Thomas Reid: For war purposes?


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: It is based on the 1939 income, and that was for the most part a period of depression. I do not think it can be said that we were clear out of the depression before the war came. As a matter of fact, I am inclined to the other view, and one point I tried to make against this agreement was the freezing of the returns to the provinces, and to the municipalities in my province, at a figure based on a pre-war period, which might be said to be more or less a depression period. There is no doubt that in New Brunswick, there was in the municipalities an increase in the 1940 assessment over the 1939 assessment. That is why I think there should have been a little flexibility. I am impressed with the
{Mr. Ilslqy.]
argument of the minister that if they were allowed to go on, having regard to the rising rate of national income due to federal government expenditures, they would have had what I might call an unearned increment or something of that sort.


James Lorimer Ilsley: A windfall.


Richard Burpee Hanson: A windfall. I think there is something in that. I still think, however, that it should not have been frozen on the 1939 income. The minister, I understand, was pretty inflexible about that, and I should like to know the reason why. Is it because he felt that there was substantial government expenditure in 1940 which should not be taken into account.


James Lorimer Ilsley: I took the actual tax receipts in the year 1940.


Richard Burpee Hanson: Yes, but that was on 1939 income.


James Lorimer Ilsley: Yes, in some cases, and in some cases it was not. I would not condemn the 1939 income too readily. A great many companies had a fine year in 1939; a good many taxpayers had a good year; their inventories were enhanced in value at the end of the year for some reason.


Richard Burpee Hanson: There was a war on.


James Lorimer Ilsley: The last four months of 1939 were war months, and income was not poor at all. However, it is a matter of judgment as to what year to take and how to select your year. We did the best we could in taking the fiscal year which ended nearest to December 31, 1940, and we stuck to it. The leader of the opposition says I was inflexible. I certainly was, because if there was one feature of this agreement that one had to stick to it was that. If we began varying the amount payable to the provinces according to an estimate-


Richard Burpee Hanson: It would not be an estimate; they could make their assessments. I understand how it could be worked out. I think the minister could have given more effect to that theory. However, he has not, and these agreements do not incorporate it, so I suppose it is a waste of time to discuss it now, except to point out the position.
Coming back to the point raised by the hon. member for New Westminster and my colleague, we have on one side 185,000,000 of which we are certain. I suppose there is no chance of these people from the provinces coming back and asking for more, on the basis of fiscal need. Later I am going to ask about these grants for fiscal need. It looks to me

Income and Corporation Tax
like a hand-out. I should like to know something about the basis. On the other hand we must know with some degree of certainty what we are getting to balance this $85,000,000, plus the contingency arising out of the gasoline guarantee. Certainly it will amount to a substantial sum if things go as they are going now. Last year the minister said it did not amount to much, $50,000, which is really nothing. But we had a 10 per cent increase in corporation income taxes plus excess profits tax. The department should know what that means because they have the returns in. The personal income tax returns were in by March 31 at the increased rates. The corporation income tax returns were in by April 30. I do not know if they have been compiled yet. While the amounts are not fixed, there must be some estimate of what the increased taxes arising out of the 1941 budget total, which are to compensate for and out of which the dominion government pays this $85,000,000 plus the guarantee. If we are not going to get $85,000,000 plus the guarantee we did not make a very good bargain. I think the minister should give that information, or he should ask that the committee rise until it is obtained.


James Lorimer Ilsley: I do not think that information could be obtained in such a form as to be of any value. The estimate that the leader of the opposition read was that $90,000,000 additional would arise from the increased income tax rates-


Grote Stirling: That has nothing to do with this.


Richard Burpee Hanson: But I am offsetting it against the $85,000,000.


James Lorimer Ilsley: Yes; that has to do with it. The question I understand is, how much money shall we get from the increase in income tax and corporation tax rates which these agreements make possible. Is that not the question?


Richard Burpee Hanson: Not quite that. You could have had the increased rates without these agreements at all; but we all agree that it would have been inequitable to do so. However, you made the agreements; you got these provinces to vacate the field; you buy them off to the amount of $85,000,000. What are you going to get to recoup these outlays? The minister made an estimate of $90,000,000; that is how I interpret the figures of his last budget speech. If that is all, it is hardly worth while. I think myself it will be more. But when you take into account the contingent liabilities that the government has incurred with respect to the gasoline guarantee you may find a deficit on this instead of a credit.
Mr. 'ILSLEY: The liability under the gasoline tax guarantee should not be set off against what we get, because we would have been obliged to look after the provinces in some way. If by putting in gasoline regulations we take ten or twenty million dollars off the revenue of a province like Ontario we could not shut our eyes to that. It might not be so fatal in the case of Ontario, although their gasoline tax revenue was $26,000,000 in 1940. We would have been obliged to do something; we cannot bankrupt a province by our acts without some provision. What would have happened would have been that the provinces would come here and by pressure, by successful presentation-


Richard Burpee Hanson: They would have had a case.


James Lorimer Ilsley: Yes; by way of advocacy they would have argued for this and that; we should have been obliged to work out something as fair as possible; and I doubt if it would have been as fair as this.


Richard Burpee Hanson: The minister says that if he had not given the gasoline tax guarantee it would have been inequitable to pass the rationing regulations and such things. What has the minister to say about this question of price-fixing? He did not think much of it in 1941. In the debate on the address in November, 1941, he condemned the whole policy of price-fixing.


James Lorimer Ilsley: I do not think so.


Richard Burpee Hanson: I have not the minister's words here; I will send upstairs and get them. However, that is only in passing. What does he think of the situation brought about by the price-fixing policy? Is he going to bankrupt all the small grocers? By adopting a policy of rationing tires and gasoline he has put out of business an army of men who were engaged in selling automobiles. Does that appeal to the minister as ethically wrong? In the United States I read that they have appropriated $600,000,000 or so to take care of the wreckage of that business. We have not done anything like that in Canada. And, believe me, that business is a wreck. If you do not believe me, go to any of the big garages in this country that were engaged in selling automobiles. You will see men vainly striving to adjust themselves to the condition, coming to Ottawa to try to get some part of the "bits and pieces" programme, with very little success. I think there is a man in this city to-day; there was last week, from a big, well-equipped garage

Income and Corporation Tax

in New Brunswick, who was trying to get something to help save his investment. On the same principle as applies to the provinces and the gasoline tax, what does the minister say he should do for these people? Take the corner grocer who, before the price-fixing, sold peas based on a certain cost, not on replacement cost at all. To-day he has to sell at the same price, which may be three cents a tin less than they cost him. What is going to happen to him? Either he must sell these peas at a loss or not handle peas. The same thing will apply to his whole stock in trade. The result is that he has either to do business at a loss or to go out of business. They are going to the wall just as fast as they can. What is the government going to do for these men?


James Lorimer Ilsley: I do not admit that that is the situation at all.


Richard Burpee Hanson: I can
demonstrate it. The minister living here in Ottawa does not know what is going on round him, and his people do not tell him.


James Lorimer Ilsley: Does the hon. gentleman
say that bankruptcies have increased?


Richard Burpee Hanson: I have
not any figures, but I know that men tell me, "I just cannot go on if I cannot have a cent or two on my prices." These men are not profiteering, they just want a chance to live, and they are not being given a chance. However, this is aside from the point we have been discussing. But I think I ought to tell the minister that the retail trade in this country is suffering. It is suffering because of the inflexibility of the position taken by the government with respect to prices. There is going to be no subsidy for these men. Perhaps something ought to be done with respect to the cost of production, so that there could be a spread between them and the wholesale. But there is no doubt that these men either must sell certain commodities at a loss, or must not sell them at all. If you carry that far enough, they are out of business.


James Lorimer Ilsley: Well, these are very general
statements, and they are irrelevant to the discussion.


Richard Burpee Hanson: I agree
with that.


James Lorimer Ilsley: The hon. member mentioned some commodity; was it tea?


Richard Burpee Hanson: I believe
it was peas.


James Lorimer Ilsley: I think it will be found that the hon. member's statements are entirely too broad, and that they are not justified by the

facts. Certainly an enormous amount of work has been done in giving reasonable protection to people in business in connection with the application of this price-ceiling policy. I might have said what I thought was happening in the instance to which the hon. member has referred, but I am not quite sure enough of my facts to make a statement.


George Russell Boucher: If the minister wants an
illustration I will give him one to which my attention was drawn to-day. I refer to a merchant right in this city who is selling cured meats, and who has found himself in a position in the last three weeks of having orders he cannot fill. The price ceiling has limited the market to such an extent that he cannot get meat to cure. Then, he has had trouble with the Department of Munitions and Supply. He used his car to deliver from his wholesale producing plant to local grocers. It was a touring car, not a truck, and he received a C-3 permit. Yesterday that permit was called in, and he has received an A-l permit which will not permit him to deliver his goods. I have just drawn this point to the minister's attention, although perhaps the discussion is wholly irrelevant. However, my observation would lead me to believe that the small independent retail grocer or the small business man, by subsidies more than by fixing, is being submerged to a level where he cannot get the commodities at a price at which he can retail to the public, and at the same time compete with the mass production carried on in chain stores and cooperative enterprises. That is definitely the situation in this section of the country, and particularly in the city of Ottawa where the independent retailer in the merchandising business is paying a very, very severe penalty for price fixing.


John Ritchie MacNicol: I am not going to refer to the question of price fixing, but I wish for a moment or two to speak respecting the small business man, whose position was mentioned by the leader of the opposition.


James Lorimer Ilsley: I do not wish to be too strict, because I always hope that these little flurries will die down, but when the debate reaches a point where it is one of another subject entirely, I feel I have to raise a point of order.
Mr. O'BRIEN: Perhaps the point I wish to make might be brought up more properly on section 5. However, there is a broad principle which might be discussed under this section. I understand the tax on gasoline sales has been fixed as of the year 1940. In view of the rationing of gasoline, which has been so severely inaugurated in the maritime

Income and Corporation Tax
provinces, there would seem to be a great danger of loss in revenue, due to the fact that cars will not be put on the road. New Brunswick-and I speak particularly for it, believing that the other maritime provinces are in a somewhat similar position-will lose a great amount of revenue which it formerly received from that source. I am just wondering if at the time these agreements were signed there was any provision whereby because of some act of the federal government, such as the procedure of rationing, a further study could be made to compensate provinces for changes which were unforeseen when the agreement was signed.
Then again, in somewhat the same category might be placed the sales of liquor. If it was expected that those sales would 'bring in a certain revenue, as was the case with respect to motor cars when the agreements were signed, in the event of some change being made by the federal government can the provinces ask the minister for a reconsideration?


James Lorimer Ilsley: The fiscal needs subsidies
were fixed once and for all, and were not based on the principle of flexibility. That principle had to be decided at an early stage in the discussion with the provinces.


Richard Burpee Hanson: They were merely hand-outs, were they not?


James Lorimer Ilsley: No; fiscal needs subsidies are, in my judgment, necessary to enable the provinces to carry on. I could give reasons why they are.


Richard Burpee Hanson: We shall come to that later.


James Lorimer Ilsley: It must be remembered that part of the time critics are saying that we have not made adequate provision for the growing requirements of the provinces and the municipalities, and the other part of the time they are criticizing what we are giving as a mere hand-out.


Richard Burpee Hanson: That
feature is certainly a hand-out.


James Lorimer Ilsley: But, with regard to the
point raised by the hon. member for Northumberland, New Brunswick-


John Ritchie MacNicol: Which, by the way, was the same point I was going to raise, but the minister objected to it.


James Lorimer Ilsley: Then the hon. member for Davenport made a bad introduction, if he was going to speak on that point.


John Ritchie MacNicol: Maybe I did; but I did
not get a chance to start.
44561-mt


Mr. MacINNIS:: Your approach is bad.


James Lorimer Ilsley: I thought the hon. member for Davenport was beginning a sympathetic examination of the problems of the small business man. That was the subject upon which he was launching.
The point raised by the hon. member for Northumberland, New Brunswick, namely that of revenue from motor car licence fees, was given careful consideration. It is an important element in the revenue of New Brunswick. It is also an important element in that of Nova Scotia, and also in that of some of the other provinces.


Richard Burpee Hanson: We have there, I believe, the highest tax in the world.
Mr. O'BRIEN: On automobiles.


Richard Burpee Hanson: Yes.


James Lorimer Ilsley: I do not know whethei they are record taxes or not, but I know they are important.


Richard Burpee Hanson: They are.


James Lorimer Ilsley: My information is that for this year, 1942, there will be no important diminution in revenues from car licence fees. However, it is feared there will be an important diminution in 1943.
Mr. O'BRIEN: May I interrupt to say that licences in New Brunswick are sold in two divisions; that is they are sold for half years. That might be an important factor there.


James Lorimer Ilsley: It might be a factor, yes. But answering specifically the question the hon. member asked, I must say that no provision is made for that affecting the fiscal needs subsidy. When the request was made that a guarantee be given with respect to the revenues from car licence fees, similar to that with respect to revenues from gasoline, I declined to give it favourable consideration. I said that if we were to examine all sources of revenue, the dominion perhaps should be receiving a guarantee that a certain amount of the service should be taken over by it. For example, if liquor revenues and car licence revenues were considered together instead of separately, and were frozen at the level of 1940 or 1941, probably the province would sustain a substantial loss.


John Ritchie MacNicol: And the minister might have added marriage licences, too.


James Lorimer Ilsley: While some of the provinces would have liked an arrangement whereby they could have obtained a guarantee of all the revenue that we are likely to take, and had been left free to keep the surplus of all
Income and Corporation Tax

revenues we are likely to raise, I did not consider that would be a fair arrangement for the dominion-and neither it would have been. If something very bad happens, I suppose the matter can be considered, but in connection with these agreements the fiscal needs subsidies are not to vary.
Mr. O'BRIEN: If it is the result of action by the dominion government, then the dominion government should consider the situation more favourably than it has.


James Lorimer Ilsley: I never can say what will be done in any particular emergency, but the government will have to discharge its responsibilities when the time comes. I do not want to lay down the general proposal here that we are going to guarantee absolutely that the provinces will be kept in a particular position. The gasoline matter is so big and so important and fundamental to the revenues of the provinces that I say that we could not do something drastic like prohibiting altogether the use of gasoline for pleasure driving, a prohibition which might possibly come during the war, and shut our eyes to the financial consequences to the provinces.
At six o'clock the committee took recess.
After Recess
The committee resumed at eight o'clock.


James Lorimer Ilsley: Mr. Chairman, the leader of the opposition this afternoon asked me to try to get some figures indicating the increase in the revenue derived from income tax for 1941-42 over 1940-41. The hon. member for Yale put the problem in this way. He said: The man on the street may say to me, "In order to get the provinces out of the income and corporation tax fields, you as a member of parliament voted and paid out to the provinces $84,500,000 to $85,000,000. To what extent did the dominion recoup itself?" I expressed the opinion that it would be impossible to give an answer to that in figures. I tried to outline some of the advantages from the point of view of taxation policy which accrued from getting the provinces and the municipalities out of the field, but I did not think a value in figures of any accuracy could be put upon that advantage. I have, however, ascertained the increase in revenue from national defence tax, personal and corporation income tax and excess profits tax for the twelve months ending May 31, 1942, there being a small element of estimate in that figure,
lMr. Ilsley.]
compared with the revenue for the twelve months ending May 31, 1941. The increase is startling, tremendous; it is $347,200,000.


Richard Burpee Hanson: That
would be partly attributable to the increased rate. The minister lumps the three together. Can he give the figures for income tax alone, divorced from excess profits tax and national defence tax?


James Lorimer Ilsley: Yes. The increase in personal and corporation income tax alone is $105,100,000.


Richard Burpee Hanson: Therefore the minister's estimate of $90,000,000 was really under the actual figure.


James Lorimer Ilsley: The two are not comparable. One must put them all in because the increase in the tax on corporations from 30 to 40 per cent was an increase in excess profits tax. The corporation income tax is 18 per cent, and we did not change it. We increased the minimum excess profits tax from 12 to 22 per cent, and therefore the excess profits tax must be included with personal and corporation income tax in any fair comparison. National defence tax should be in there too, because that is really an income tax and was part of our total increase in taxation provided for in the 1941 budget. It is not fair to say that we have paid out $84,500,000 and that we have got in return $347,200,000.


Richard Burpee Hanson: Not to put it bluntly like that, I agree.


James Lorimer Ilsley: No, for two reasons. In the first place we could have increased our income and corporation tax and the national defence tax to some extent, even if the provinces and municipalities had stayed in the field. As a matter of fact, we increased the excess profits tax and the income tax on corporations from 30 to 40 per cent, an increase of 10 per cent of the income, but we calculated that the provinces were collecting only 7 per cent, so in that case alone of corporation and income taxation we put on a little more than we got the provinces to take off.


Richard Burpee Hanson: That is my understanding.


James Lorimer Ilsley: That is the first qualification of this figure which must be taken into account. The second qualification of course is that this tremendous increase of $347,200,000 for this year over last year is not due entirely to an increase in the rate but partly due to an increase in business.

Income and Corporation Tax


Richard Burpee Hanson: Quite so.


James Lorimer Ilsley: No hon. member need be under the apprehension that we are paying out this $84,500,000 or $85,000,000 and that our receipts from taxation have gone up that much. They have gone up $347,200,000, but-
Mr. HANSON (York-Sunbury:) From all the sources the minister mentioned. I suppose it is not possible to separate the figures and show what was due to the increased rate and what was due to increased business.


James Lorimer Ilsley: No.


Richard Burpee Hanson: That would be a tremendous task, and I could hardly expect the minister to get the figures. But the figures the minister has given are revealing. They are perhaps a little beyond what I had anticipated. Of course the rates are exceedingly high. Has the minister given any consideration to the question whether he has not reached the saturation point in this class of taxation?


James Lorimer Ilsley: I should not like to say anything about that at this stage of the session.


Richard Burpee Hanson: There is no harm in flying a kite once in a while. I have been examining a comparatively large number of financial returns as they have been published from time to time in the financial papers, and I have been impressed with this fact, that owing to the very heavy increase in taxation the net profits are, in most instances, away below what they were before the increase in taxation. I am not complaining about that because the country must have the money, but I know of a company which showed a gross profit of $5,400,000, the best in its history. The write-offs for various items reduced that figure to a net of $2,400,000, and because the tax had not been assessed the directors of the company had to appropriate the whole sum and the shareholders got nothing.


Alexander Malcolm Nicholson: I am very glad that the minister answered the leader of the opposition as he did. I think it would be unfortunate if any statement should be made at this time indicating that we have reached the maximum.
I have two interesting tables before me. One is in the account of the budget speech delivered by the present Minister of National Defence (Mr. Ralston) in 1940, when he was Minister of Finance. On page 17 is a table showing the income tax payable in the different provinces. I notice quite a wide variety of rates. In British Columbia, for example, married persons receiving $500,000-


An hon. MEMBER:: If any.


Alexander Malcolm Nicholson: -are taxed, according to the 1940 rate, $357,000. There is a provincial tax of $135,000. Elsewhere the provincial rates are approximately:
Alberta	 $145,000
Saskatchewan	 181,000
Manitoba	 50,000
Ontario	   24,000
Quebec and Montreal	 76,000
Prince Edward Island	 15,000
It will be seen that the rates range from $15,000 in Prince Edward Island to $181,000 in Saskatchewan. I suppose it can be taken for granted that there is no one in Saskatchewan in receipt of so large an income.


Karl Kenneth Homuth: Is the hon. member sure of that?


Alexander Malcolm Nicholson: I am quite sure of that, although the rates are not broken down on that basis.


Karl Kenneth Homuth: How about summer-fallow?


Alexander Malcolm Nicholson: Could the minister
explain how the rate brought down last year was arrived at, as shown on page 15 of his budget speech. I find that for the same income group, now that the provinces have retired from the field, the proposed tax is $401,000. That is a good deal less than the combined provincial and federal taxes imposed in 1940 in all the provinces with the exception of Ontario and Quebec. Indeed, in respect of incomes of $200,000, $150,000 and nearly all the way down the line, the amount is lower than the rate which was in effect in the previous year in the province of Quebec and Montreal. I imagine that in that province, particularly in Montreal, there is quite a large number of people in these higher income groups. Could the minister give any good reason why, under these new rates of taxation, which according to his statement last year are about as extreme as we can expect, the rates are lower than those previously prevailing in the province of Quebec when his predecessor brought down his budget?


James Lorimer Ilsley: I shall have to check the statements, to begin with. I think the hon. gentleman has left out any investment surtax, has he not?


Alexander Malcolm Nicholson: I am simply comparing these two similar tables.


James Lorimer Ilsley: I think he has also left
out national defence tax, which is very substantial.


Alexander Malcolm Nicholson: No. The figures I have given are after providing for national defence
tax.
Income and Corporation Tax


James Lorimer Ilsley: I suggest that, if the hon. member can spare his documents he should send them over. Perhaps I can check them here and give him an answer. I may have to ask him to wait until another day. Usually figures of this sort require a little study before a categorical answer can be given.


Karl Kenneth Homuth: It is rather difficult to preserve sequence in this debate. Just before six o'clock the hon. member for Northumberland, New Brunswick, asked certain questions with respect to the gasoline tax and the liquor tax. I was about to ask a question when the hon. member for Renfrew South (Mr. McCann), who was in the chair, declared that it was six o'clock. We come back at eight o'clock and find that we have to take up an entirely different trend of thought. We were discussing whether there would be any agreement as between the provinces and the dominion government with respect to the lowering of gasoline tax revenues as a result of war conditions. At that time the minister said that there are certain things which we cannot control; that we cannot predicate our taxation on war conditions. I quite appreciate that. But one thing which war conditions do not particularly affect is the revenue derived by the provinces from liquor. I know the minister and all other hon. members realize that, apart from provincial revenues from mining and lumbering-and even those are more or less controlled by the federal government through the controllers whom we have appointed- the greatest provincial revenue comes from liquor taxation. In view of the arrangement made as between the federal government and the provincial governments there is something which I think it is important that the provinces should know, particularly in view of the campaign which is going on from Halifax to Vancouver in favour of curtailing not only the sale but also the manufacture of alcoholic beverages. Would the minister be prepared to say now, so as to give some assurance to the . provinces that are depending on this revenue to carry on their various paternal and social legisative enactments, that the federal government has no idea at the present time of making any change whatsoever in the liquor laws which would adversely affect-


An hon. MEMBER:: The breweries?


Karl Kenneth Homuth: No, the revenue. I am not talking about the breweries alone. I am speaking of revenue. This is the revenue which hon. members connected with the Cooperative Commonwealth Federation are always asking about-revenue belonging to the provinces. Is the minister prepared to say that the federal government will not introduce

any legislation which will adversely affect the revenues of the various provinces so far as it is dependent on the sale of alcoholic beverages?


James Lorimer Ilsley: I would not care to make a commitment of that kind. I wrote the premier of Ontario some months ago that it was not the intention of the dominion government to step into the field of regulation of the sale of liquor, that the dominion considered that that should be left to the provinces; and that is what I do feel about that. I believe that the provinces should assume and properly discharge the responsibility of regulating the sale of liquor. But if the hon. gentleman wants me to go to the length of saying that no legislation will be introduced which may adversely affect the revenue from the sale of liquor, I do not know what the ramifications of that commitment would be, and I would not like to make it.


Richard Burpee Hanson: There is no question about the jurisdiction to do it, though.


Karl Kenneth Homuth: The minister perhaps misunderstood me. I realize that his budget may, through taxation, affect indirectly the sale of liquor. What I am getting at is, that the federal government is not prepared to bring down any legislation which will curb sales, apart from the fact that extra taxation may be levied. The federal government does not intend to bring about any question of prohibition in the country?


James Lorimer Ilsley: The statement I made in my letter to the premier of Ontario, which was given publicity at the time, still stands. It is not our intention to regulate the sale of liquor. That we consider is primarily at least within the jurisdiction of the provinces, and the provinces should assume and discharge that responsibility. I think they are prepared to do so.


Richard Burpee Hanson: The
government is not prepared to exercise any measure of control over the sale of intoxicating liquors, but the question of taxation is quite another matter. The minister distinguishes between the two.


James Lorimer Ilsley: Yes. I can imagine other ways. I do not want to foreshadow anything, because I have nothing in mind as likely to be done, but I can imagine other things that might possibly affect the production of liquor, or something of that kind.


Richard Burpee Hanson: Or the importation.


James Lorimer Ilsley: Yes, something of that kind. I do not know what it may be necessary to

Income and Corporation Tax
do before the war is over, but it is not our present intention, any more than it was at the time I wrote Mr. Hepburn and gave the letter to the press, to enter into the field of regulation of sale in the provinces.


Richard Burpee Hanson: Although the jurisdiction is there.


James Lorimer Ilsley: We have the power under the War Measures Act.


[Stage Direction]
Section agreed to.
On section	2-Agreements	with the
provinces
Alexander Malcolm Nicholson: Will the minister make a statement with regard to the point I raised?


James Lorimer Ilsley: It is unfortunate that the hon. gentleman has not these documents before him so that he can follow what I say. The tax on a married person with no dependents, having an income of $500,000, is now $401,120. That includes national defence tax, but does not include the surcharge on investment income. This was not exactly a new feature, but the tax on investment income was changed last year so that it became a much more important feature of taxation than it was before. But without that, the tax on a married person with no dependents is $401,120. Before that, it is quite true that in Alberta the combined dominion and provincial taxes amounted to $502,935. That is more than 100 per cent of the income and is not in accordance with my views as to what taxation should be. I do not believe in more than 100 per cent income tax.


Alexander Malcolm Nicholson: If the minister would confine his comparison between the present tax and the tax prevailing in Ontario and Quebec, that would give real cases, because there are no people getting $500,000 in the western provinces.


James Lorimer Ilsley: I will read them and come to Ontario and Quebec. I do not know how many people have incomes of $500,000. I think they would be confined practically to Ontario and Quebec, but since the hon. gentleman mentioned the other provinces I may give the figures. The tax in Saskatchewan on a person of the description I have mentioned, having an income of $500,000, was $538,332.18 which was a bit heavy even for so rich a man. British Columbia, I believe, was mentioned.


Richard Burpee Hanson: Give us the whole picture.


James Lorimer Ilsley: I want to mention the ones the hon. gentleman mentioned.


Alexander Malcolm Nicholson: I mentioned them all.


James Lorimer Ilsley: In British Columbia the tax was $492,230. We now come to Ontario and Quebec. Ontario would be the most important province from this point of view and the tax was $381,103.30. That was raised to $401,120 plus the special tax on investment income, whatever the amount might be. In Quebec, the figure given by the hon. gentleman included three taxes-the dominion tax, the provincial tax and the city of Montreal tax. These three taxes did amount to $433,682. It may have been that there were taxpayers in the city of Montreal-I do not know-who paid in one or more years $433,000 dividing it up among the dominion, the province of Quebec and the city of Montreal, and that did become $401,120 plus the surtax on investments. The hon. gentleman asks, why did we reduce that? I presume we thought that $401,000 was pretty good, that it was about a fair rate of taxation. It is a pretty large proportion of the income and raised substantially the tax on persons in that category in Ontario, where I believe most of them would be. It is not fair to base a tax on a triple tax. The triple tax that existed in Montreal was recognized as-not exactly a scandal, but an undesirable arrangement.


Richard Burpee Hanson: Inequitable.


James Lorimer Ilsley: Yes, inequitable.


Alexander Malcolm Nicholson: While i'discussed just this one group-and I agree that we have not a very large number of people in this $500,000 categoiy-I quoted figures all the way down the list in the province of Quebec and in Montreal of taxes prevailing higher than the present tax. I cannot agree with the minister's statement that the $433,000 tax in the province of Quebec is too high under present circumstances. The President of the United States in one of his recent addresses referred to a maximum income of $25,000, and the taxation that prevailed in Quebec left around three times that amount to people in this particular bracket. It seems to me that the tax prevailing in Quebec before -the minister brought down his budget last year should be the minimum rate that should prevail under the new legislation. I know the rates arrived at have been a compromise between Ontario and Quebec, where most of the people in these higher income groups are found. It seems to me that consideration might have been given to retaining the rates which prevailed in Quebec.


James Lorimer Ilsley: My hon. friend should say
the city of Montreal.
Income and Corporation Tax


Alexander Malcolm Nicholson: And Quebec.


James Lorimer Ilsley: No; the hon. gentleman has selected the one place in the province of Quebec where he gets these rates; he gets them by combining three taxes: dominion, provincial and municipal; and he says that should have been our model, that we should have based our legislation on the Montreal situation. I do not agree with him. With regard to whether the rate should have been raised this year to that figure or a higher figure or to an amount that would leave a man only $25,000 is a matter for consideration. But a year ago there certainly was no $25,000 ceiling in the United States nor was one thought of.


Richard Burpee Hanson: Nor will there be.


James Lorimer Ilsley: Nor is there yet, for that matter.


Alexander Malcolm Nicholson: I do not wish to labour this point, but when the present Minister of National Defence brought down his budget in 1940 I remember one hon. member from Montreal, I think the hon. member for West-mount, stated that he had no doubt there were more people in his constituency who would be affected by this drastic increase than perhaps in any other constituency, and he was pleased to say that he had not received a single criticism from anyone in his constituency regarding this increased taxation. While I agree that the tax scale which prevailed in Montreal was higher than any in-the rest of Canada, I think, in view of the statement of that hon. member, that scale should have been maintained in subsequent budgets in deciding what would be a fair rate.


John Ritchie MacNicol: I should like to ask the minister a question in reference to the latter part of section 2 reading:
. . . and subject to such exceptions as may be set out in such agreement, for the duration of the war and for a certain readjustment period thereafter. . . .
Has the minister arrived at any understanding with the provinces as to the length of this "certain readjustment period"?


James Lorimer Ilsley: Yes, that is provided for in the agreement, section 23:
This agreement shall continue in force until and terminate on the last day of the fiscal year of the province ending nearest to the thirty-first day of December in the first calendar year which begins after the date of cessation of hostilities complete or substantial between the Dominion of Canada and Germany, Italy and Japan unless sooner terminated pursuant to the provisions hereof.


Richard Burpee Hanson: How long might that be? My lightning calculator says it might be anything from thirteen to twenty-three months. Does the minister agree?


James Lorimer Ilsley: I would have to work at that to see what the maximum might be. I think something would depend on the dates on which the fiscal years of the provinces end.


Richard Burpee Hanson: That is one of the starting points.


James Lorimer Ilsley: Yes. I do not want to work it out now unless I am obliged to.


Richard Burpee Hanson: This bill must have been drafted after the agreements were drafted. I wonder why this rather indefinite phrase is used when the minister has in the agreements themselves what would appear to be a definite statement which could be worked out mathematically in respect of each province. Why should that not be in the bill?


James Lorimer Ilsley: There was not much need to insert it; the agreements were all prepared and . agreed on, and everyone knew what it was. A short summary description of the period after the duration of the war was all that was necessary for the bill.


Richard Burpee Hanson: In other words, this phrase is merely descriptive?


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: I think it could have been better drafted.


[Stage Direction]
Section agreed to.
On section 3-Annual amount of compensation.
Richard Burpee Hanson: Were the figures contained in 3 (a) in the case of the provinces which elected to accept their income and corporate tax payments audited by the federal authorities?


James Lorimer Ilsley: Yes; that is correct.


Richard Burpee Hanson: Those
figures are vouched for?


James Lorimer Ilsley: Yes. I have a correction to make, an amendment to move relating to the amount for Manitoba.


Richard Burpee Hanson: How did the error occur?


James Lorimer Ilsley: It was either a typing error or a printing error. I think it arose in this way, that the first instead of the corrected copy of the bill was handed to the officers for

Income and Corporation Tax
printing. It was not an error in calculations. That is shown by the fact that the last five figures are the same.


Richard Burpee Hanson: What
should the figure be for Manitoba?


James Lorimer Ilsley: It should be $5,054,740.92.


Richard Burpee Hanson: There was another amendment-


James Lorimer Ilsley: They come in sections 4 and 5.


John Ritchie MacNicol: I should like to ask a question based on that part of paragraph (a) of section 3 which reads:
. . . being an amount in each case calculated as equivalent to the total revenue obtained by the said provinces from personal income and corporation taxes during the fiscal year of each of said provinces and of municipalities therein ending nearest to the 31st day of December, 1940. . . .
And that part of paragraph (b) of the same section which reads:
. . . being an amount in each case calculated as equivalent to the net debt service paid by the province during its fiscal year ending nearest to December 31, 1940.
Is the basis on which these amounts are granted the same, in spite of the expressions used in describing how the amount is made up? In one case we find the expression "equivalent to the total revenue obtained by the said provinces from personal income", and in the other case "equivalent to the net debt service".


James Lorimer Ilsley: Those are different bases, entirely.


John Ritchie MacNicol: What is the difference? tVhat is the reason for the different bases?


James Lorimer Ilsley: Because the option is given to provincial governments to accept the amount of the tax collections or the amount of the debt service, less succession duties. Some of the provinces took one option and some took the other one.


Mr. McLARTY:: I move, in accordance with the observations of the Minister of Finance:
That the figure $5,634,740.92 on line 33, subclause (a), clause 3, be amended to read "$5,054,740.92."


Thomas Reid: With regard to the proviso, what is really involved by saying to any province that any arrears of personal income and corporation taxes collected by them shall be deducted from the annual amount provided them by the dominion government, and later on be paid? Why should a province not be
allowed to collect its arrears of income tax and immediately apply those arrears to its annual expenditures?


James Lorimer Ilsley: It would give them entirely too much the first year. It would give practically twice the revenue they require. If that were done in Ontario, for instance, it would mean that instead of having about $30,000,000, Ontario would have about $60,000,000 on which to operate in the year 1941-42. That would, of course, be entirely unnecessary. It would mean that at the end of the time there would be a year when Ontario would have nothing. Therefore the arrearages-I believe that term was used by an hon. member-are held back by the dominion to be paid at the end of the time.


Richard Burpee Hanson: Payment is just postponement. I should like to ask a question with respect to the figures in paragraph (b). I believe Nova Scotia had an income tax, had it not?


James Lorimer Ilsley: No.


Richard Burpee Hanson: A personal income tax?


James Lorimer Ilsley: No, no provincial personal income tax.


Richard Burpee Hanson: Neither did New Brunswick. Prince Edward Island did, did it not?


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: And Saskatchewan did?


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: It is obvious that New Brunswick, not having had any personal income tax, and having a limited corporation tax, would have fared rather badly if the other alternative had been chosen. I believe they have chosen the wiser course. In the case of Nova Scotia, what would be the difference? I understand they had a corporation tax, but no income tax?


James Lorimer Ilsley: That is correct.


Richard Burpee Hanson: The same with New Brunswick.


James Lorimer Ilsley: Nova Scotia had a corporation income tax, as well as corporation taxes; they are different.


Richard Burpee Hanson: They had a profits tax.


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: I think New Brunswick had something like that; and Saskatchewan had an income tax.
Income and Corporation Tax


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: Has the minister the figures available for Saskatchewan to show what the figure would have been, had that province accepted the alternative (a) rather than the alternative (b) ?


[Stage Direction]
Amendment agreed to.
James Lorimer Ilsley: 
Richard Burpee Hanson: That comes in under section 4.


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: What
would be the figures for New Brunswick?


James Lorimer Ilsley: Had New Brunswick selected option (a) they would have received $2,450,067.45, instead of which, by selecting option (b), they receive $3,278,574.15, in addition to the fiscal needs subsidy.


Richard Burpee Hanson: Will the minister put Nova Scotia and Prince Edward Island on record, too?


James Lorimer Ilsley: Yes. I shall give the figures for Prince Edward Island first. Had Prince Edward Island selected option (a), they would have received $251,943.96, but by taking option (b) they got $264,769.94, in addition to the fiscal needs subsidy. If Nova Scotia had taken option (a), they would have received $1,611,078.03, but by taking option (b) they received $2,585,308.72, in addition to the fiscal needs subsidy.


Richard Burpee Hanson: The proviso is that the provinces are not entitled to the arrears at the moment. They are postponed until after the termination of the agreement. What is the position with respect to arrears of income tax qua municipalities?
I understand that they are allowed to collect their arrears. Is that correct?


James Lorimer Ilsley: They are treated the same as the provinces.


Richard Burpee Hanson: Is the minister quite certain about that? The impression has gone abroad in New Brunswick that they are entitled to retain their arrears of income 
tax in addition to the government grant provided for in appendix D, which aggregates $1,384,000.


James Lorimer Ilsley: It all depends upon what is meant by arrearages. It must be remembered that the term of this agreement, in the case of New Brunswick, begins on November 1, 1940.


Richard Burpee Hanson: That is
the beginning of their fiscal year.


James Lorimer Ilsley: Each agreement begins on the beginning of the provincial fiscal year nearest to January 1, 1941. In the case of New Brunswick their fiscal year begins November 1, 1940. They are entitled to the payment provided for by this agreement for the period beginning November 1, 1940. At the same time, during the first fiscal year of the agreement and during subsequent fiscal years, but to a smaller degree, they will be actually collecting arrearages. During the first year they will collect a very substantial sum, perhaps nearly as much as the amount payable to them from the dominion.


Richard Burpee Hanson: Say 50
per cent as an illustration.


James Lorimer Ilsley: We could find out exactly, but I think it might go as high as 90 per cent of what was due them from the dominion. They would keep those arrearages and the dominion would simply pay them the remainder.


Richard Burpee Hanson: Deduct
them.


James Lorimer Ilsley: It would be the same as if they deducted the amount of the arrearages. Those arrearages would be accumulated by the dominion in that and subsequent years. If they collected some back taxes, which would be truer arrearages, they would subtract those from the payment due from the dominion until the dominion had in its hands a sum equal to the payment due the province for the first year. Then, after that, if the province collected any arrearages they could keep those arrearages and do anything they liked with them. At the end of the agreement they would be entitled to the accumulation of arrearages which the dominion would have in its hands and which would be a sum equal to the payment due the province for the first year.


Richard Burpee Hanson: I understand that.


James Lorimer Ilsley: That is the arrangement applied to the municipalities.

Income and Corporation Tax


Richard Burpee Hanson: I am glad to have the minister make that specific statement because the municipalities think they are going to have their grant from the dominion through the province on the basis of this agreement and hold their collections as well.
I think nearly all the municipalities run their fiscal years coincident with the calendar year, and a comparison is a little difficult. In the case of Fredericton, the assessment just out is on the basis of their getting the full amount named in the appendix, namely $79,949.93. But there are always collections on account of arrearages, and those would be deducted from that item by the province, or be paid over to the province and handed to the dominion, or whatever machinery might be used. It would be accumulated until the end of the period. They are not going to have that now-that is quite clear from the minister's statement-in addition to the grant.


James Lorimer Ilsley: I do not think that is the
situation.


Richard Burpee Hanson: Then I
should like to know what it is.


James Lorimer Ilsley: It is so hard to explain
this.


Richard Burpee Hanson: Perhaps
I am dense.


James Lorimer Ilsley: The hon. gentleman certainly is not; it is just one of those matters that mixes anyone up for the first three months. We shall have to take the city of Fredericton and see what the exact transaction would be. In one sense they do keep their arrearages, but in another sense they do not.


Richard Burpee Hanson: They do
not get them twice.


James Lorimer Ilsley: I think what happens to
the municipalities is set out pretty well in the agreement.


Richard Burpee Hanson: What is
the section?


James Lorimer Ilsley: Sections 10 and 11.


Richard Burpee Hanson: I think
section 11 makes it quite clear. I should like to have some publicity given to this, because there is some misapprehension throughout the province and especially in the city of Fredericton with regard to it. I may be wrong in making that statement, but that is what I gathered from discussing the matter with his honour the mayor who is a visitor to Ottawa. In talking to him on the train last night I got the impression that they expected to keep their arrears. I think section 11 of the New
Brunswick agreement makes it very clear. It reads:
From the sum of $3,650,067.45 payable by the dominion each year under the provisions of section ten, there shall be deducted from time to time pursuant to the provisions of section 14, the amount of any income and corporation taxes collected by the province during the term of this agreement and the amount of such taxes collected by its municipalities during the twelve months following the last day of the year one thousand nine hundred and forty, under the provisions of any of the enactments enumerated in appendix A-
That would be another matter.


James Lorimer Ilsley: Appendix A covers income
and corporation taxes.


Richard Burpee Hanson: The section continued:

less the amount of any such taxes so collected which are later refunded to the taxpayer pursuant to the provisions of sections 5 and 6; provided that after the cumulative total of all such deductions amounts to $2,450,067.45 no further deductions shall be made.
That amount is the difference between the $3,650,000 and the amount referred to in section 10.


James Lorimer Ilsley: That is not it.


Richard Burpee Hanson: Then I
should like the minister to explain it. I thought I had it, but I am afraid I have not.


James Lorimer Ilsley: The city of Fredericton is entitled to the amount collected in income and corporation tax in 1940-


Richard Burpee Hanson: Which
was?


James Lorimer Ilsley: I do not know.


Richard Burpee Hanson: It was


James Lorimer Ilsley: I do not know. Perhaps I can get that in a minute.


Richard Burpee Hanson: That is the amount indicated by the attached memorandum.


James Lorimer Ilsley: Let us assume that that is the figure, $79,949.93. If it is wrong I will correct it later. Let us say that the city of Fredericton in 1940, which is their fiscal year and is also the calendar year, collected $79,949.93. They get from the dominion, through the province, that much each year during the term of the agreement. In 1941, let us say they collected $70,000 over and above refunds that they would have to make pursuant to the agreement. Let us say they collected $70,000 in 1941. Would they collect more or less?
Income and Corporation Tax


Richard Burpee Hanson: This is 1942. I think it was around $SO,0O0.


James Lorimer Ilsley: If they collected more than $79,949.93 they would keep the whole thing and would get nothing from the dominion, and they could keep their arrearages thereafter and get $79,949.93 each year.


Richard Burpee Hanson: That is what I understand, but I did not understand that the minister agreed with that.


James Lorimer Ilsley: There is so much chance of misunderstanding and ambiguity about what arrearages are.
Mr.	HANSON	(York-Sunbury):	This	is
my understanding about arrearages. A man is assessed on his income for 1938 in 1939 and he does not pay the tax, but he pays it during 1941 after this agreement takes effect. Does the city keep that irrespective of this $79,000?


James Lorimer Ilsley: In the case I put they would.
Mr.	HANSON	(York-Sunbury):	I think
they ought to, myself. That is the minister's interpretation of the contract?


James Lorimer Ilsley: There is no doubt about that.
Mr.	HANSON	(York-Sunbury):	That	is
good. That is all I wanted to know.
Mr.	ILSLEY:	But you might	have	a
municipality that did not collect as much that year.


Vincent-Joseph Pottier: Under this section large amounts are to be paid to the provinces for the purpose, I have no doubt, of enabling them to carry on. Let us assume that a province decides to default on one of its obligations. Is there anything in the agreement whereby the payments are affected by such act? The province could very well make money by defaulting on its interest and the like unless some steps were taken to prevent it. What has the minister to say about that?


James Lorimer Ilsley: There are certain provinces with which we have made an agreement on the basis of assuming their debt service less succession duties. We have done that for the purpose of putting them in funds with which to pay the interest on their debt. Some provinces have taken the debt service option, which is option B. If, after entering into this agreement, any province repudiates and does not pay the interest which is due to its creditors, after having got the money from us on that basis, I can assure the committee that we would take a very grave
(Mr. Hsley.l
view of that situation. I do not think any province would do it. I certainly hope that no province would undertake to do it; but if they did, speaking for myself, I would give very serious consideration to a reduction in the amount paid to that province, despite the terms of the agreement.


Richard Burpee Hanson: I am glad to have the minister make that declaration. I think any government ought to take a very grave view of a situation like that if it arose. I have no thought that it will arise. I think everything will be done in good faith. But I would point out to the minister that that situation is not covered in the agreement, and the question is whether he should proceed on the assumption that a province might possibly make default, or on the other assumption that a province would honourably carry out its contractual obligations and pay its carrying charges, having regard to the fact that the money is being supplied by the federal treasury. I would give the minister my vote in the position he has assumed that the province would carry out its obligations. But if it did not, whether he would dare to take drastic action is another question. You have a contract between the crown in the right of the province and the crown in the right of the dominion, and I would not suppose that you could override that contract except by act of parliament. I do not think any other action would be upheld by the courts. But I was glad to have the minister make that statement.
I want to review the position on which the payment to New Brunswick is based. The province accepted option B, the debt service grant, less all dues. I am going to spread on the record the items which make up the total of $3,278,574.15 which the federal treasury is to pay to the province. Some of these figures are striking, having regard to the fact that New Brunswick has only half a million people and a budget a little in excess of $10,000,000.
The debt charges are as follows: Interest on funded debt, $4,277,129.34; interest on treasury bills-that means interest on floating debt- $98,164.53; interest on bank drafts, overdrafts, and temporary loans-that is not floating debt but I assume temporary loans are temporary deposits, bearing interest, with the government-$16,145.62; other debts-it does not distinguish what they are-$7,221.74. Then follows this item: Foreign exchange, $310,061.83. That, I assume, was the cost to the province for the fiscal year ended October 31, 1940, of exchange on the principal and interest of its debt held in the United States and payable in United States funds, which of course is a very heavy charge. Then follows: commission and

Income and Corporation Tax
other charges of management, $8,847.93. I would say that that was a proper item of debt service or debt charge. Altogether these items make a total of gross debt charges, excluding debenture, discount, amortization, sinking fund or debt retirement, which is properly excluded, of $4,717,570.99. That is, approximately 40 per cent of the total revenue of the province is required to take care of the interest charges and the foreign exchange on the public debt of New Brunswick. That is a very serious situation for the province. It just means this, that the province for a long time- and I am not confining it especially to recent years-has been heaping debt upon debt upon the backs of the people of the little province of New Brunswick. A very large portion of that was incurred during the last five or six years, and it is not a creditable situation. Against that are these credits of interest received, made up of interest on sinking fund investments, $416,694.01; investments in government utilities-hydro and the like- $400,715; advances and amounts receivable- whatever that means-$68,978.66; sundry loans and deposits, $4,786.34. The total interest receipts are $891,174.01, leaving the net debt charges, excluding debenture, discount, amortization and sinking fund or debt retirement, $3,826,396.98. Deducting succession duty receipts for the same fiscal period, namely the fiscal year ended October 31,	1940,
$547,822.S3, we find there is left a net debt charge of $3,278,574.15, as stated in the bill.
Of course, this is a generous payment to New Brunswick. I have said that from the very beginning. But the pity of it is that so much of the revenue of the province-approximately 47 per cent-has to go in interest. I will not say that it shows profligacy, because I do not want to use so strong a term, but at least it indicates that they were very careless with the province's credit in the days gone by, with the consequence that the province's debt is top-heavy to-day.
I am going to have something further to say, on section 4, with regard to the fiscal needs subsidies.
I want to put those figures on Hansard because the minister has not done so. I think it would be illuminating if hon. members of this committee from other provinces were to put on the record the figures as stated by the federal government, so that the public might have before them a comprehensive statement of the true financial position of some of the provinces.
Section as amended agreed to.
On section 4-Additional subsidies.


John Ritchie MacNicol: This section sets out the additional subsidies during each year of the term of the agreement to the provinces of Nova Scotia, New Brunswick, Prince Edward Island, Manitoba and Saskatchewan. On what basis are these five provinces accorded the extra subsidies set out in this section?


James Lorimer Ilsley: On the second reading of the bill I stated that when section 4 was under discussion I would wish to give the house more information in regard to the principles and considerations which led us to fix upon the fiscal needs subsidies recommended for the three maritime provinces and for Manitoba and Saskatchewan.
Unfortunately, there was no ready-made formula which could be used for this purpose. It was a question of judgment based on a great many factors. Of necessity the decisions had to be somewhat arbitrary, but there were a number of important factors or principles which were taken into account.
In the first place, we considered it preferable to settle once and for all the amounts of the annual payments under the agreement to the provinces, including the fiscal needs subsidies, if any. The alternative would have been for the dominion to review the provincial budgets each year, which would entail a careful and detailed scrutiny of all expenditures.


Richard Burpee Hanson: Would that have been an unmixed evil?


James Lorimer Ilsley: I think it would have been undesirable.
Mr. HANSON (York-Sunbury); That is, they would resent it.


James Lorimer Ilsley: I would rather have the hon. gentleman doing it than myself.
Even if the dominion were in a position to do this effectively, which it is not, it would tend to create antagonism and friction between the dominion and the provinces, and in addition would have involved a number of other undesirable factors. Under the circumstances, it seemed wiser to fix the subsidy where one ' was needed at an amount which would permit a province to stand on its own feet until the end of the war without coming back to the dominion for further assistance. This does not, of course, mean that if something in the nature of a national catastrophe should occur, it would not be necessary for us to review the situation again and perhaps take necessary supplemental action.


Richard Burpee Hanson: That is leaving the door open.
Income and Coi~poration Tax


James Lorimer Ilsley: It is not very far open. I think the committee will agree that barring such developments of a grave and emergent nature, no province should feel that it has any right to come back to the dominion for further assistance under present conditions.


Richard Burpee Hanson: That is positively closing it.


James Lorimer Ilsley: As a result of the agreement, it knows pretty well what its total revenues will be; it should know the total amount of cloth available to it and it should cut its coat according to its cloth.
Second, it was desirable to use as far as practicable "objective criteria" as a basis for assessing the financial position of any of the provinces requiring fiscal needs subsidies. This phrase "objective criteria" was used frequently in the discussions with the provinces. In other words, it was desirable that consideration should be given to known facts rather than to hypothetical considerations. This meant that the basic consideration had to be the .financial position of the province during its last completed fiscal year, together with any other known factors which might reasonably be expected to alter such position in the future, but that no attention should be paid to contingencies of an intangible or a speculative nature or provisions for emergency situations.
It will be understood that several of the provinces argued for something of the nature of insurance against emergent situations. They argued that they could not tie themselves up in this way, that they might have to do this and they might have to do that which would cost them money, and that the dominion, if they were fixing these fiscal need subsidies once and for all, would have to take account of possible or certainly probable developments.


Richard Burpee Hanson: In other words, they wanted the dominion to assume responsibility in any emergencies.


James Lorimer Ilsley: Yes. I do not say they were unfair about it at all; but the principle we went on was that we could not base our payments upon hypothetical considerations, or possibilities of emergencies, or anything like that.
Third, while some increases in provincial costs may be expected, particularly in connection with cost of living bonuses for civil servants, interest on indebtedness, maintenance of highways and bridges which are being subjected to heavy traffic wherever near army, navy and air force camps, and possibly in certain cases higher salaries to retain public schoolteachers, there should be a reasonable limit to any of such increases in costs in view

of the ceiling which has been placed over prices and wages. Furthermore, these increased costs will be offset partly or wholly by reductions in unemployment relief and by increased revenues.
Fourth, the relative level of costs and services in the different provinces cannot be ignored, but in view of the tremendous sums which the dominion must raise for war expenditures, this was not considered an appropriate time for certain of the provinces to bring their services up to the levels prevailing in other provinces. There is an obligation on all governments to defer until after the war every expenditure which can possibly be avoided.
It was in the light of these general principles and considerations that the fiscal needs subsidies provided for in the bill were determined. In view of their strong budgetary position it was obvious at once that no fiscal needs subsidy could be justified in the case of Ontario, Quebec, Alberta and British Columbia.
In the case of the maritime provinces there was a special situation in view of the fact that the special grants voted annually to these provinces as a result of the recommendations of the Duncan and White commissions represented in fact additional subsidies w'hich the dominion is bound to continue. It was for this reason that a special clause was inserted in the agreements with the maritime provinces to the effect that the dominion recognizes that these grants are in the nature of a subsidy and undertakes to continue paying them upon the termination of the agreement. As the committee is aware, Bill No. 17. has been introduced in order to incorporate this undertaking in dominion legislation so as to avoid any possibility of misunderstanding at a later date.
Under these circumstances none of the maritime provinces could reasonably be expected to enter into the agreement if it was going to result in an out-of-pocket loss to the province on the basis of its 1940 operations. Otherwise the province would be better off if it continued to receive the annual special grant from the dominion and continued to collect the relatively moderate taxes imposed upon its residents. In the case of all three maritime provinces there would have been out-of-pocket losses, and for this reason alone fiscal needs subsidies would have been justified and required.
The subsidy of $325,769.31 which is recommended for Nova Scotia is in fact the amount of the out-of-pocket loss to the province; in other words, the total loss of its fiscal needs subsidy plus the annual payment to be made

Income and Corporation Tax
to Nova Scotia under section 3 of the bill will merely place Nova Scotia in the same position it would have been in if it had retained its special annual grant or subsidy and had not suspended its income and corporation taxes-on the basis of 1940 results from these taxes. Any additional payment was not considered justified in view of the province's strong budgetary position. After making up the out-of-pocket loss referred to, the province would have a surplus of $1,096,000 on the basis of its 1940 operating results after provision for debt retirement. That answers the question as to the basis for the fiscal needs subsidy for Nova Scotia.
In the case of Prince Edward Island, the out-of-pocket loss to the province on the basis of its 1940 operations, had no fiscal needs subsidy been provided for in the agreement, would have been $262,17402, and the province would have had a deficit of $280,000 before making any provision for debt retirement or providing any cushion whatever for possible increases in certain costs. It wTas believed that the dominion should not assume responsibility for placing every province in a position where it could meet its full obligations for sinking funds or debt retirement. To do so would mean that the dominion, out of its own current revenues, would be paying off the capital obligations of a province. Furthermore, the required provisions for sinking funds and debt retirement vary considerably in the different provinces; they are particularly high in Prince Edward Island where they average some 2i per cent of the total debt. On the other hand it could be argued that the dominion should leave the province in a position to make some minimum capital expenditures or, alternatively, to make some moderate provision for sinking funds or debt retirement and, in addition, have something as a cushion against increased costs. In the case of Prince Edward Island, therefore, it is recommended that the dominion should pay a fiscal needs subsidy of $175,000 in addition to the $262,174.02 necessary to make up the loss which, as I have already pointed out, Prince Edward Island would otherwise have suffered under the agreement; this means a total fiscal needs subsidy of $437,174.02. On the basis of the 1940 results this would leave a surplus of $157,000 before provision for sinking funds. A sinking fund provision of one per cent of the province's outstanding debt at December 31, 1940, would be $85,000, leaving $72,000 as a cushion against increased costs. Actually sinking fund requirements were $205,000 in 1940, so that on this basis, after making this very heavy provision for debt retirement and giving effect to all the dominion's proposals, there would have been
a deficit of $48,000 on the basis of 1940 operations. I think that answers the question in regard to Prince Edward Island.
In the case of New Brunswick, the out-ofpocket loss to the province already referred to would have been $71,493.30. It is proposed to make up this loss and to pay, in addition, $300,000 as a fiscal needs subsidy, making a total of $371,493.30. This would leave the province, on the basis of its 1940 operations, with a surplus after provision for normal debt retirement-which is somewhat less than 1 per cent of its total outstanding debt-of $353,000, which we do not consider excessive at all and which we thought was fair. I think that answers the question in regard to New Brunswick.
So much for the maritime provinces. I have still to deal with the provinces of Manitoba and Saskatchewan.
After deducting the loss of the $750,000 special grant to Manitoba, which was cancelled last year, Manitoba would have had a surplus of $1,040,000 on the basis of its fiscal year ended March 31, 1941, before making any provision for sinking funds or debt retirement. A provision, for this purpose or for capital expenditure, of one per cent of the province s outstanding debt would amount to about $900,000. leaving only $140,000 for increased costs in the future. Costs have been held down and services starved in Manitoba in recent years to a very considerable extent, and some increases are to be expected in the future, particularly for highway maintenance and education. In view of this, it was proposed that Manitoba should be given a fiscal needs subsidy of $600,000 per annum, instead of the special grant of $750,000 which the province had been receiving in recent years.
In the case of Saskatchewan, after giving effect to the new arrangement-apart from any fiscal needs subsidy-the province would have had a deficit of $653,000 on current account for the year ended March 31, 1941, before making any provision for sinking funds or debt retirement. A sinking fund provision of 1 per cent of the outstanding debt would require $1,261,000, which, if added to the deficit of $653,000, would mean a total deficit of $1,914,000. Actually Saskatchewan has not been providing for its full sinking fund requirements for some years, so that it would not be reasonable for the dominion to make up the full amount of the deficiency referred to plus a cushion to take care of any increases in costs. After all the factors were considered, it was decided to recommend that Saskatchewan should be granted a fiscal needs subsidy of $1,500,000 which, after the current
Income and Corporation Tax

account deficit of $653,000 is deducted, will leave $847,000 for debt retirement or as a cushion for future increases in costs. Actually the provision made by Saskatchewan for debt retirement in its fiscal year ending April 30, 1941, was only $170,000. On the basis suggested, Saskatchewan should be able to stand on its own feet for the first time in many years and should be required to do so.


John Ritchie MacNicol: Is not Alberta in a more unfavourable financial position than Saskatchewan as regards what the minister has been saying?


James Lorimer Ilsley: No. Alberta has a comfortable surplus without any fiscal needs subsidy.


John Ritchie MacNicol: I understood they were repudiating a portion of their debt interest.


James Lorimer Ilsley: They are paying half the interest on their debts, but they have a substantial surplus.


John Ritchie MacNicol: Why should we not help Alberta too?


Richard Burpee Hanson: In the
light of the statement with respect to fiscal needs and the suspension of certain subsidies, what is the effect of the estimate, page 10, 1942-43, "Subsidies and special compensations to provinces", $13,768,953.24? That was the vote last year. Will it be effective now after this bill goes through-these grants to the different provinces? What is this money?


James Lorimer Ilsley: What we call constitutional subsidies will continue to be paid to the provinces.


Richard Burpee Hanson: That is the 80 cents a head?


James Lorimer Ilsley: And its developments, yes.


Richard Burpee Hanson: They are continuing to be paid?


James Lorimer Ilsley: Yes.


Grote Stirling: These will be additional to that?


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: So that New Brunswick, in addition to the amount mentioned in section 3 of this bill, $3,278,574.15, and $371,493 for fiscal needs, receives $693,940 based on population; that grant has not been altered in any way?


James Lorimer Ilsley: No; New Brunswick gets its regular constitutional subsidy under the British North America Act as usual. That is not affected in any way. It is only its special grant that was terminated; that is under the White and Duncan commissions.


Richard Burpee Hanson: The
$900,000 under the White and Duncan commissions is cancelled, but the statutory provision always in force is continued?


James Lorimer Ilsley: That is right.


Richard Burpee Hanson: So that under the present arrangement New Brunswick will now be receiving three different payments:
$3,278,574 under section 3 of this bill
$ 371,493 under section 4 of this bill
$ 693,040 as shown by the main estimates.
And in addition a guarantee against any deficit in the gasoline tax?


James Lorimer Ilsley: Yes; that is correct.


Richard Burpee Hanson: I think the federal treasury has been pretty generous to them.
I want to ask a question about this special grant in aid under section 4. It is stated in the bill to be $371,493.30. On reference to appendix D, the break-down figures for New Brunswick, that is arrived at as shown: Loss of revenue to the province under the proposals, $1,065,657.22; municipal, $1,384,410.23; total $2,450,067.45. Added to that are the special grants of $900,000 under the Duncan and White commissions, or a total of $3,350,067.45, from which stands to be deducted the amount mentioned in section 3 of this bill, namely, the debt service charges as indicated in the break-down of $3,278,574.15 which I put on the record. Therefore the net loss of revenue to the province under the proposal is only $71,493.30. Then the minister out of the goodness of his heart gives them a lump sum of $300,000. If I followed him correctly, the minister has done that on the basis that the sinking fund payments were not quite adequate, and consequently the province should have a cushion or some fund to pay increased costs. Are those the two bases on which the $300,000 is figured? In any event it would appear to me to be a mere arbitrary figure, more in the nature of a hand-out than an earned grant.


James Lorimer Ilsley: It puts the province in this position: they will have a surplus of $353,000 on the 1940 basis if they provide their normal debt retirement, which is very moderate, less than one per cent. That province, like other provinces will undoubtedly be confronted with slightly increased costs.


Richard Burpee Hanson: Well, they ought to have cheaper money on refunding.


James Lorimer Ilsley: They may have rapidly increasing costs. Hon. gentlemen should have heard these provinces, heard about their difficulties. We turned a deaf ear to about

Income and Corporation Tax
seven-eights of it, I must say, but there was some of it that was valid. I do not want to deny any generosity on the part of the dominion government, but I do not think we were unduly generous in the ease of New Brunswick, or any other province for that matter. The level of social services in New Brunswick is not high; anyone who reads the Duncan report will know that. They are simply put in the position, on the basis of the revenues and expenditures remaining the same as in 1940, of having a surplus of only $353,000 after meeting their normal debt retirement, which is something less than one per cent, so I do not think we are giving them any encouragement to extravagance. I admit that their liquor revenues will probably be greater in 1941 and 1942 than in 1940; their gasoline revenues are guaranteed, and with the expansion of activity they may work up revenue here and there. That is something we did not get much information about from the provinces. I admit we got much more information about possible increases in expenditure. Nevertheless I think the arrangement made with New Brunswick is a reasonable one and about in line with the arrangements made with the other provinces. Some provinces were inclined to think they were badly treated in comparison with others, and the judgment we were called upon to exercise was difficult, but I think we made an arrangement that was defensible.


Mr. HAZEN:: In addition to the compensation provided by this measure and the compensation for gasoline tax and the subsidies, I understand the provinces will get their constitutional subsidies provided by the British North America Act?


James Lorimer Ilsley: That is correct; they were not disturbed.


Douglas King Hazen: In addition, do they get the subsidies provided by Bill No. 17?


James Lorimer Ilsley: No; Bill No. 17 does not provide any subsidy until after this agreement ends.


Richard Burpee Hanson: To make sure that they will get it after this terminates?


James Lorimer Ilsley: Yes.


John Horne Blackmore: I wish to say a word regarding the way in which the minister has dealt with the provinces. I wish to support him in his generous stand. I do not know what is the matter with the leader of the opposition. He seems to have a particular animosity against the provinces; he seems to think they are legitimate prey.


Richard Burpee Hanson: I have not expressed any animosity toward the provinces, but I think the little province of New Brunswick is very extravagant. I am free to say that here, and I shall say it again many times.
I do not make any reflection on any other province.


John Horne Blackmore: Judging from what I have heard regarding the history of New Brunswick and the position in which she has been placed by the fiscal policy of the dominion during past generations, I think she must have been exceedingly parsimonious not to be head over heels in debt.


Richard Burpee Hanson: That was not the cause of her debt.


John Horne Blackmore: I believe that the attitude of the Ottawa officials in the main for past generations has been altogether too callous toward the provinces. I commend the minister for having shown a different attitude in these agreements. He can afford to be a good deal more generous. I resent the expression which the leader of the opposition has used in designating some of these allowances as "hand-outs." The organizations in this dominion that have been giving hand-outs since 1867 are the provinces; they have been "handing out" generously. Ottawa has not, I think, realized the extent to which they have been handing out, and it is time a little began to be handed back.


Mr. ESLING:: Would the minister revert to paragraph (a) of section 3 under the British Columbia agreement, and give a word of explanation? What is the situation in British [DOT] Columbia with reference to the 2 per cent mineral tax?


James Lorimer Ilsley: Income and corporation taxes are levied in British Columbia under the income tax act. Certain taxes are also levied under taxation acts which are alternative to the payments required under the income tax act. These have been classified as output taxes, and are not included in the computation of the grant. Licence fees up to $1,000 are imposed on fisheries and canning companies, and with the exception of the fish buyer's licence fees, with a maximum of $25 per licence, these are included in the grant.


William Kemble Esling: Does that mean that the 2 per cent mineral tax will still apply in British Columbia?


James Lorimer Ilsley: Yes, that is correct. It is an output tax, a tax on the natural resources, and the province by agreement expressly retains the right to impose such tax and, I presume, will continue to impose it.
Income and Corporation Tax


Mr. GERSHAW:: Speaking with respect to section 3, the minister said that any province under option (b), which was being paid by servicing its debt, in the event of failing to pay such debt would be regarded rather seriously by the dominion. That would not apply to any province under option (a), where they were being paid, irrespective of servicing of debt?


James Lorimer Ilsley: I would not like to say that the dominion would not seriously take a grave view of the action of any province which repudiates its debt,


Frederick William Gershaw: Surely it would not assume any control.


James Lorimer Ilsley: I am not prepared to make a statement about that. I do ruot like to say anything at all which would give any encouragement to a province to repudiate. I do not believe any province ought to do so, under present or any other conditions.


Richard Burpee Hanson: It seems to me that this question of the Alberta position was raised last year, and I urged the minister on one occasion at least to use his influence with the government of Alberta to keep their contractual obligations.


James Lorimer Ilsley: What influence would I have?


Richard Burpee Hanson: I have heard it said that he who pays the piper calls the tune. At the moment I do not just remember in what connection the point was raised last year.


James Lorimer Ilsley: I remember.


Richard Burpee Hanson: I pressed the minister hard to take a different attitude, and he was loath to take it. To-day he has thrown out a serious warning, for the future I assume; but I should not like to think he is absolving them for the past.


James Lorimer Ilsley: No.


Richard Burpee Hanson: Perhaps the dominion ought to do something to try to have Alberta meet its contractual obligations.


James Lorimer Ilsley: My hon. friend wanted me to pay it to them, and I would not do that.


Richard Burpee Hanson: Oh, I did not remember that.


John Horne Blackmore: I should like to ask the leader of the opposition what he would do.


Richard Burpee Hanson: I will
answer that question.


John Horne Blackmore: I will make it clear-
[Mr. Ilsley.l


Richard Burpee Hanson: You asked me what I would do. I would pay my debts, to the last dollar. I would be just before I would be generous. That is what I would do.


John Horne Blackmore: Supposing the leader of the opposition were the Prime Minister of Canada; I should like to know where he would get the money to enable a province to pay its contractual obligations, when the province has not the wherewithal to pay.


Richard Burpee Hanson: That is a question of fact. I would ask the minister to tell us what the surplus of Alberta was on last year's auditor's statement.


James Lorimer Ilsley: For the year ended March 31, 1941, the Alberta surplus on current account was $4,875,000.


Richard Burpee Hanson: That is a sizeable sum of money.


John Horne Blackmore: Can the minister say whether with that $4,000,000 odd Alberta paid off some of its outstanding debt? For example, what about savings certificates, $10,000,000 of which were against Alberta when the present administration assumed office?


James Lorimer Ilsley: The amounts are these: public buildings, $257,000; highways, bridges, forests, wharves and docks, $1,146,000; other public works, $113,000. agricultural loans, $447,000; miscellaneous expenditures, $3,000; leaving an overall surplus of $2,909,000.


John Horne Blackmore: Has the minister any information as to what was done with that $2,000,000 odd?


James Lorimer Ilsley: Some of it was used to redeem savings certificates, and other forms of debt.


Richard Burpee Hanson: Has the minister any information-


John Horne Blackmore: I want to ask-


The ACTING CHAIRMAN (Mr. Ross, Calgary East):: Order; the leader of the opposition has the floor.


Richard Burpee Hanson: Does the auditor's statement which the minister has before him show how much Alberta has increased taxation in the last seven years?


James Lorimer Ilsley: I have not that information.


Richard Burpee Hanson: It is quite easily available, and I think it is very large.


John Horne Blackmore: Since the question of Alberta has been raised, I might tell the leader of the opposition I am ready to take him on at any time, on the question of Alberta.

Income and Corporation Tax
He seems to think he knows a lot about it, but there are several things he does not know yet. In the first place-


George Russell Boucher: Shall I hold the coats and the boxing gloves?


John Horne Blackmore: Yes, all the trimmings. In the first place, he will find, if he examines the expenditures with respect to public works, that they were expenditures which were utterly unavoidable. The remainder of the money, as the minister has indicated, was largely used in the reduction of savings certificates, which constituted a $10,000,000 floating debt against the province, and was destroying the credit of the province. The question arises as to what an administration should attend to first, whether it should leave a floating debt like that, with thousands of poor people holding certificates, or whether it should pay interest. I think the leader of the opposition has not indicated a very statesmanlike attitude to the problem of provincial finances and provincial problems in this dominion. I do not care to say any more now.


Richard Burpee Hanson: I am
rebuked by the hon. member for Lethbridge; but I think I hold the orthodox view, one held by most people in Canada, with respect to the repudiation of contractual obligations by the present administration in Alberta- and I am not receding for one minute from that position.


John Horne Blackmore: I wonder whether the leader of the opposition remembers that after the last war the British government had to repudiate its debt; and if he remembers, what would he say about that?


Richard Burpee Hanson: I had not heard that before.


John Horne Blackmore: There was an impossible situation there.


James Lorimer Ilsley: I think they made an
agreement.


John Horne Blackmore: Perfectly all right, but if we know the whole story there is not so much of the offensive about it.


George Henry Ross: Hon. members should confine their discussion to section 4 of the bill.


Norman Alexander McLarty: I move that the figure "$324,122.10" in line 34 of section 4 be amended to read "$325,769.31".


[Stage Direction]
Amendment agreed to.
Section 4 as amended agreed to.
On section 5-Compensation for loss of
revenue re tax on sale of gasoline.
John Ritchie MacNicol: This section reads:
The agreement may also provide, in accordance with and subject to such terms and conditions as may be set out therein, that the dominion shall pay to the province the amount by which the net receipts from the tax imposed by the province on the sale of gasoline are less in each case than the following amounts.
Then amounts are set out opposite the names of the nine provinces. The section continues:
. . . being an amount in each case calculated as equivalent to the net receipts of the province from the tax imposed by the province on the sale of gasoline during the fiscal year of the province ending nearest to December 31, 1940.
I have been wondering whether, with the amounts set out in this section being fixed, the federal government does not stand to lose. What is happening in connection with the gasoline shortage? Five business men called to see me over the weekend. They represented two different classes of business, the first being small cleaners and pressers. There are perhaps thousands of these throughout Canada, there being hundreds in Toronto alone. Their gasoline ration has been cut down from approximately twenty-five gallons a week, which was altogether too little, to approximately eight gallons a week. These Toronto men told me that this will mean they will have to close shop. The government will not only lose revenue on what they would have made if these men had continued in business, but will have to make up to Ontario and the other provinces a considerable amount in connection with the gasoline tax.
The next class of business were those small business men who travel round the country in their own cars, taking with them the goods they sell for immediate delivery. These men have also had their gasoline ration severely cut, and they told me that they will be put out of business. I was just wondering whether the government is not going to lose a lot of revenue. As the leader of the opposition said earlier in the day, the ministers located here in Ottawa are not up against the cushion like the average member of parliament when he returns home. I am besieged by business people, and if I am told the right story, the government is not only going to lose a lot of revenue through these men being put out of business, but going to have to pay out the amounts set out in this bill.


James Lorimer Ilsley: We shall have to make good to a considerable extent this year, and I do not know what the situation will be in future years. The liability under this undertaking for 1941 amounted to only about $50,000.

Income and Corporation Tax


John Ritchie MacNicol: I am very much concerned over the situation. I think regulations have been issued that are not in conformity with the facts in reference to the gasoline situation. The amounts the provinces are to receive are fixed, but the Dominion of Canada has no surety as to what it is going to receive in connection with the gasoline tax.


Thomas Reid: Is this gasoline tax confined to gasoline, or will it cover gasoline and fuel oil?


James Lorimer Ilsley: In some provinces certain types of fuel oil are treated as gasoline and are subject to the same taxation. That would be covered by the guarantee.


Norman Alexander McLarty: I move that the figure $2,104,685.81 in line 46 of section 5 be amended to read "$2,101,072.01".


[Stage Direction]
Amendment agreed to.
Section as amended agreed to.
On section 6-Charge upon consolidated revenue fund.
Richard Burpee Hanson: Does this mean that hereafter these payments are to be statutory and will not be reviewed by parliament?


James Lorimer Ilsley: That is right. They will not need to be voted.


Richard Burpee Hanson: They will appear as statutory votes?


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: What
opportunity will there be to consider the question of deficits on gasoline taxation? I do not think these should be made statutory charges altogether. I would not object to the items in sections 3 and 4 being made statutory because they are fixed, but the amounts to be paid under section 5 ought to be voted by parliament after discussion. This is simply giving a blank cheque to the government to pay what it wants to pay without parliament or the House of Commons having anything to say about it.


James Lorimer Ilsley: We can pay only in accordance with the agreement. The payments would be reviewable by the auditor general, and there would be that protection.


Richard Burpee Hanson: Why not parliament?


James Lorimer Ilsley: We are meeting the province of Ontario here.


Richard Burpee Hanson: What is the secret?
tMr. Ilsley.]


James Lorimer Ilsley: We intended to have annual votes for the whole thing, not only this but the rest of it, but the point was raised very strongly by Ontario. The hon. gentleman may remember that it was back about the end of February or the early part of March and a tremendous demand was made that this be made statutory. They said that they could not rely and should not be asked to rely on an undertaking which would be subject to a vote of parliament. They contended that there might be a term of several years during which this agreement would be operative, and they might be at the mercy of a hostile vote in the House of Commons when their agreement actually entitled them to the payment of so much money.


Richard Burpee Hanson: That would be with regard to the principle involved in the payment, but surely the quantum of the amount should be open to discussion.


James Lorimer Ilsley: I do not know.


Richard Burpee Hanson: What
would happen if there was a change in the tax imposed by the province?


James Lorimer Ilsley: They cannot do that.


Richard Burpee Hanson: They
might do that.


James Lorimer Ilsley: It is provided against.


Richard Burpee Hanson: There
ought to be some provision. In New Brunswick we have the highest tax rate on gasoline in the world, 10 cents a gallon.


An hon. MEMBER:: Not in the world.


Richard Burpee Hanson: Residents of Nova Scotia and Prince Edward Island also pay 10 cents a gallon on gasoline. It is a very heavy tax, too high in my judgment especially when one realizes that the crude oil comes to the refinery in normal times at a cost of less than 10 cents, landed in Halifax, and we are paying 36| cents a gallon for Esso.


Grote Stirling: I cannot understand how the amount of $3,763,625.95 can have an "S" against it in the estimates if that sum be not the amount that will be paid. As I understand it, it will be looked upon as a statutory item in the estimates of next year, but how can that be if that be not the correct sum to be paid?


James Lorimer Ilsley: The $3,763,000 will not
necessarily-


Grote Stirling: I understood the minister to say that it would appear in the estimates as a statutory figure.

Maritime Provinces-Subsidies


James Lorimer Ilsley: The amount that is payable, the net total.


Grote Stirling: The adjusted figure.


James Lorimer Ilsley: Yes.
Section 6 agreed to.
On section 7-Coming into force.


Richard Burpee Hanson: Why was March 15 fixed?


James Lorimer Ilsley: That was just prior to the conclusion of the first agreement. The first agreement was signed with British Columbia on March 18.


[Stage Direction]
Section agreed to.
On the preamble:
Richard Burpee Hanson: The estimates are made up in the fall, depending of course upon when parliament meets. How would it be possible to have this provision made in the main estimates? The amount of the deposit may have to be dealt with by special estimate.


James Lorimer Ilsley: I have not given any
thought to it. Perhaps we could vote it in two parts.


John Ritchie MacNicol: A short time ago when we were on section 4 the minister said with reference to the amount granted to Saskatchewan, with which I am in accord, something that indicated that Saskatchewan had been treated generously. I asked why was not something given to Alberta, because I understood it was in perhaps a more unfavourable position, and the minister said that it had an operating surplus on last year's operations -that is current operations, I presume-of $4,000,000 more or less.


James Lorimer Ilsley: Yes.


John Ritchie MacNicol: There was no reference to debt interest. I was wondering whether, if Alberta were treated in the same way as the other provinces, particularly Saskatchewan, would it be in the unfavourable position it is in? Is the parliament discriminating against Alberta for repudiating or threatening to repudiate its debt interest? Would it be in the position of having to repudiate its debt interest if it were treated the same as the other provinces?


James Lorimer Ilsley: Alberta cut its interest rate in two on June 15, 1936. The question of the hon. gentleman perhaps is this: Was Alberta treated fairly before that date? Was there some discrimination that made it do that. That is a little far back for me, but I must say that I do not think so. I am strongly of the impression that it was not the fault of
the dominion government at all in any way, shape or form.


Richard Burpee Hanson: I think
the minister will find that Mr. Bennett made a very strong argument once to the opposite effect.


Frederick William Gershaw: Alberta has needed social services very badly because of the general poverty which has prevailed there for some time. The minister has read out the expenditure of the province. Would he give the committee the sources of Alberta's revenue? Was it affected by taxation? Were some of the payments from the wheat pools and some payments on railway debt or was it all ordinary taxation?


George Henry Ross: I do not think these questions are relevant at this stage.


James Lorimer Ilsley: I am not familiar with the
rules, Mr. Chairman; I do not know what can be taken up on the preamble.


Richard Burpee Hanson: By common consent, it can be done.


James Lorimer Ilsley: Alberta's revenue for the base year ended March 31, 1941, was $20,875,000, made up as follows:
Corporation taxes	 $3,017,000
Income tax on persons	 1,041,000
Gasoline tax	 3,222,000
Succession duties	 417,000
Real property taxes	 1,171,000
Amusement taxes	 208,000
Motor vehicle licences	 2,572,000
Other licences	 1,254,000
Publi* domain	 2,264,000
Liquor control	 3,158,000
School lands, interest	 477,000
Other current revenues	 286,000
Ordinary subsidies	 1,788,000
These items make up the total of $20,875,000.


[Stage Direction]
Preamble agreed to.
Bill reported, read the third time and passed. MARITIME PROVINCES

[Stage Direction]
Hon. J. L. ILSLEY (Minister of Finance) moved the second reading of Bill No. 17, to provide for the payment of additional subsidies to the maritime provinces.
He said: Mr. Speaker, I have not prepared any statement with a view to making it on the second reading of this bill. The whole story is found in the preamble to the bill. Briefly I may say that these grants have been voted year by year by parliament, pursuant to the findings of two commissions, the Duncan commission and the White commission.
[Stage Direction]
Maritime Provinces-Subsidies
The maritime provinces considered that since they are forgoing these grants for the period of these agreements, they should have some statutory guarantee that the grants would be resumed at the termination of the agreements. It was considered that it was desirable to do this because these payments are fixed and settled by the findings of commissions, judicial bodies which went into all relevant matters at great length, and there is no reason that I can think of why the payments should not be guaranteed to these provinces by statute.
Mr. CRUICKSHANK:: This bill is not particularly clear to me, coming from the far west/ It is intended, as I understand, to pay subsidies to the maritime provinces. Am I to understand that, like Alberta, New Brunswick is asking for some special allowance of $25 a month in lieu of the subsidy it got for lobsters?


Richard Burpee Hanson: Perish the thought.


James Lorimer Ilsley: No such request has been made.


Richard Burpee Hanson: I have no objection to this bill. The grants were made, as the minister stated, after royal commissions were issued and judicial reports were made, and the grants are now looked upon by the maritime provinces as part and parcel of their provincial revenues. I can imagine what would happen if they were to be discontinued at any time. While they are discontinued in name now, they are really not being discontinued in fact. But when the agreement provided in Bill No. 16 ends, this will make sure that they will be resumed. It is really an insurance policy to the maritime provinces.


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: That is all there is to it. As a matter of fact, the title of the bill as set out at the front and on top of the bill is rather misleading; it should be, an act to preserve the payment of additional subsidies to the maritime provinces after a certain point of time.


James Lorimer Ilsley: They are not technically subsidies now.


Richard Burpee Hanson: That is true; they are not. They are special grants.
It is not an act to provide something now. It is an act to preserve something which is
already in existence. That is the only suggestion I have to make.
Mr. KARL K. HOMUTH (Waterloo South): I am not opposing the bill; but from

time immemorial there has been a feeling both in the maritime provinces and in the western provinces, through all of which I have travelled annually for perhaps the last twenty-five or thirty years, that the people of the provinces of Ontario and Quebec are more or less parasites, that we take, from those various provinces-


An hon. MEMBER:: In high tariffs.


Karl Kenneth Homuth: The hon. member says, "in high tariffs." I will argue that with him when the budget comes up. I believe-in fact I know-that he is wrong.


John Horne Blackmore: The hon. member is surely mistaken.


Karl Kenneth Homuth: The leader of-I do not know what they call the group-


John Horne Blackmore: Social Credit group.


Karl Kenneth Homuth: No-New Democracy
group; he does not even know the name of his own group. He also has some diffidence, I notice, about admitting the facts. But there has never been in the history of the House of Commons a time when members from Quebec or Ontario have opposed anything for the benefit of the maritimes or the western provinces. We have supported those proposals, because we-that is, the members of the opposition and at least a few members of the Liberal party-believe in national unity. It is true that we do not have national unity to-day. The blame for that condition may be laid on the government; that is a matter which will come up in debate later on. But I often wonder whether the minister has given careful attention to some of the freight rates which have a great deal to do with the trade of the maritimes. We grant certain subsidies to the maritime provinces. I realize that, for instance, their textile industries have a certain barrier to overcome in order to compete with the textile industries in Ontario and Quebec, in sales to the west. It has often seemed to me that our subsidies to the maritimes are not adequate. We may be dealing with this thing in a rather half-hearted manner. We make deals with the provinces; we tell a particular province that we will do this and we will do that. Well, we, the people of Canada, own a railway: can we not work out some system of readjustment of freight rates which will give the great industries of the maritime provinces an opportunity of competing with the industries of Ontario and Quebec? Speaking as one who, one may say, represents industry in Ontario, I am not. sure

Maritime Provinces-Subsidies
that we should not start now, by means of subsidies, freight rates, or some other method, to develop industries in western Canada; because, if there is anything which will bring prosperity to our farming community, it is the building up, in agricultural areas, of towns and cities. If you want proof of that fact, go through western Ontario. It has always known prosperity. Even in the days of deepest depression the farmers had at least a semblance of prosperity because our industries were so diversified that considerable numbers were working. The farmers came into our towns, sold their products, and so provided themselves with spending money from week to week until their big crop was sold and their cattle marketed.
I do not object to this legislation; indeed I agree with it; but I suggest that all governments, not merely this one, have forgotten that to build up unity in this country we must industrialize it, provide local markets, and spread the process from one end of the country to the other. We have not done this. So, while not opposing this bill, I would urge the government to give a great deal of consideration to subsidizing those provinces which have not the advantage of the industrial development which exists in Ontario and Quebec.


George Alexander Cruickshank: I should like to be clear upon the purpose of section 2. As I understand it, at the termination of the new agreements, the existing or old agreements with the maritime provinces will be carried on. Am I right?


James Lorimer Ilsley: Yes.


Georges Parent: May I point out to the hon. member that his question, having regard to a particular section, should be asked when the house is in committee.


[Stage Direction]
Motion agreed to, bill read the second time, and the house went into committee thereon, Mr. Ross (Calgary East) in the chair.
On section 1-Short title:
Grote Stirling: At the very time in 1934 when the White commission was appointed, the dominion government, as I recollect, realized that the subsidy being paid to British Columbia was not commensurate with the subsidies being paid to other provinces, and it was then increased and has been passed by parliament each year on the increased figure. I think I am right in saying that. Would the minister explain the reasons for treating the maritime provinces differently in this respect from British Columbia?


James Lorimer Ilsley: The British Columbia figure was never settled. It was an interim payment which was not judicially determined. It was a tentative payment and had not reached the stage of settlement.


Richard Burpee Hanson: It was a matter of government policy.


Grote Stirling: It was recognized and paid.


James Lorimer Ilsley: For a number of years. There is a clause in the British Columbia agreement with respect to this matter. Let me read it:
Neither the execution of this agreement nor anything herein contained shall affect or prejudice any right or claim, moral or otherwise, which the province may have to the restoration and continuation, at the termination of this agreement, of the $750,000 special grant discontinued by the dominion in the year 1941.
A similar clause is found in the Saskatchewan agreement and in the Manitoba agreement with regard to their special grants. The committee will realize that there were six of these special grants, three for the maritime provinces, one for British Columbia, one for Saskatchewan and one for Manitoba. They were of differing degrees of finality. There was no doubt about those with respect to the maritime provinces having been finally settled.


Grote Stirling: Based on the findings of a commission?


James Lorimer Ilsley: Yes, and finally settled and determined. British Columbia was in an intermediate position. It was not as fleeting and temporary as in the case of Manitoba and Saskatchewan; nevertheless it was not judicially determined. Of course, there is this about the British Columbia grant, that the payment to British Columbia is very large. It is some twelve or thirteen million dollars [DOT] because of the very high taxes-the height of the corporation taxes.


Grote Stirling: Under the bill just
completed.


James Lorimer Ilsley: Under the principles laid down in my budget speech, it would have been perfectly impossible to justify the payment of any further sum by way of fiscal needs subsidy.


Richard Burpee Hanson: They do not need it.


James Lorimer Ilsley: There was no pretence that they did. I would not go to the length of saying that they would not have accepted it; nevertheless no contention could be put forward that British Columbia needed more than that twelve or thirteen million dollars.
Maritime Provinces-Subsidies


George Alexander Cruickshank: It may not be clear to me, and I am sorry I could not hear all the minister has been saying. As I understand him, however, this is merely carrying forward, after the termination of the new agreements, the agreements which were in effect with the maritime provinces.


James Lorimer Ilsley: That is right.


George Alexander Cruickshank: Is it the intention of the present government to carry on, at the termination of the new bill, the agreement with respect to the subsidy of $750,000 to British Columbia? The minister has looked after British Columbia very well so far, and I will also endeavour in a small way, with the assistance of the member for Yale (Mr. Stirling), to look after British Columbia. I do not want to repeat myself, but I understand that we are merely carrying on the old agreements. As I understand the minister- and, as I say, I have not heard him very well-this $750,000 subsidy is left to the will of the government of the day. I cannot agree with the minister, as I understood his remarks, with regard to extra grants in the case of British Columbia, because he did not state that if any extra moneys were allotted to that province during the last few years of depression, it had been allotted purely and simply by way of grants to British Columbia to care for exceptional circumstances which we had in that province, to look after some unfortunate people from the prairie provinces. Does the minister expect British Columbia to concur in the continuation of the subsidy to the maritime provinces and at the same time to concur in the subsidy granted by the last government under Viscount Bennett, to the province of British Columbia, amounting to $750,000? Is it the intention of the present government, at the termination of the new agreement, to continue the special grant of $750,000 to British Columbia?


James Lorimer Ilsley: I should not like to say that we have any intention one way or the other, but the rights of the province, if any, to that subsidy are expressly preserved by the section I have read. This agreement is not to affect or prejudice any right or claim, moral or otherwise, which the province may have to the restoration and continuation, at the termination of this agreement, of the $750,000 special grant discontinued by the dominion in the year 1941. It is not, in my judgment, a right. It is a claim rather than a right, never finally settled. I understand the province always contended that they were entitled to much more than that.


Karl Kenneth Homuth: It is not an obligation?


James Lorimer Ilsley: It is not an obligation at all, but it was voted for a number of years. If there is any obligation or if there is any right there, it is expressly preserved by this clause of the agreement. I do not think the province would want us to pin that down definitely to $750,000 as we are doing in the case of the maritime provinces, putting it in statutory form. They would not want that themselves.


George Alexander Cruickshank: I was not suggesting that the minister should pin it down. We realize that we have been penalized for a great many years, and I am glad that the member for Waterloo South (Mr. Homuth) has come to the assistance of the Minister of Finance (Mr. Ilsley), but I cannot see why there should be a specific bill stipulating that it should be so much for the maritime provinces, while it is decided that it may or may not be the case for British Columbia. All I want the minister to say is this. In so far as the policy of the present government is concerned, will the subsidy be continued or possibly increased-and I think it should be increased? If so, then will there be a bill to that effect? I do not know much about monetary reform-I am not from the province of Alberta-but I cannot see any consistency in stating that there should be a certain subsidy for the maritime provinces, irrespective of the fact that the leader of the opposition (Mr. Hanson) comes from one of those provinces, and that they should have a guarantee to that effect, while British Columbia is left problematical. I cannot see any reason for a special bill providing that they should get a guaranteed amount while ours is left in that uncertain state. Surely the minister can say that, as far as the government of the day is concerned, the amount will not be reduced below $750,000.


James Lorimer Ilsley: No, I cannot.


George Alexander Cruickshank: I would like a little clarification. After all, British Columbia is one of the provinces of this dominion, a most important part.


James Lorimer Ilsley: I cannot say anything more than I have said. In the case of the maritime provinces those amounts were settled by two royal commissions, and as far as they are concerned it is the end. There has been no such settlement of the British Columbia amount. The British Columbia amount has been carried on in a tentative way awaiting settlement year after year, and any rights that province has are preserved, but it is not in any such settled state that it can be embodied in a statute.

Maritime Provinces-Subsidies
The hon. gentleman asks me for a statement of intention; I cannot give any such statement. The matter will have to be taken up at the end of the agreement where it is left. Whether it is resumed or not is a matter for consideration at that time. But no rights are lost by this.


George Alexander Cruickshank: I can take it that it will have the same consideration that the maritimes have had, even, if necessary, a royal commission?


James Lorimer Ilsley: I cannot give any such undertaking.


George Alexander Cruickshank: But I want the minister's opinion.


James Lorimer Ilsley: I should not like to make any commitment in that regard.


Clarence Gillis: Am I right in my interpretation of this: Prior to the enactment of the dominion-provincial taxation agreement the amounts set out in the schedule were paid to the provinces of Prince Edward Island, New Brunswick and Nova Scotia?


James Lorimer Ilsley: Yes.


Clarence Gillis: What is taking place now is that the amounts set out here are discontinued; that the provisions of the dominion-provincial taxing agreements displace that, and that statutory effect is now being given to the undertaking that the arrangement as carried on previously will be picked up on the expiration of the dominion-provincial taxing agreement?


James Lorimer Ilsley: That is correct.


[Stage Direction]
Section agreed to.
On section 2-Additional annual subsidies.
Vincent-Joseph Pottier: The minister said this afternoon that the agreement could be terminated by a province on thirty days' notice before March 31 each year. Is there a similar provision that the dominion can give notice and cancel the agreement?


James Lorimer Ilsley: No; there is not.


Thomas Reid: The section says "the following additional annual subsidies". What would be ' the total subsidies as outlined in the present bill?


James Lorimer Ilsley: These are in addition to what we call the constitutional subsidies provided in the British North America Act and amendments. Those subsidies were instituted at the time of confederation and,
I think, have been modified from time to time. They are fundamental subsidies; they are paid not only by virtue of a statute of this parliament but by virtue of a statute of the imperial parliament; they are British
North America Act subsidies. These are additional to those.


Thomas Reid: The reason why British
Columbia is not mentioned here is that British Columbia has not come to a definite settlement as to the total amount. They were receiving $750,000, but they were not altogether satisfied. No definite agreement has been arrived at?


James Lorimer Ilsley: That is right.


Thomas Reid: If they had arrived at a definite agreement, it would be included in this bill?


James Lorimer Ilsley: It might or might not. We may not have agreed to that on account of the annual payment to British Columbia being so large. It is some $12,000,000 or $13,000,000, due to the fact that so much of that province's taxation was income tax and corporation tax. The size of the payment to British Columbia I think I may fairly say has almost been a stumbling block to concluding agreements with the other provinces. I should not like to say we would have made the same kind of offer to include those amounts if they were settled. I do not think myself that there would have been any difficulty about enacting that they would be picked up at the end of the agreement if they had been settled.


Thomas Reid: I take it then that British
Columbia stands to lose because of the fact that after the termination of this agreement the income tax payment will cease a year after the cessation of hostilities; the subsidy of $750,000 is also gone, and the province will have to come then to the federal house and begin all over again arguing for a subsidy? It is left out in the cold.


James Lorimer Ilsley: Many things may happen
before that. I do not know what will happen at that time. This was all discussed at the conference of the provincial premiers and treasurers and myself, and it was finally decided that this was the best way to handle the matter of the subsidies to British Columbia, Saskatchewan and Alberta, because these were never settled as being the correct amounts. So, whatever rights British Columbia had before, they have again. I do not think they have any rights.


Thomas Reid: The minister has repeated the
statement that they have no rights. I am wondering whether it was made clear at the conference with British Columbia that they were letting go their subsidy of $750,000, and that on the cessation of hostilities they would have to come back and deal with the federal government again.



Maritime Provinces-Subsidies


James Lorimer Ilsley: They were letting nothing
go any more than they do at the end of every calendar year. They have no agreement, no award of any commission; they were simply dependent upon the dominion parliament voting that sum year by year. What did they let go?


Thomas Reid: That is very true, but no government would just cut them off. They are now cut off.


George Alexander Cruickshank: This is very important to us in British Columbia. The hon. member for New Westminster has brought it out in specific terms. I am not grudging the maritimes their subsidy, but they get it automatically under the act. As I understand, however, at the end of this agreement the question comes before parliament whether or not British Columbia continues to receive the $750,000. It is not a question whether the $750,000 is or is not ample; the question whether or not the province gets one dollar must come before this parliament. When the minister asks us to approve a bill which definitely states that at the termination of this agreement the maritimes will receive the amount specified in the bill, I think the minister should state that as far as the present government is concerned they will be agreeable to continuing the existing subsidy to British Columbia. As a member representing British Columbia I should like a definite statement as to whether the provincial authorities thoroughly understood in agreeing to this new bill, that there was only a possibility of the subsidy of $750,000, which might be classed as a special subsidy, being restored.
There are two things the minister should state, and they are of vital importance to British Columbia. Apparently we do not come under any royal commission or any act of parliament, as do the maritime provinces. I suggest, however, that at least morally it is recognized not only by this government but by the preceding one, that we are entitled to something. It would appear to me that under this bill we from British Columbia would have to appear before the parliament of Canada, at the expiration of the present new bill, asking parliament to grant us a subsidy of $750,000, as a temporary amount pending a final solution. All this would happen while the maritime provinces by an act of parliament receive a specified amount. The minster should state whether this government is in favour of the subsidy of $750,000 being continued, in the same manner as is the maritime subsidy. I should like to know, too, if the provincial treasurer of British Columbia agreed to the bill as it now reads, namely that it is liable to continuation subject to the approval of parliament.


James Lorimer Ilsley: As I said before, I do not wish to make any agreement with respect to restoration, because action may depend upon a great many factors. Just consider what the situation is likely to be. These agreements may last three or four or five years. At the end of that time the question will arise as to whether the province will resume the collection of income and corporation taxes, or whether it will not. There will, in all probability, be a completely new arrangement with the provinces. Then, that may not happen; it may be that the agreement will just come to an end, and that there will be no arrangement. The province will simply pick up where it left off. A person cannot foresee what the situation will be. One cannot foresee what concession or new arrangement will be made by the provinces, or between the provinces and the dominion. It may be that at that time this grant will be a very unimportant thing, and that something else will take its place. Possibly something more advantageous will take its place. It may be that the amount will be too small, that it will need to be larger. It may be that no subsidy at all will be required, or that a lesser amount may be required. It is not a settled thing, and I cannot make any commitment or give any undertaking in regard to what the policy of the government in power in Canada at that time will be, or what our policy will be if we are then in office. There are too many factors in the situation which would have some bearing on the matter, and I do not think we should be asked to do anything more than it was agreed at the conference we would do, namely insert a clause protecting such rights as there may be, and put that clause in the agreement, so that it cannot be said at the termination of this agreement that a certain thing went by the board, and that something was forfeited at the time the agreement was entered into. We have protected the provinces to that extent. Beyond that we have not gone.


George Alexander Cruickshank: The minister has said that what happens depends a great deal on circumstances, which may be different. In that connection I cannot see how it is possible now to State exactly what subsidies may or should be granted to the maritime provinces, when it is not possible to do the same for British Columbia. That does not seem reasonable to me. If we can say definitely now that the sum for Nova Scotia will be $1,300,000; for New Brunswick $900,000, and for Prince Edward Island, $275,000, and yet as the government of the day we cannot say that British Columbia will or will not require a minimum of $750,000, that does not seem to be a reasonable situation. I want to say

Maritime Provinces-Subsidies
now, as I have said before, that I have no quarrel with the maritime subsidies. As a matter of fact, they may not be ample. But if we can say definitely in parliament that they must have a minimum of a certain amount, then why is it not possible to say, subject to revision, that there shall be at least a minimum of $750,000 for British Columbia?
Possibly the minister did not understand my second question; I may not have made it clear to him. Did the provincial treasurer for British Columbia, knowing that a specified sum was to be allocated to the maritime provinces, agree that that sum was to be given to them, by act of parliament, and that they would automatically have that amount? Did the provincial treasurer of British Columbia know that he might possibly secure for his province-I repeat the'words "might possibly" -the sum of $750,000, subject to the right, will or permission of parliament?


James Lorimer Ilsley: Oh, yes, the arrangement was thoroughly explained, understood and agreed to at the conference. But the hon. member must realize that we are not agreeing that the maritime provinces are to get at least a certain amount. We are agreeing that they will get a certain amount. British Columbia is not prepared to do that. From their point of view it may be much better for them to be in an undetermined position.
At the conference the provincial treasurers and premiers were expressly informed that it was my intention, or the government's intention, to introduce a bill fixing the maritime provinces grants, to take effect after the termination of the agreement. The other three subsidies were discussed-one for Manitoba, one for Saskatchewan and one for British Columbia. There was considerable argument as to what should be done to give some protection to these provinces. Finally I believe it was I who suggested-it may have been someone else-that the clause which appears in the agreement should be put therein. I drafted it there and read it to the premiers and provincial treasurers, and no exception was taken to it. I do not know how formal it was, but that certainly was the settlement of the matter which was made at that conference in the presence of everybody, with a complete disclosure of all the facts. The agreement is signed by British Columbia on that basis. It was signed on March 18, and the conference to which I referred was about December 18. So three months later, after there was the fullest opportunity to think it over, as to what should be done, the government of British Columbia signed the agreement. Certainly I do not think they have forfeited anything, and they do not think they have. I do not believe they would be in any better position if we intro-
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duced a bill like this to apply to that province. Of course, if we introduced a bill saying that they would get a minimum of $750,000, they would have everything to gain and nothing to lose. They would have that much anyway, and whatever more we did for them. But that is not the maritime provinces bill. This is a settlement of the matter. This is what they get, and all they get, by way of subsidy.


George Alexander Cruickshank: I understood the minister to say that that is the minimum; but that is not necessarily all they get?
Mr. ILSLEY; That is all they get on account of the special claims which were dealt with by the Duncan and White commissions.


George Alexander Cruickshank: British Columbia has never been overpaid, and we are sent here to see that they get their fair share.


Angus MacInnis: Representing a constituency in Vancouver, I thought it would be better to see if I understood what the situation really was before I said anything. The agreement made must be fairly satisfactory to British Columbia because, as far as I know, no representations have been made to members here. I am speaking only for myself, but from conversation with other members I have not heard of any representations having been made. Premier John Hart is an astute man, and I do not think he would let very much slip. My understanding is that the subsidy which is paid to British Columbia was never settled, but that the province has been accepting $750,000, thinking it was entitled to more.


Grote Stirling: That is additional to what it had been before.


Angus MacInnis: In the agreement referred to in Bill No. 16 there is an undertaking that the case of British Columbia will not be prejudiced in any way when the provisions of that bill expire after the war. The province will be still in the same position as it was before, and will be able to claim the $750,000 annually and press for a greater subsidy if it can get it.
The bill now before us is a little different. The maritime provinces receive their subsidies as a result of the findings of two royal commissions, and the bill before us makes these amounts as definite and static as anything can be between provinces and the dominion. They are no worse or no better off than they were before. As far as I can see, no further assurance can be given in connection with this bill, since the representatives of British Columbia did not insist on a bill. I do not see how they could have insisted on a bill
Naval Services

unless the $750,000 had been agreed upon as a definite amount.


Mr. EDWARDS:: Were the recommendations of the commission implemented before? Have they been given effect to at all?


James Lorimer Ilsley: These amounts have been paid to the maritime provinces since early in the thirties.


Manley Justin Edwards: By agreement?


James Lorimer Ilsley: Year by year.


George Alexander Cruickshank: I should like to say one word by way of compliment to the Minister of Finance. I am sure British Columbia will be delighted to know that the hon. member for Vancouver East (Mr. Maclnnis) is endorsing the action of this government, while the hon. member for Fraser Valley is doing otherwise.


Angus MacInnis: I do not want the hon. member for Fraser Valley (Mr. Cruickshank) to put words in my mouth. I expressed myself quite clearly as to what was done. I am sorry to note that the hon. member for Fraser Valley is out of line, not only with this government but also with the government of British Columbia.


[Stage Direction]
Section agreed to.
Bill reported, read the third time and passed.
At eleven o'clock the house adjourned, without question put, pursuant to standing order.
Tuesday, May 26, 1942