[Stage Direction]
On the order for motions:
Mr. T. F. DONNELLY (Wood Mountain) moved:: That for the remainder of the session all private bills from the Senate when received from that house be read a first and second time and be referred forthwith and that standing order 105 respecting the posting of bills be suspended in relation thereto.


[Stage Direction]
Motion agreed to.

Right Hon. W. L. MACKENZIE KING (Prime Minister):: Hon. members of the
house yesterday were, I think, in general agreement with the arrangement proposed by the several leaders of the house as to the winding up of its business, and, as hon. members will have noticed, I had the following notice inserted in the Votes and Proceedings of yesterday:
That on and after Saturday, July 18, 1942, until the end of the session the house shall meet at 11 o'clock in the morning of each sitting day and that in addition to the usual intermission at 6 o'clock p.m., there shall be an intermission every day from 1 to 3 o'clock, p.m., and the order of business and procedure shall be the same on Saturday as on Friday.
With the consent of the house that motion might be put now.


[Stage Direction]
Motion agreed to.
(Mr. MacNicol.]


[Stage Direction]
15 to July 13, 1942
Hon. L. S. ST. LAURENT (Minister of Justice): I lay on the table of the house a report pursuant to paragraph 3 of regulation 21 of the defence of Canada regulations for the period June 15 to July 13, 1942 inclusive.

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

Mr. GRAYDON:: 1.	Has any provision been made in the regulations of the wartime prices and trade board in relation to the rationing of sugar whereby farmers will be assured of sufficient supplies of sugar for threshings, corn-cuttings and other such occasions?
2.	If not, will the matter be given early consideration?


Mr. ILSLEY:: 1.	Yes. Provision was made at the outset for dealing with thresher gangs. Special purchase permit has been printed and distributed to local offices of the board for use in this connection. The provision for threshing gangs has not been extended to other special farm groups as yet, but these and related matters are being given consideration.
2.	Answered by No. 1.


DIRECTOR OF WAR AUXILIARY SERVICES
Mr. CASTLEDEN:: 1.	Who is the present director of national war auxiliary services?
2.	What is his salary?
3.	What position did he hold prior to taking his present position with the national war
services ?
4.	What are his duties in his present position?


Mr. THORSON:: 1.	The present director of voluntary and auxiliary services, also the secretary of the national war services funds advisory board, is George Pifher.
2.	$5,000 per annum.
3.	Secretary of national war charities funds advisory board, liaison officer to director of auxiliary services, Department of National Defence and assistant to director, war charities division.
4.	To administer "The War Charities Act" and the regulations made thereunder, to cooperate with all organizations registered

Questions
under "The War Charities Act", including such organizations as are or may become subject to the supervision of the national war services funds advisory board, and, generally, to promote, organize and coordinate different forms of voluntary assistance, with a view to the most effective use of personal services or material contributions for the prosecution of the war and the welfare of the nation; to act as secretary to the national war services funds advisory board, who govern the payment of accountable grants to certain national war services organizations. To examine the budgets of the national war services organizations and recommend in regard thereto to the above advisory board.


TORONTO SHIPBUILDING COMPANY-RENTAL OF EQUIPMENT
Mr. FRASER (Peterborough West):: 1.	What equipment does the Toronto Ship Building Company rent from other firms in addition to crawler cranes?
2.	From whom is it rented?
3.	What are the rates of rental on each piece of equipment?


Mr. HOWE:: 1.	(a) Two only 2-ton dump trucks.
(b)	One only surveyor's transit.
2.	(a) Danforth Haulage Company, 197 Victor Avenue, Toronto, Ont.
(b) Instruments Limited, Toronto, Ont.
3.	(a) SI.75 per hour, inclusive of gas, oil and driver.
(b) S15 per month.
The above two trucks are to be returned to the lessor this week as the Toronto Shipbuilding Company Limited now have their own trucks.


WARTIME PRICES AND TRADE BOARD-FISH ADMINISTRATION
Mr. REID:: 1.	Who is the administrator on the wartime prices and trade board in connection with fish?
2.	When was he appointed?
3.	What salary does he receive?
4.	What -was his business previous to appointment and in what city or place was he located?
5.	Has any advisory board been appointed to assist him?
G. If so, what are their names, places of business and business connections?
7.	Have any persons from British Columbia been appointed on the advisory board?
8.	If so, who are they, and if not, why not?


Mr. ILSLEY:: 1.	Alexander Neil McLean is the fish products administrator of the wartime prices and trade board. Mr. McLean- is assisted by C. J. Morrow of Lunenburg, NR., as director
for Atlantic division, J. S. Eckman, of Vancouver, B.C., as director for Pacific division, and J. R. Langskill of Toronto as director of fresh and frozen fish division.
2.	Mr. McLean was appointed on November 22, 1941.
3.	Mr. McLean receives no salary.
4.	Mr. McLean is President, Connors Brothers, Black's Harbour, New Brunswick.
5.	Yes.
6.	H. G. Connor, president, Maritime National Fish Ltd., Halifax, Nova Scotia; T. A. MacLean, Jr., managing director, Lockport Co., Ltd., Lockport, Nova Scotia; Fred Magee, Port Elgin, N.B.; W. H. Tidmarsh, Charlottetown, P.E.I.; Achille Raymond, general manager, Quebec United Fishermen, Gaspe, P.Q.; Xavier Lelievre, Little River East, Gaspe Co., Quebec; H. Welham, secretary, Montreal Fish Trades Assn., Montreal, P.Q.; Thos. Steele, St. Lawrence Fish Market, Toronto, Ontario; George Kentner, Booth Fisheries Canadian Co., Ltd., Winnipeg, Manitoba; Capt. J. B. Skaptason, Viking Fisheries, Winnipeg, Man.; N. T. Gardner, Burns and Company, Regina, Sackatchewan; Wm. Schlader, 806 McLeod Building, Edmonton, Alberta; G. Humphreys, London Fish Co., Vancouver, B.C.; S. M. Rosenberg, Nootka-Banfield Co., Vancouver, B.C.
7.	Yes.
8.	See answers to 1, 6 and 7.



QUESTIONS PASSED AS ORDERS FOR RETURNS


Mr. CASTLEDEN:: 1.	What is the present government position held by Alan Williamson?
2.	What are his duties in that position?
3.	What previous experience has he had since 1932 which would qualify him for this position?
4.	By whom and for what period was he employed prior to taking his position with the government ?
5.	Is he in receipt of any pay or allowances from his former employers?


Mr. HOWE:: Return tabled.


LIFE INSURANCE
Mr. FAIR:: 1.	What- is the amount of life insurance written in Canada in the calendar years, 1936, 1937, 1938, 1939, 1940 and 1941, by, (a) Canadian companies, (b) British companies, (c) other companies?
2.	What is the amount of premiums paid on the above policies during each of these years?
3.	How many policies have lapsed or been surrendered for cash surrender value during the above period?
4.	What is the value of such lapsed or surrendered policies ?

Motions for Payers



MOTIONS FOR PAPERS


Mr. BLACKMORE:: For a copy of all documents, letters, telegrams, etc., pertaining to the court martial which, on May 2, 1941, dealt with the charges preferred against Major H. C. Singer, of the 2nd Canadian Anti-Tank Regiment in England, including the following: -
1.	The application for Major Singer's court martial.
2.	The convening order for his court martial.
3.	The subpoena of each of the witnesses who gave evidence in the court martial.
4.	The first summary of evidence taken under Major S. McQwirter, April 14 to 18, both dates inclusive.
5.	Major-General Victor Odium's letter, 2 D.C./5-4, April 15, 1941.
6.	The complete copy of the proceedings of the court martial.
7.	The shorthand notes taken by the court recorder at the trial.
8.	All details as they appeared in the application for the court martial, including character, correspondence, court of inquiry, etc., etc.
9.	The letter sent to the Secretary of State concerning the dismissal of Major H. C. Singer from the services.
10.	Part 1 orders 2nd Cdn. Div., February 20-28, 1941; Part I orders No. 1 Base Depot, February 20-28, 1941; Part I orders 2nd Cdn. A/T Regt. R.C.A., Oct. 30-Nov. 8, 1940, Dec. 15-27, 1941, Dec. 28-Jan. 5, 1941; February 20-28, 1941.
11.	Declarations to suspend, (a) Rule 8, officer present at investigation- (b) Rule 14, officer sent to inform accused of charges, etc.; (c) Rule 17, undue delay in convening court martial. Open arrest April 9. Trial May 2, 1941.
Mr. BLACKMORE; Stand.


Mr. RALSTON:: Mr. Speaker, I want to ask that the question be put.


John Horne Blackmore: I asked that it stand.


Mr. SPEAKER:: Objection has been taken according to citation 189, Beauchesne's Parliamentary Rules and Forms:
When an order of the day has been read, it must thereupon be proceeded with, appointed for a future day or discharged.
Since objection has been taken, the sense of the house must be ascertained.


Mr. HANSON (York-Sunbury):: Is this motion debatable?


Georges Parent: No. I must therefore put the motion.


Richard Burpee Hanson: What are the grounds of objection to the motion? They may be technical; I do not know.


James Layton Ralston: The ground of objection is that it is not considered in the public interest to produce the proceedings of courts martial.

The officer himself is entitled to a copy of the proceedings of the court martial and will get it under the usual terms. Otherwise, it would mean that parliament would be acting as a court of appeal in connection with courts martial which are held by military officers. The officers act in accordance with their military duties in dealing with courts martial, and this court martial having been dealt with by officers duly appointed, having been confirmed bjf the divisional commander, and having been confirmed by the corps commander, it is not considered in the public interest to produce the documents.


Georges Parent: Those in favour of the motion will say "Aye". I declare the motion lost.



PUBLIC SERVICE-DEPARTMENTAL COSTS-NUMBER OF EMPLOYEES, 1938-42

Mr. CHURCH:: For a return showing-1. The cost of operating, during the fiscal periods ending March 31, in each of the years, 1938, 1939, 1940, 1941, 1942, the following departments and branches of government:	Agriculture, Auditor General's
office, Chief Electoral Officer's office, Civil Service Commission, External Affairs, Finance, Fisheries, Governor General and Lieutenant Governor, Insurance, Justice, Labour, Mines and Resources, National Defence, National Revenue, Pensions and National Health, Post Office, Prime Minister's office, Privy Council office, Public Archives, Public Printing and Stationery, Public Works, Royal Canadian Mounted Police, Secretary of State, and Munitions and Supply, including salaries and wages paid to executives and clerical staffs.
2.	The number of employees in each of the above departments, in the years 1938, 1939, 1940, 1941 and 1942, and the total salaries paid.
3.	The number of employees engaged by permanent commissions under the federal government, (a) civil-for the above years; (b) war-by years since established.
4.	The total number of staff and employees of all departments and commissions in existence in 1938, 1939, 1940, 1941 and 1942.


Mr. ILSLEY:: I have written a letter to my hon. friend about this, and I suggest that the matter stand until he has had an opportunity to consider the letter, if he has not already done so.


Thomas Langton Church: I shall confer with the minister; I shall be glad to do so. I think it is in the public interest, though, that the people should know what the costs of these outside commissions are, and they should know before this house closes.
Motion stands.

Customs Tariff



HONG KONG COMMISSION


[Stage Direction]
On the orders of the day:
William Lyon Mackenzie King: Yesterday I promised my hon. friend the leader of the Cooperative Commonwealth Federation (Mr. Coldwell), that I would table a letter from Mr. Drew, with respect to which he said he would take the responsibility of asking that it be tabled. I wish to have a word with my'hon. friend before proceeding further in complying with his request. There had not been an opportunity for that until we met in the house a moment ago, and in the circumstances I would ask if the question of compliance with that request might stand until eight o'clock this evening.



MILITARY CAMPS


[Stage Direction]
On the orders of the day:
Mr. F. D. SHAW (Red Deer):: I wish to direct a question to the Minister of National Defence. In view of the fact that a report is now abroad in the land that when the fire broke out in Barriefield military camp on Saturday morning the available fire-fighting apparatus proved useless, would the minister make a statement to the house, either discounting that report or indicating what steps are being taken to provide adequate firefighting equipment?


James Layton Ralston: I will make inquiries and give the information.



WAYS AND MEANS


[Stage Direction]
The house in committee of ways and means, Mr. Fournier (Hull) in the chair.
Customs tariff-410c.	(i) Machinery and
apparatus and complete parts thereof for use exclusively in producing unrefined oil from shales, not to include motive power, of a class or kind not made in Canada: British preferential tariff, free; intermediate tariff, free; general tariff, free.
(ii) Machinery and apparatus for operating oil-sands by mining operations and for extracting oil from the sands so mined; complete parts of the foregoing:	British preferential tariff,
free; intermediate tariff, free; general tariff, free.	[DOT]
Mr. ROSS (Moose Jaw):: Both parts of this item have to do with the importation of machinery for the development of the oil
44501-267J
resources of Canada, but one has reference to machinery for producing unrefined oil from shale, while the other has to do with the production of oil from tar sands in western Canada. I notice in this item that the machinery for producing oil from shale is free of duty except for the motive power in the machines. With a war on, and with such dire necessity for oil in this country, I see no reason why there should be any tariff whatever on any machinery that can be used for developing the oil resources of Canada at this time. Even if it is an engine that goes into the machine, we are not going to interfere with anyone making engines in Canada to-day merely because we permit the free importation of an engine for an oil drilling machine of any type. Engines are so hard to obtain now that you must get priorities before you can obtain them. All this oil drilling machinery and all material used for the development of oil, such as pipe, drilling machines, bit stems, bits, refining machinery, and so on, should be allowed in duty free from any country in which we can get them, in order to develop our oil resources.
Much has been said by leaders throughout the democratic part of this world in the last few months about freeing the channels of trade throughout the world when the war is over, in order that all democratic countries may have access to raw materials and may trade with other countries in order that there may be a fuller life throughout this whole world. If we are ever to get at that at all, it is time we were getting at it now. If there is one thing for which I have to criticize the Minister of Finance in connection with this budget it is that in it he has made no move toward that end. If we cannot have some of these restrictive tariffs removed now, when there is no necessity in the world for them, when this war is over it will be even more difficult to do it. To-day we are more and more industrializing one certain part of Canada. By the time the war is over that part of Canada will be so highly industrialized that they will fight every move that is made to reduce tariffs, and the result will be that other parts of Canada will suffer even more than they have suffered in the past.


Mr. REID:: They are suffering now.


John Gordon Ross: It is therefore
about time the government made some real reductions in tariffs in order to start this thing going. It is recognized that the sentiment of the people, in this country, in Great Britain, and in the United States of America, has changed greatly in regard to trade matters. A majority in all these countries is of the opinion that trade between the democratic nations of the world should be unfettered.
Customs Tariff

I repeat, I do not know how we are going to be able to do anything about it after the war if we are not ready to do it now. Therefore I am sorry that this budget has not provided for drastic reductions in the tariff.
I think something should be said by hon. members with a view to seeing that those changes are made when the next budget comes down. Is it not ridiculous that Canada, a highly industrialized country, which is giving to Great Britain the greater part of a billion dollars in war goods manufactured in this country, for the purpose of helping her and ourselves in this war, and deferring until after the war the repayment of a loan of some $700,000,000, should be sending these goods to Great Britain in that way because it is impossible for Great Britain to pay for them in goods?


Richard Burpee Hanson: Is it not
part of our contribution to the common effort, not a gift at all?


John Gordon Ross: No doubt part
of it is.


Mr. MacNICOL:: What has it to do with
this item?


John Gordon Ross: It has this to do with it, that even if Great Britain wanted to pay with goods, we, the Canadian people, through our tariffs, are saying, "No; your goods cannot come into this country, even to help pay your debt to us." That is a ridiculous situation and should be corrected.
I have spoken here before for freer trade, and I intend to keep on doing it. I think this country and the world at large is at last beginning to see the light of that kind of reasoning, and I hope the Minister of Finance will be able to see some more of it before the next budget.


Mr. HANSELL:: I am greatly surprised
that the minister has seen fit to place such an enormous tax upon "machinery and apparatus for operating oil sands by mining operations and for extracting oil from the sands so mined, and complete parts of the foregoing." Thirty-five per cent is a tremendous tax on that machinery at a time when the people of this country are anxious to develop our oil resources.


James Lorimer Ilsley: I am not putting it on; I
am taking it off.


Ernest George Hansell: Well, take it completely off-that is what I ask. Perhaps the minister might explain what this is. There seems to be some confusion.


John Ritchie MacNicol: The confusion is at
your end. It is free. You do not want anything better than that.


Ernest George Hansell: I do not read anything
free there.


James Lorimer Ilsley: I have before me two
columns, on page 16 of the ways and means resolutions. The first column contains the proposals; the second column-which is divided into three parts, as is the first- contains the present rates. The present rates for certain of these articles are, free, 27i per cent, and 35 per cent; and for others, 10, 27i, and 35 per cent. All these duties are being removed and the articles placed on the free list under all classifications.


Ernest George Hansell: Then I shall have to
make the same speech but instead of castigating the minister I shall have to compliment him. The fact of the matter is that we in Canada are anxiously trying to develop our oil resources. This item will apply particularly to the Fort McMurray tar sand development, in which we in this corner of the house are particularly interested. The development of these sands will aid tremendously the building of the Alaska highway, and that highway will aid greatly the defences of that northern territory. In my study of this matter I find that one of the obstacles encountered is that it is difficult to mine those sands and extract the oil in competition with oil obtained from drilled wells. This will help the tar sand producers to compete.
I was pleased to hear the Minister of Munitions and Supply say not long ago that they are sending men in there to review this whole situation and bring about further development of the Fort McMurray tar sands. I urge upon him that he do this speedily. Let the government develop them, or give every possible inducement to their development, without delay.


Mr. ROSS (Calgary East):: Will the tariff be removed on rotary drilling rigs such as those used in deep drilling in Turner Valley, for instance?


James Lorimer Ilsley: Item 410d, which was inserted last year, provides that the following shall be duty free:
Well-drilling machinery and apparatus, and complete parts thereof, for use exclusively in drilling for water, natural gas or oil, or in prospecting for minerals, not to include motive power; machinery and apparatus of a class or kind not made in Canada for maintenance and testing purposes in connection with gas or oil wells; well-packers and complete parts thereof, for oil or gas wells; seamless iron or steel tubing of a class or kind not made in Canada, for use in casing water, natural gas or oil wells.


George Henry Ross: That does not exempt the motive power used in drilling.


James Lorimer Ilsley: That is correct.

Customs Tariff


George Henry Ross: Is there any reason why it should not be exempted?


James Lorimer Ilsley: I do not know of any. That is the question that was raised by the hon. member for Moose Jaw. I have made inquiries to ascertain whether there have been any communications or complaints with regard to diesel engines and the like. I find there have not, and it is now a little late to suggest that in connection with this budget.


George Henry Ross: Then could it be considered for next year's budget?


James Lorimer Ilsley: Yes, it can be considered. There may be reasons against it which I do not know, but we have not considered it; that is all.


Richard Burpee Hanson: I understand that what is being done in this item is to restore a position which previously obtained, from 1936 to 1938, in connection with the United States trade agreement. In the new agreement of 1938 the arrangement was dropped and is now being revived. It is not a new proposal at all, except with reference to a portion coming under the intermediate and general tariffs. Everything is to be made free. This machinery and apparatus for use exclusively in producing unrefined oil from shale, for instance, is of a class or kind not made in Canada. It is intended, I think, to help in the development of the oil shales of New Brunswick and eastern Canada generally; that is part 1. Part 2 is to help in the development of the oil sands. Part 1 does not include the motive power, which I understand is of a class or kind made in Canada, and the protection heretofore given on that is being continued. I see no great objection to the passing of this item as it is, if we understand the position historically and what is now being sought. I have an idea that previously it was all one item and it is now being separated. In any event all this machinery and apparatus, which is of a class or kind not made in Canada, is being put on the free list. That is in accordance with government policy; I am not objecting to it, and I think we might carry the item.


Mr. JOHNSTON (Bow River):: The minister is to be commended for removing the duty on this apparatus, because this may tend to increase the production of oil in areas where oil is contained in the shale and tar sands. But I do not think the results for which we hope will come about simply through the removal of this duty. The government should go further. I realize that the Minister of Finance is not concerned in what I
am about to say, but I think our endeavours to develop the present production of oil from all sources, including the tar sands and the shale, should be greatly increased. The government should go much further than merely removing the duty on this equipment, because the situation is becoming exceedingly critical.
I brought up this question in the house over a year ago, but up to the present time practically nothing has been done to develop the production of oil from our tar sands. I am sure the minister recognizes the seriousness of our oil situation just as much as anyone else, probably more so than a great many people in this country. We see now that the oil fields of Iraq and Iran are in a very dangerous position; in fact the entire Persian field is in a most critical situation, and according to information appearing in the public press the United States is becoming acutely aware of an oil shortage in that country. A great deal of our crude oil comes from the-United States; and when we see them going to the extent of setting up plants for the production of synthetic oil from coal, it becomes apparent that the situation is serious. We in Canada are favourably situated in that regard; we have the largest potential oil field in the world, bar none. Right now, when the situation is so critical, when the possibility of having our supply of oil from the Persian field cut off is becoming more apparent day by day, the government and the Minister of Finance should insist that the development of these oil fields be hurried along as much as possible.
The minister will remember that when I brought up this question in the early part of 1941 I was ridiculed; I was called a defeatist and an alarmist when I dared to suggest that before this war was over our oil supply from Iraq and Iran might be cut off. I am not satisfied with the progress that has been made, and I want to commend the Minister of Finance on the removal of the duty from this equipment, which may hasten our progress in this direction. Certainly I am not satisfied with the progress that has been made in the development of the tar sands.


James Lorimer Ilsley: Operations are going on at the moment, I am told.


Charles Edward Johnston: Just in an
experimental way, I think.


James Lorimer Ilsley: I do not think so.


Charles Edward Johnston: When I spoke on this matter previously the Minister of Munitions and Supply took me to task and said that the prospect of developing oil from the tar sands was too remote for this war, that perhaps we would have it for the next
Customs Tariff

war. I am glad to note that once more the Minister of Munitions and Supply has been forced to change his opinion. Perhaps the Minister of Finance has had to sit on him a little; and if that has brought about the good results shown here I hope the minister sits on him good and hard, so that some real action may be taken.


James Lorimer Ilsley: I am not sitting on him.


John Ritchie MacNicol: Under this item is
machinery to be admitted free for the removal from the oil sands of bitumen and other ingredients, or merely the oil?


Mr. MacKINNON (Edmonton West):: While my colleague is looking up the information I might just say, for the information of the hon. member for Bow River, that I have ascertained by inquiry that final investigations of the McMurray and Waterways district are in progress at the present time, looking toward the actual production of oil from those sands. I do not know how far the minister concerned may care to go in giving details of arrangements that have been made, but I can assure the hon. member that this work is definitely under way.


Charles Edward Johnston: Then may I ask the minister whether he will consider the advisability of setting up a committee of this house when parliament reassembles to make a thorough investigation of 'the progress being made in the development of oil from these tar sands, as well as developments in the manufacture of synthetic rubber in Canada. If the minister will give the committee that assurance I think it would be to the advantage of our war effort.


James Lorimer Ilsley: If I am the minister to whom the hon. member refers, all I can say is that I will bring what he has said to the attention of my colleague, the Minister of Munitions and. Supply.
Replying to the question of the hon. member for Davenport, this item provides for the free entry of "machinery and apparatus for operating oil-sands by mining operations and for extracting oil from the sands so mined." His question was whether machinery for extracting other substances-


John Ritchie MacNicol: Such as bitumen and tar.


James Lorimer Ilsley: -from the sands so mined will be admitted free. Such machinery is not covered by the item. I do not know enough about machinery to know whether the machinery provided with free entry by this item could be used for both purposes. If not, it is not covered.


Richard Burpee Hanson: I was hoping this item would go through. May I ask the minister whether any machinery is to be imported for the development of the oil shales, and whether there have been any developments with respect to the oil shales in New Brunswick. Months ago I brought to the attention of the oil controller the position in New Brunswick, and I was met with the statement that it was not part of government policy to go into the production business itself. I can understand that. Then I urged that investigations should be made, and I was promised that some investigation would be made. What I am asking now is whether investigations have taken place, how far have they proceeded, and is there any prospect of the development of the oil shales of New Brunswick, which are known to be a substantial natural resource of that part of the country, where we need development if we can possibly get it.
I am not deprecating what the minister is doing by this item. This machinery is not made in Canada, and was admitted free some years ago. I think there is some differentiation, and I was hoping that the minister would give the history of the position, which I attempted to give somewhat inadequately a few moments ago. This item is not a new departure. It simply restores the item to the position which obtained up to 1938, at which time the item was dropped.


James Lorimer Ilsley: From 1936 to 1938, yes.


Clarence Decatur Howe: With reference to the point raised by the leader of the opposition, I think I announced to the house that the federal government, in partnership with the provincial government, was making a very thorough investigation of the oil shales of New Brunswick. The investigation is practically completed, but I have not seen the final report. An interim report which I saw indicated not too hopeful a situation. The shales did not have the oil content that it was hoped would be found.
As regards the Alberta tar sands, we are making a very thorough investigation. We are not only checking all available data, but are making a close examination of refinery results in that area. We are having refinery runs made of the product, as well as laboratory tests, and we are drilling to find the extent of the sands with a view to a large scale development. In both cases I think we are taking the steps which are necessary before large expenditures would be warranted.


Mr. PERLEY:: Would the Minister of
Munitions and Supply enlarge upon the statement he made on May 15 with respect to this

Customs Tariff
development? The minister said, in connection with the investigation to which he has just referred, that they were studying the Gower system of processing. I wonder if he would enlarge upon that and tell us what the results of investigations into that system of processing have been.


Clarence Decatur Howe: I would not like to discuss the system of processing. That is under study as well, but I am not enough of an oil technician to be able to discuss it, even if I knew the full results of the investigation, which I do not. The whole investigation has been placed in responsible hands, and we hope to have a report within a month or six weeks which will tell us what development is justified and what process is likely to obtain the best results. I am sorry that my information does not allow me to go any further.


John Ritchie MacNicol: There were only two plants operating in the oil sand area. There was the bitumen plant, forty or fifty miles north of Fort McMurray, operated by Mr. Fitzsimmons, and they were doing a pretty good job in extracting bitumen. They were shipping thousands of barrels of bitumen and tar. When I was up there last summer I saw two hundred barrels going up the river. The other plant, which was manufacturing oil, was turning out a year ago somewhere between 200 and 250 barrels a day, but unfortunately the plant was burned down in the fall. It has been rebuilt, and the last information I had was that before now the rebuilt plant should be turning out about 600 barrels a day.
I am in accord with this item, which is to admit free the machinery required for the further development of these sands. All the machinery used in the oil plants came from the United States, and there is not a great deal of it even there. This machinery requires constant replacement; so that if this item, which will admit free machinery not made in Canada which is required for extracting the oil from the oil sands, will assist in the development of these sands, I think we should all be in favour of it.


[Stage Direction]
Item agreed to.
Customs tariff-422a. Concrete road-paving machines, self-propelling, end loading type, with a capacity of 21 cubic feet of wet concrete or more; concrete and asphalt road finishing machines; form graders; sub-graders; combination excavating and transporting scraper units; concrete mixers, transit type; dump wagons or trailers, having a capacity of 10 cubic yards or over, not self-propelled; backfilling machines and equipment, mounted on self-propelling wheels or crawling traction, semi-or full-revolving boom and scraper type; steam or air driven pile hammers or extractors; well-points; truck turntables; all the foregoing of a
class or kind not made in Canada, and complete parts thereof: British preferential tariff, free; intermediate tariff, 10 per cent; general tariff, 12J per cent.
James Lorimer Ilsley: The only change being made in this item is that the words "dump wagons or trailers on crawler tracks not self-propelled" are being amended to read "dump wagons or trailers, having a capacity of 10 cubic yards or over, not self-propelled". The new item will admit dump wagons or trailers equipped with rubber tires on the same basis as dump wagons or trailers equipped with caterpillar tread. These dump wagons or trailers cost from $8,000 to $10,000 each. The LeTourneau dump wagons are equipped with rubber tires, while the Athey are equipped with caterpillar tread. Both types are hauled by tractors, and are used in road construction work and in the construction of airports. There is no information available as to the value of the imports of these dump wagons or trailers, but it is estimated that from ten to twenty are imported each year.


Richard Burpee Hanson: They are not made in Canada?


James Lorimer Ilsley: No.


John Ritchie MacNicol: There are two plants in Canada making road making machinery, self-propelled. One is a fine plant in Plessisville, Quebec, and the other is located in Toronto. As this machinery is not made in Canada I do not suppose that either of these plants will be affected?


James Lorimer Ilsley: That is right.


[Stage Direction]
Item agreed to.
Customs tariff-428g. Fuel injection pumps and nozzles for diesel and semi-diesel engines: British preferential tariff, free; intermediate tariff, free; general tariff, free.
Richard Burpee Hanson: Is this item for purposes of clarification? Are these made in Canada? What is the reason for the change?


James Lorimer Ilsley: They are not made in
Canada. This is a new item to provide for duty-free entry under all tariffs of fuel injection pumps and nozzles for diesel and semidiesel engines. Fuel injection pumps and nozzles are not made in Canada and are imported mainly for servicing diesel and semidiesel engines. Imports of pumps and nozzles are entitled to duty-free entry if they are for internal combustion traction engines or for the construction or equipment of ships, but when imported as replacement parts of diesel or semi-diesel engines used for road building, agricultural, industrial or
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logging purposes they are dutiable as complete parts of diesel or semi-diesel engines under tariff item 428e at the United States trade agreement rate of 20 per cent. These pumps are also used for the servicing of diesel and semi-diesel engines used in lighting plants and motor patrol boats. There is no information available as to the value of the imports of these pumps and nozzles, but it is estimated that the value of these imports amounts to about $20,000 annually. Apparently some of these items were not free, being classified as parts, and this item makes them all free.


[Stage Direction]
Item agreed to.
Customs tariff-435. Locomotives and motor cars for railways, of a class or kind not made in Canada, and complete parts thereof, for use exclusively in _ mining, metallurgical or sawmill operations; diesel switching locomotives of a class or kind not made in Canada: British preferential tariff, free; intermediate tariff, 12J per cent; general tariff, 20 per cent.
Richard Burpee Hanson: The first part of this item is the same as it was heretofore?


James Lorimer Ilsley: That is right.


Richard Burpee Hanson: Diesel
switching locomotives of a class or kind not made in Canada are being included. I assume the railways want to use this type of locomotive. I suppose they cannot be obtained anywhere but in the United States?


James Lorimer Ilsley: That is correct.


[Stage Direction]
Item agreed to.
Customs tariff-438d. Front and rear axles; brakes; clutches; internal combustion engines; steering gears; magnetos; rims for pneumatic tires larger than thirty inches by five inches; transmission assemblies; drive shafts; universal joints; steel road wheels; and parts of the foregoing, when of a class or kind not made in Canada, and imported by manufacturers of the goods enumerated in tariff items 424 and 438a for use only in the manufacture of motor trucks, motor buses and electric trackless trolley buses, or for the manufacture of chassis for the same: British preferential tariff, free; intermediate tariff, 174 per cent; general tariff, 274 per cent.
(1) Provided that if the above articles are imported for use as original equipment for motor trucks, motor buses and electric trackless trolley buses, or for chassis for the same, by a manufacturer of the goods enumerated in tariff items 424 and 438a, and provided also that during the year during which importation is sought, not less than 40 per centum of the factory cost of production of such motor vehicles and chassis therefor, not to include duties and taxes, is incurred in the British Empire, the rates of duty under this item shall be: British preferential tariff, free; intermediate tariff, 74 per cent; general tariff, 274 Per cent.

(2) Provided that the governor in council may make such regulations, if any, as are deemed necessary for carrying out the provisions of this item.
Richard Burpee Hanson: I think
the minister should explain this change.


James Lorimer Ilsley: The only change being made in this item is that the words "complete parts of the foregoing" are being amended to read "parts of the foregoing." The administrative problem in regard to this item arose in connection with imports of axle housings. Front and rear axles are specified in tariff item 438d. It has been the practice to import rear axle housing tubes as complete parts of rear axles, since the tubing manufacturers in Canada are unable to manufacture this particular type of seamless steel tubing. These tubes are of a very heavy type, being formed by forcing a mandrel through a solid bar, giving a very heavy walled seamless tube, which is subsequently swaged at one end. These axle housing tubes require a large number of manufacturing operations after importation before they are adapted for use as complete parts of rear axles. They are not entitled, in condition as usually imported, to entry under tariff item 438d as "complete parts" at the proviso rate of 74 per cent, but are dutiable under the general item covering parts of motor vehicles at the rate of 25 per cent. Imports under tariff item 438d during the calendar year 1939 amounted to over a million dollars in value. Almost all of these imports came from the United States. Imports under this item during the calendar year 1941 exceeded $6,000,000 in value, almost all of which came from the United States.


Mr. LOCKHART:: Is any of this tubing made in Canada?


James Lorimer Ilsley: No, not the type for axle housings.


[Stage Direction]
Item agreed to.
Customs tariff-438i. Body bottom cross members and steel shapes for the manufacture thereof; bumpers, front and rear, and parts thereof, including spring steel bumper plates; casket tables or platforms for hearses; destination and route sign assemblies, illuminated or not, and parts thereof; direction signals, illuminated or not; door and step mechanism, hand, vacuum or air operated, and parts thereof; door locks and catches and parts thereof; electric switches, buzzers, bells, push buttons, fuse assemblies and parts thereof; forward drive control conversion assemblies and parts thereof; lamps of all kinds, illuminating and indicating, including sockets, flanges, terminals, glassw'are, lenses and gaskets therefor, assembled or not, but not to include lamp bulbs; metal stampings, oiled and primed or not, and assemblies thereof; rubber fenders; seat operating mechanisms; ventilators, including motor

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driven fan type, and grilles, and parts thereof; window operating mechanisms; all of the foregoing when imported to be used only in the manufacture of motor bus bodies, electric trackless trolley bus bodies, motor ambulances and hearses: British preferential tariff, free; intermediate tariff, free; general tariff, 20 per cent.
Mr. FRASER (Peterborough West):: Are the electric switches, buzzers, bells and so on for automobiles, or is this the type of equipment used in houses?


James Lorimer Ilsley: The concluding words of the item are, "all of the foregoing when imported to be used only in the manufacture of motor bus bodies, electric trackless trolley bus bodies, motor ambulances and hearses."


Gordon Knapman Fraser: These items are not manufactured in Canada?


James Lorimer Ilsley: I do not think so.


John Ritchie MacNicol: What is the significance of the 25 per cent under the intermediate tariff in the present rates?


James Lorimer Ilsley: The only change being made in regard to this tariff item is that the words: "all of the foregoing when imported by manufacturers of motor bus bodies, electric trackless trolley bus bodies, motor ambulances and hearses, to be used in the manufacture of such motor bus bodies, electric trackless trolley bus bodies, motor ambulances and hearses, in their own factories"-
-are being amended to read:
"all of the foregoing when imported to be used only in the manufacture of motor bus bodies, electric trackless trolley bus bodies, motor ambulances and hearses".
This change will permit the large automobile concerns manufacturing buses to import duty free from the United States material to be used by the manufacturers building bodies for these buses. Under the present wording of tariff item 438i it is necessary for the body builder to import the parts in his own name, pay the duty and taxes, as well as the vendor for the material. The body builder immediately invoiced the automobile concern with the bill of the material as well as the duty and taxes paid. Under the amended wording the automobile manufacturer can purchase and import the materials, pay the duty and taxes, and consign the goods to the manufacturer who is building the bus body on the chassis produced by the automobile concern.


Richard Burpee Hanson: It is a
concession to the automobile manufacturers?


James Lorimer Ilsley: A convenience more than
anything else.


John Ritchie MacNicol: I asked the minister the significance of the 25 per cent intermediate rate under the present rates. I should also like this information about the 40 per cent general rate.


James Lorimer Ilsley: The rates which these items carried were 25 per cent under the intermediate and 40 per cent under the general tariff unless they were imported by the various classes of manufacturers that I mentioned, to be used in their own factories. If they were to be used in their own factories they were free, from the United States, but if not to be used in their own factories they were 25 per cent from the United States. The change provides that they may be imported free whether they are used in their own factories or not, so long as they are to be used in the manufacture of motor bus bodies and so forth. It is more of a convenience than anything else.


Norman James Macdonald Lockhart: Is it changed as a result of a request from the manufacturers of bodies or from the manufacturers of chassis? Did it come as a request from either one of these groups?


James Lorimer Ilsley: It came from the manufacturers of the buses.
Item agreed1 to.
Customs tariff-438j.	Semi-finished piston
castings of any material: British preferential tariff, free; intermediate tariff, 25 per cent; general tariff, 35 per cent.


Richard Burpee Hanson: This refers to the automobile industry too. This is a reduction in tariff. Are these made in Canada, or is it an administrative item, a distinction between fully finished and semi-finished?


James Lorimer Ilsley: This is a new item to provide for the same rates on semi-finished piston castings as on finished piston castings. That is the purpose of it.


[Stage Direction]
Item agreed to.
Customs tariff-451b. Pins manufactured from wire of any metal:
(i)	Specially designed for marking systems: British preferential tariff, free; intermediate tariff, 5 per cent; general tariff, 10 per cent.
(ii)	N.o.p.: British preferential tariff, 174 per cent; intermediate tariff, 274 per cent; general tariff, 30 per cent; and, per pound: intermediate tariff, 10 cents; general tariff, 10 cents.
Richard Burpee Hanson: These are not the ordinary domestic'pins. Are they of a class or kind made in Canada?


James Lorimer Ilsley: No.

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Richard Burpee Hanson: They are specially for marking systems?


James Lorimer Ilsley: Yes; that is right.


[Stage Direction]
Item agreed to.
Customs tariff-534.	(a) Wick, with or without core, processed or not, when imported hy manufacturers of wax candles or tapers for use in their own factories in the manufacture of wax candles or tapers: British preferential tariff, free; intermediate tariff, free; general tariff, free.
(b) Braided wick, with or without core, processed or not, when imported for use exclusively in oil-burning sanctuary lamps, under such regulations as the minister may prescribe; British preferential tariff, free; intermediate tariff, free; general tariff, free.
Norman James Macdonald Lockhart: This material is not made in Canada, is it?


James Lorimer Ilsley: No. This is a rewording. In (a) the word "braided" is left out.


[Stage Direction]
Item agreed to.
Customs tariff-574. Woven fabrics, nonelastic, not exceeding three inches in width, imported by manufacturers of suspenders, garters, hose supporters, abdominal supporters and spinal braces for use exclusively in the manufacture of such articles in their own factories: British preferential tariff, 10 per cent; intermediate tariff, 171 per cent; general tariff, 20 per cent.
Richard Burpee Hanson: I understand that the words "abdominal supporters and spinal braces" are now included in the term "woven fabrics, non-elastic". It is an extension of the principle, is it not, and nothing more?


James Lorimer Ilsley: Yes.


John Ritchie MacNicol: What is the significance of dropping the 221 per cent of the British preference, the 271 per cent intermediate and the 35 per cent under the general tariff? Is it because of the war? Some of this material is made in Canada.


James Lorimer Ilsley: The wording of this item is being amended to cover non-elastic woven fabrics not exceeding three inches in width, when imported by manufacturers of abdominal supporters and spinal braces. These fabrics are at present dutiable under tariff item 542a at rates of 221 per cent, 271 per cent and 35 per cent. It just lengthens the list of non-elastic woven fabrics which may be imported at the rates of 10 per cent, 171 per cent and 20 per cent. It adds a little to the list, that is all.


[Stage Direction]
Item agreed to.
Customs tariff-584. Resin or rosin; bone pitch, crude only: British preferential tariff, free; intermediate tariff, free; general tariff, free.
Richard Burpee Hanson: What is the position with respect to this? It is not indicated what the change is.


James Lorimer Ilsley: It drops the words "in packages of not less than 100 pounds".
Mr. HANSON (York-Sunbury); Does that arise out of the shortage of jute?
Mr. ILSLEY; Yes, they are using paper instead.


Richard Burpee Hanson: But they cannot put a 100 pound weight in a bag of
paper?
Mr. ILSLEY; That is correct.


Richard Burpee Hanson: That is the only reason?


James Lorimer Ilsley: That is the reason, yes.


Richard Burpee Hanson: Is there any change in the tariff?


James Lorimer Ilsley: No.


Richard Burpee Hanson: Yes, there is in the intermediate.


James Lorimer Ilsley: The main item was free-that is, it was free when it was brought in in packages of not less than 100 pounds. Now it is free in packages of less than 100 pounds.


Richard Burpee Hanson: Is there any production of resin in Canada?
Mr. ILSLEY; No.


[Stage Direction]
Item agreed to.
Customs tariff-610. Belting, n.o.p.: British preferential tariff, 71 per cent; intermediate tariff, 25 per cent; general tariff, 271 per cent.
John Ritchie MacNicol: What particular brand or line of belting has this item reference to? What is it to be used for?


James Lorimer Ilsley: It is a long story, and it is a very small matter. Item 610a, the item covering belting of camel's hair for machinery, -with rates of 71 per cent, 271 Per cent' and 271 Per cent, is being deleted. The goods covered by this item will now fall under tariff item 610, the item covering belting, n.o.p. The present rates on item 610 are 15 per cent under the British preferential tariff, 25 per cent under the intermediate tariff, and 271 Per cent under the general tariff. The British preferential rate on this item is being reduced from 15 per cent to 71 per cent. Belting of camel's hair for machinery when imported from countries entitled to intermediate tariff treatment will enjoy a reduction from 271 per cent to 25 per cent. There is a world shortage of belting of camel's hair. Belting of alpaca hair is being substituted

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therefor. Imports of belting of alpaca hair from the United Kingdom are dutiable at 15 per cent, whereas belting of camel's hair for machinery is dutiable at 7J per cent. Under the new tariff item both of these will be admitted at the rate of per cent.


[Stage Direction]
Item agreed to.
Customs tariff-657.	Mouthpieces in the
rough, screws, aluminum pipe fitments and pipe howls moulded from briarwood dust, and bowls of wmod, not further processed than frazed, when imported by manufacturers of tobacco pipes for use in the manufacture of such pipes, in their own factories:	British preferential
tariff, free; intermediate tariff, free; general tariff, 25 per cent.
Richard Burpee Hanson: There is a change of wording here. It is a question of rough mouthpieces and pipe bowls. The minister might explain what the change is.


James Lorimer Ilsley: The present item is being reworded to provide for mouthpieces in the rough of any material, for screws of brass, bone or any other material, and for pipe bowls of any kind of wood. Most of the mouthpieces in the rough now being imported are made of synthetic resin and are dutiable under 711 at rates of 15 per cent, 25 per cent, and 25 per cent, with the United States trade agreement rate of 20 per cent. Screws if made of bone are dutiable under tariff item 711 at rates of 15, 25 and 25 per cent, with the United States trade agreement rate of 20 per cent. If these screws are made of brass they are dutiable, under tariff item 352, at 20, 271 and 30 per cent, with the United States trade agreement rate of 25 per cent. The present item, 657, provides for briarwood bowls. The item is being widened to cover bowls of any kind of wood, bowls of wood other than briarwood are at present dutiable under tariff item 506 as manufactures of wood at rates of 17i per cent, 22J per cent and 25 per cent, with a United States trade agreement rate of 20 per cent.


Richard Burpee Hanson: I suppose briarwood comes from France and Africa and is not available, and this is an attempt to use substitutes.


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: Are we making any bowls for pipes in Canada out of any woods grown in Canada?


James Lorimer Ilsley: Cheap ones, yes.


Richard Burpee Hanson: Where?


James Lorimer Ilsley: In Montreal.


Richard Burpee Hanson: From wood produced where, and of what kind?


James Lorimer Ilsley: From wood produced in British Columbia; I do not know what kind.


[Stage Direction]
Item agreed to.
Customs tariff 682a. Net floats of aluminum, glass, convas, cork, rubber or cellulose acetate, for use exclusively in commercial fishing: British preferential tariff, free; intermediate tariff, free; general tariff, free.
Richard Burpee Hanson: Do we *not make something in Quebec out of cellulose?


James Lorimer Ilsley: Not these floats. Some nets are made.


Richard Burpee Hanson: They do not make floats but fishermen's nets. They are using cellulose acetate for floats and it must be imported?


James Lorimer Ilsley: Yes.


[Stage Direction]
Item agreed to.
2. Resolved, that schedule A to the customs tariff, as amended, be further amended by deleting from the Customs Tariff Amendment Act, 1939, as amended by chapter twenty-nine of the statutes of 1940 and chapter thirteen of the statutes of 1941, the following enumerations of goods and rates of additional duties of customs:
Whiskey, brandy, rum, gin and all other goods specified in customs tariff items 156, 156a,
and 156b	 $3 per gallon of the
strength of proof.
Ale, beer, porter and stout	 9 cents per
gallon.
Wines of all kinds except sparkling wines, containing not more than 40 per cent of proof spirit	 32J cents per gallon.
Champagne and all other sparkling wines
[Stage Direction]
$1.25 per gallon.
and by substituting therefor the following enumerations of goods and rates of additional duties of customs:
Whiskey, brandy, rum, gin and all other goods specified in customs tariff items 156, 156a,
and 156b	 $5 per gallon of the
strength of proof.
Ale, beer, porter and stout	30 cents per
gallon.
Wines of all kinds except sparkling wines, containing not more than 40 per cent of proof spirit	 42J cents per gallon.
Champagne and all other sparkling wines
[Stage Direction]
$1.75 per gallon.
Mrs. CASSELMAN:: I was not in the house on Monday when the debate on the excise resolutions took place with regard to the taxing of alcoholic beverages. I was attending a committee meeting. Had I been here I should have liked to say a few words on this important question, and perhaps I may be allowed to say them now; this is * somewhat similar resolution.
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I would urge that measures be taken to cut down the further use of such intoxicants, because it seems to me there are no factors that contribute more to the inefficiency, the degradation and the sorrows of individuals and of the nation, than the continued abuse of physical, moral and mental powers through the use of intoxicating liquor. It is a waste of human and material resources. I do not want to reopen the debate that took place on Monday, but I feel bound to say a few words on this subject. I have sometimes thought seriously of introducing a resolution which I might ask any of the hon. gentlemen who spoke on Monday, and who applauded temperance sentiments, to support. It may be that reform in this case is hard to obtain by legislation.	The experience
of the prohibition years shows the difficulty of attempting to keep men sober by law- or women either-but I think it should be our responsibility to educate our young people in the danger of the use of alcoholic beverages, danger to body, mind and soul. Boys and girls should be told of the misery they are storing up for themselves, how they undercut their God-given abilities and prodigally throw away- their opportunities right and left when they give these and similar poisons a chance to do their work. They should know that drinking is the preliminary step along the primrose path that leads to disease, crime and destruction.
I am not going to make a speech; I am simply offering a couple of suggestions that might be valuable to the minister and to temperance societies. It seems to me that the temperance societies are not making much headway towards legislation for absolute prohibition. In Sweden before the war they had a different method of approaching the control of alcohol than by resorting to absolute prohibition. I will not go into that, but you will find it set out in Marquis Child's book, "Sweden-The Middle Way," chapter 8, on "Liquor Control That Works." Another suggestion I would make is that in addition to taxes and tariffs we might label every bottle containing alcohol with some such inscription as this; it was written by an eminent physician. May I read it: Directions for Use
Use moderately and not on successive days. Eat well while drinking. If necessary, supplement food with vitamin tablets while drinking.
W arning
May be habit-forming. Not for use by children. If this beverage is indulged in immoderately it may cause intoxication (drunkenness), later neuralgia and paralysis (neuritis), and serious mental derangement, such as delirium tremens and other curable and incurable mental diseases, as well as kidney and liver damage.
[Mrs. Casselman.l
If this were used as an advertisement in newspapers or on street cars it might serve a more useful purpose than some of the advertisements we have seen, and it might counteract certain advertisements which were spoken of on Monday by some hon. members, put out by different firms that deal in such beverages. We should increase taxes and tariffs and warn all and sundry of the deadly dangers they run.


Richard Burpee Hanson: Have the minister and the administration taken cognizance of the public reaction to the debate on Monday in this house, and has the government given consideration to steps which would have the effect of diminishing the huge sums of money now diverted to the liquor trade in this country? I think the minister would find, if he read the press across Canada, that for the most part the expression of opinion from either side of the house on Monday last has been well received. I will not repeat in any measure what I said on that occasion, and I am not inviting another debate on the question, but I should like to know whether the government has considered the reaction of public opinion in regard to this matter. Will the administration make some effort to negotiate with-the provincial administrations with respect to the huge increase in the retail sales of liquor? Since we met the other day I have had occasion to review what Mr. MacMillan, the premier of Nova Scotia said, in the legislature, I believe, with reference to the huge increase in sales in that province. He affirmed the position that among the civilian population the increase has not been large, but that the increase, in his view at all events, was due to two factors, namely, the large increase in the sales in the city of Halifax arising from the fact that so many ships were entering and leaving that port, and also the position with respect to sales in the vicinity of the large army camp at Debert. I hope the government will not leave all the responsibility with the provincial governments. There is a responsibility on the federal government to do something in the matter. Various methods have been suggested. I am not going into them now, but I think we ought to cut down this bill with respect to spirits by at least one-third between now and the next budget.


James Lorimer Ilsley: I have not had time to read the editorials on the subject since last Monday. In fact the only one I saw was not in accord with what the hon. gentleman has said; it was the other way. But probably the others will come in, and I shall see them sooner or later. I think it would be a most

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serious step for this government to be responsible for instituting a system of dual responsibility for the control of the liquor traffic in Canada. The moment we start that we are in for plenty of trouble. Everything that goes wrong is then the fault of the other jurisdiction.


Mr. DIEFENBAKER:: Yesterday a return for which I had moved was brought down, in connection with statutes that have been amended, suspended or otherwise interfered with by order in council. Apparently so far as statutes are concerned the government has seen fit to amend them in a great many ways under the powers contained in the War Measures Act. I think that generally speaking all over Canada to-day there is a feeling that something should be done toward reducing the increasing consumption of intoxicating liquors. Apparently the government does not feel disposed to use the powers it has under the War Measures Act to reduce this consumption. If it will not use those powers, does it not think that a national appeal should be made by the government to people all over Canada, in the interests of an increasing war effort, to reduce their private consumption of intoxicating liquors? That I think the government could do. It could prevent the advertising of intoxicating liquors. During part of the period from 1929 to 1934 the government of Saskatchewan refused to permit liquor advertising in that province. It was criticized for interfering with private business. The result of the refusal to permit the advertising of liquor was not apparent until after that ban had been removed, when there was an immediate and very considerable increase in consumption, in no way attributable to increase in population, the process being rather in the other direction.
Having regard to the feeling of people all over this country, will the government give consideration, if not to the use of its powers, to a national appeal to the people of Canada urging upon them, in the interests of the war effort, that they reduce the private consumption of intoxicating liquors?


Mr. COLDWELL:: I should like to add
a word to what has been said on this subject. I do not know what effect a national appeal would have, but the government has the power, and from all parts of this house expressions of opinion have come from hon. members representing all shades of opinion that the consumption of intoxicating liquor since the war began has increased to an alarming extent. When we are not only asking but conscripting young men to join the armed forces, we ought to see to it at least that the
fears which naturally arise among the parents of those boys are allayed so far as we are able to allay them.
I know that we tried prohibition in the last war and the experiment did not work out as many of us who supported the prohibition campaign at that time believed it would, and perhaps we could not enforce a measure of prohibition at this time. But every possible effort should be made in that direction, not only by appealing to the population of the country to reduce the consumption of intoxicating liquor, but by the government restricting the hours of sale, perhaps rationing the amount supplied, and generally endeavouring to cut down the consumption of intoxicating liquor, or at least its widespread sale in places where it is easily accessible to young men who often in their periods of rest have little chance of recreation other than in some sort of beer parlour.
I strongly endorse the sentiments which have been expressed and the requests that have been made of the government. I have sufficient faith in the government to believe that it will consider the matter and take effective steps to remove what has become a real menace to many of our people.


Thomas Reid: I have one suggestion to make to the minister. I realize his difficulty and how reluctant he would be to interfere with the trade by way of prohibition. But it is a well-known fact that the greater amount of drinking takes place in the later hours of the evening and on into the small hours of the morning. My suggestion would be that the wartime prices and trade board should restrict the hours of sale. Ten o'clock in the evening is late enough. Those of us who have been in Ottawa many months have witnessed the scenes mentioned' by one hon. member the other evening as having occurred1 on Bank street and other streets in * the city between eleven and twelve o'clock at night. A reduction of hours of sale might not stop these incidents, but I believe would curtail consumption to a considerable extent. The wartime prices and trade board are curtailing the liberty of the subject in every other way; why should they hesitate to do it in a matter affecting the moral welfare of the people?


John George Diefenbaker: I should like to have an answer from the minister as to the attitude of the government towards such a national campaign as I have suggested.


James Lorimer Ilsley: All I can do is to bring to the attention of my colleagues the remarks of my hon. friend and of the hon. member for
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COMMO-NS
[Stage Direction]
Vancouver South, who made a similar suggestion the other day. I would not have too much confidence in the result of such an appeal, but it is worthy of consideration.
With regard to the suggestion of the hon. member for New Westminster, I feel sure that the wartime prices and trade board would feel that such action is outside the scope of their activities. They are not looking for new fields to enter.
Richard Burpee Hanson: They have grabbed off almost everything.


James Lorimer Ilsley: It must be remembered that if we were to take direct curtailment measures, the body being curtailed would be the crown in the right of the province, because the crown in the right of the province, in every province with the exception of Prince Edward Island, I think, controls as a monopoly the sale of liquor. What we are being asked to do in taking such measures is to step right into the field of another jurisdiction being actively exercised at the moment, and say to that jurisdiction: "You are not doing your duty; this is what you shall do hereafter."
I do not think this government is the guardian of the morals of the people to any greater extent than the governments of the provinces, and I have never been able to see why pressure converged upon this government. The people who are in the business, who have a monopoly of the sale, and who are sovereign, under the decisions, within their jurisdiction to the same extent that the federal government is-they have all the powers in the world in this particular matter. If they are exercising them wrongly, why do they not exercise them properly? It is part of the war effort of the provinces; it is something they should do; it is their responsibility; it is their duty, and they should discharge it. Speeches such as we have heard here are all to the good as a manifestation of a very considerable popular sentiment in the country; but do not try to push this government into a position which the prov-in'ces now occupy.


Mr. JACKMAN:: The federal government put in prohibition during the last war.


Major James William Coldwell: While it is true that the provincial governments are very largely interested in the liquor business-I think unfortunately, from many points of view- I believe that ultimately the only way to control the entire liquor traffic will be to take it out of private hands altogether and, under rigid government supervision, handle the whole business from the manufacture right down to the sale. The manufacturers 
and distillers of liquor are the people who are making huge fortunes out of it. I can think of one fortune in this country, for example, which began in a little junk yard in the city of Regina during the last war. Its foundations were laid through one of the most pernicious bootlegging businesses this country has ever seen, with hi-jacking and similar practices of every description. To-day the people who were associated with that little junk yard, who corrupted the morals of a vast number of Canadian citizens, are multi-millionaires, controlling Canadian Distillers, one of the richest groups of people in this country. The making of that fortune, originated in a Regina junk yard, brought about the demoralization of many people both in the province in which I live and across the line in the United States, where they ran liquor successfully for years in violation of every law and every decency. It makes me shudder when I sometimes see those people in honoured places in this country-even sitting at the table of the king and queen when they came to Canada some time ago.
The only way to handle this business is to take it out of the hands of these people. They corrupt everything they touch. I do not speak as a fanatical teetotaller; for I was brought up in a home where we were taught to use liquor moderately, and I have never abused it, perhaps because of my early training. But if a provincial government stands in the way, that provincial government should be exposed and denounced. I think I know one provincial government which will stand in -the way, and I will name it: the government of Ontario, under the leadership of the present premier of this province, whose associations with the liquor business are pretty well known all across this country. The time has come when we ought to take a stand as a dominion parliament and say to these people: We are taking these young men into the armed forces; we are sending them here, there and everywhere, away from home, and as a dominion parliament and a dominion government we are going to see that these boys are properly protected against the traffic of people who have piled up huge fortunes out of this business.


Richard Burpee Hanson: I regret the minister has taken the attitude that because there is a dual jurisdiction, this government should not take any action and has no responsibility. I do not think that position will be satisfactory to the people of Canada. The responsibility of conducting this war is upon this government, not upon the provincial

Customs Tariff
governments. Of course I agree that the provincial governments, in their jurisdiction and within their spheres of influence, have a responsibility too in connection with the conduct of the war, but it is a relatively small responsibility as compared with that of the federal government. If this be a great evil, as is suggested and as I personally believe it to be, I do not think it is good enough for this government to take the attitude which has been indicated by the Minister of Finance, that it can do nothing because the crown in the right of the province has a sovereign jurisdiction coextensive. Actually, that jurisdiction is not quite co-extensive because it has nothing to do with the importation. I imagine the minister has not even had time to take up the matter with his colleagues since Monday last, but I suggest to him that public opinion will continue to press for some action by the dominion government. My suggestion was that a conference be called with these gentlemen with a view to arriving at an amicable arrangement whereby, through mutual action, an accommodation could be reached which would have the effect of reducing the retail sales. At the same time the federal government, within the sphere of its jurisdiction, could make some arrangement whereby importations also would be reduced, as well as the domestic manufacture, which are matters solely within the jurisdiction of the federal authority. This would release materials and labour for other and better purposes.
I am not advocating prohibition in war time. We had it once. I was very hopeful that it would succeed, and I must say that it was a great disappointment to me when it did not succeed. I place my support of prohibition not on ethical but on economic grounds. I saw how it operated in my own city for two years, and I must say that operation was effective. It can be done, but only if you have behind it two factors: first, a fearless enforcement of the law, which is sometimes difficult to obtain; and, second, a preponderance of public opinion in support of it.


Mr. McIYOR:: To those who seek reformation along this line I say that before we can do away with one custom we have to replace it with something better, and I would like to ask hon. members what they have offered the minister as a substitute for the drinking that is taking place all over this country.


Mr. ROSS (Souris):: More milk.


Daniel (Dan) McIvor: If a custom is bad, we should replace it with a better custom, and I think there is a better one. You must change the thinking of those who practice that bad custom. If a boy is bad, or if there is a group
of boys meeting in a shack in the back lot, you can overcome the difficulty by keeping those boys busy doing something they will enjoy, something the motive behind which they may not understand. I am convinced that if we are to help in any reformation along these lines we must offer something better in its place, and I think that the senior Protestant chaplain, Bishop Wells, an old college friend of mine, has that. The only cure is for a man's thinking to be changed and for him to become a Christian through and through. That is the only cure for any evil habit.


Mr. GREEN:: There is one part of the minister's statement of a few moments ago which should not be allowed to pass without remark, and that was his reference to the provincial governments. The actual fact is that if this matter is left to the provincial governments nothing will be done. That is how it will work out, and the minister, if he will think it over, will come to the same conclusion. You have nine different governments -one province I believe has prohibition- and the urge is different in the different provinces, with different suggestions being made to the different governments. They are not under the same pressure of public opinion as we are here in Ottawa. The public, I am sure, are looking to the government of the nation to take the lead in this matter, because it is a national question .at this time. Money is being spent on liquor which should be diverted to the purchase of war savings certificates and war bonds. Men are being employed in the liquor industry who could be employed in war industry. Materials are being used in the liquor industry which could be used in manufacturing war equipment. Then, of course, there is the moral side of the question, and that is of the greatest importance, particularly in war time, when we have to get the right spirit instilled into the people of this country or Canada will not play her part in winning the war. There is a responsibility there which cannot be evaded by the dominion government or by this House of Commons. I do urge upon the minister again, as I did on Monday last, that he make a national appeal to the people, that he put the story before them with the authority of the Canadian government behind the appeal. I think the results would be surprisingly effective. I urge upon him that he take action right away along that line.


Mr. NOSEWORTHY:: I wish to support the suggestion which was made by the leader of the opposition. If the government is unwilling to do anything more it should at least institute a programme of education across the
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country. Certainly more leadership would be given to the provinces if a convention or conference were called at which this question could be threshed out and a solution found that would be Acceptable to the provinces and the dominion. This government owes it to the Canadian people to show at least that degree of leadership in this time of national crisis.


John George Diefenbaker: I would ask the minister a question arising out of a statement by the hon. member for Rosetown-Biggar. The attitude taken by the minister is that this is a provincial matter, while, in point of fact, having regard to the size of the problem and its effect upon the war effort in general, it is a great national problem. The distribution of intoxicating liquors is a matter for the provinces ; but have the provinces been approached by the dominion government with a view to securing their cooperation in a campaign to reduce the sale and consumption of liquor? If so, what has been the result?


James Lorimer Ilsley: I have discussed the matter with representatives of more than one province, but in no formal way have we told the provinces what we thought their duty was.


Harry Rutherford Jackman: Did they tell you?


James Lorimer Ilsley: No, and they do not often tell us what our duty is.


Mr. GRAYDON:: Sometimes they do.


James Lorimer Ilsley: I am temperamentally averse to telling people what their duty is or telling governments what their duty is. The likely answer would be that they are pretty well informed as to what their duty is, that they know the situation. I was thinking when members were speaking that there is nothing to prevent any member from holding meetings in his constituency and asking the people to drink less.
The suggestion is that the government of Canada should advise the people on their personal habits, thereby assisting the churches and other persons whose duty it is to do that. The reason why the dominion government is being urged to do this is that a change in these particular habits would assist in the war effort. There are a great many other habits of the Canadian people that could be changed to the advantage of the war effort. I suppose there is no reason why the dominion government should not point this out from time to time, but the idea of bringing together the provincial governments and telling them, "Here, do better than you are doing," is a suggestion that would not :be welcomed by some governments, particularly by those who

are doing their level best to curb this evil. I am speaking about the government of Nova Scotia. I know how they have struggled, and the curtailment there, so far as I can see, has not amounted to anything at all. The people have the money, they want the liquor, and they are buying it. Surely the provincial governments, faced with these very local situations that were mentioned this afternoon, are in a better position to deal with them than is the dominion government. I would far rather see people spend their money on war savings certificates or bonds than in buying liquor.


Howard Charles Green: Why not tell them so?


James Lorimer Ilsley: I have told them that. I have told them for the last one or two years to curtail their expenditures.


An hon. MEMBER:: And the people have been doing it.


James Lorimer Ilsley: Some have and some have not. I have probably met with some success, but not by any means with spectacular success, in view of purchases from the liquor stores being about 50 per cent higher than they were the year before the war, despite all our talk about sacrifice. I am just pointing out that it is all very well for hon. gentlemen to say, "Mr. Dominion Government, you are the one to make people drink less liquor"; but it is not as simple as that.


Thomas Langton Church: The onus is on the dominion government to solve this problem. The government of the day cannot treat this simply as a question of prohibition or temperance or a question of morals; it is a war question. The government are approaching it wholly from the point of view of revenue. They have practically abolished provincial and municipal institutions as they have existed under the British North America Act. I should like to have the attention of the hon. member for Moose Jaw and of other members of the committee, who should be interested in what is being said. The fathers of confederation saw fit to design and carve out provinces and municipalities, which were given certain legislative powers under the British North America Act. They were given certain powers with respect to taxation. The government cannot shelter itself behind the idea that this is a provincial and not a federal matter; it is entirely a war problem. Secondly, the municipalities were obliged under the constitution to provide police protection and other necessary services.
They had a reduction of licences campaign many times. The province took the revenues, and all the municipalities had to say about

Customs Tariff
it was that the owner and the property should be satisfactory in order to get a licence.
I have never been in a new beer parlour since they have been allowed in the province I live in, although I am not by any means a temperance man or prohibitionist. I look for some sanity from the government on this question. During the last war soldiers were placed in camps which were located a long way from any form of transportation; they put up with untold hardships. Soldiers need stimulants in their canteens. This is known by most of the military men, and they feel that nothing should be done to legislate against soldiers in canteens. When I was head of the city and chairman of the police commission of Toronto riots broke out near the close of the last wrar about foreigners and licences. Foreign people who had only recently come to the country were holding most of the licences for restaurants and other places. While prohibition was on in Ontario, civilians were able to stock their cellars with wet goods of all kinds, and when the soldiers came home they found prohibition in effect and bootlegging going on. When the troops returned they could' buy nothing. When we had prohibition in Ontario and other provinces; it was simply an incentive for the bootlegger to flourish like a green bay tree, which he did. The law was not a success.	[DOT]
I have received a good many resolutions regarding this question. If there is one thing that will drive a>
man to drink, it is the budget of the Minister of Finance. In my opinion, it is acting both as hangman and undertaker for the small retailer and wholesaler alike. Never mind what a whole battalion of hired press experts paid by the government say of the budget. It is confiscation to the small property owner and worker.
As to beer, according to bank statements and returns made by various departments many distillers and brewers were making a lot of money-the brewers especially-and were taxed little. We are compared with the United States. The brewers are violating the law on billboard advertising and pages in papers, and they will violate this new clause of the tariff also. At the present time they advertise on billboards throughout the country and attempt to capitalize on the man in the navy, the army and the air force. In my opinion wisdom and leadership in arriving at a solution of this question is lacking. Full control over this matter has been placed in the hands of the minister and his department by the War Measures Act.
The government of Canada has the responsibility to take up this question because of the changed conditions brought about by the war and the fact that the enemy is at both our front and back doors. They have failed in this responsibility. The onus of solving this question is not on this committee, it is on the government of the day as long as they are the government. They should be able to arrive at a sane and reasonable settlement of this question, especially in war time. Because of this budget the price of milk in the canteens has been put up to six cents, and beer, cigarettes, ice cream, sandwiches, coffee, tea and other liquids have gone up a cent or two. The minister should make a national survey and study the policy and come to a decision. He should know what they are doing in Great Britain and by our allies and the other dominions; and also the civil side of it should be gone into.
The minister is always preaching against luxuries; here is a good chance to practice it. There was considerable criticism in a Toronto weekly paper about the amount of money the minister's own department spent in connection with the victory loan and the war savings campaign-cigars, hotel expenses, banquets and refreshments. There has been no statement from the department contradicting what was said about this extravagence or stating their policy. As I say, the onus is on the government to solve this question, to provide a fair, reasonable and just settlement for all classes of the community. The soldier should not be lost sight of and his privileges should not be taken away without his consent.
When in the days of Sir Wilfrid Laurier the clergy came to ask him for prohibition and a vote, the chairman of the delegation, Rev. Mr. Huxtable, found Sir Wilfrid most democratic. In the days of Sir Oliver Mowat and Mr. Ross every licensed victualler had to be a Liberal and help to raise a campaign fund. When Sir James Whitney came into power he introduced wise temperance legislation and the three-fifths clause and aided temperance. It was a sensible law and provided proper control.
The onus is not only on the minister; it rests also upon the other members of the government. There are some from Ontario but we do not see much of them. Ontario is the forgotten province in connection with confederation. The four cabinet ministers from Ontario-Toronto has none-should give heed to the people of that province on this question and aid in a solution. There is no doubt at all that much money is being
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wasted. The minister is asking everybody to save, but we should be able to read the handwriting for war reform on the wall. As I say, I believe the onus is on the government and they should solve this question.


Gordon Knapman Fraser: Who is responsible for the runners or agents of the breweries and distilleries? Every session since 1940 I have had men come to my room in the hotel and ask if Mr. So-and-So was in. When I replied, "no," they would say that they wanted to sell him a case of such and such a brand of beer and wondered if I did not want a case. The same thing with liquor. They would intimate they had an order from this fictitious man and then try to sell me a few bottles. That sort of practice is to encourage people to buy. I do not know who is responsible, but these men are going around the hotels. I have had this happen here as well as in Toronto and Hamilton, although I have not bought any yet.
Resolution 2 agreed to.
Resolution 3 agreed to.
Resolutions reported, read the second time and concurred in. Mr. Usley thereupon moved for leave to introduce Bill No. Ill, to amend the Customs Tariff.
Motion agreed to and bill read the first time.



INCOME WAR TAX ACT

[Stage Direction]
The house in committee of ways and means, Mr. McCann in the chair.
Resolved, that it is expedient to amend the Income War Tax Act and to provide:-
1. That the rates of tax applicable to persons other than corporations and joint stock companies shall be increased to the rates set forth in the following schedule:-
A. Rates of tax applicable to persons other than corporations and joint stock companies:-
I. Normal tax-
(1)	In the case of
(a)	a married person,
(b)	a widow or widower with a son or daughter under eighteen years of age and wholly dependent upon such taxpayer for support, or a son or daughter eighteen years of age or over and dependent on account of mental or physical infirmity, or a son or daughter under twenty-one years of age who is dependent upon such parent for support on proof that such child is a student at secondary school, university, or other educational institution;
(c)	an individual other than a married person, who maintains a self-contained domestic establishment and who actually supports therein a person wholly dependent upon him and connected with him by blood relationship, marriage or adoption;
(d)	a minister or clergyman, other than a married person, in charge of a diocese, parish or congregation, whose duties require him to

maintain at his own and sole expense, a self-contained domestic establishment and who employs therein on full time a housekeeper or servant;
Provided, in the case of (a), the spouse, and m the case of (b), the said dependent, is resident in Canada or in any other part of the territory of the British commonwealth of nations, or in a country contiguous to Canada, or is a national or citizen of a country allied with Canada in the present war and is prevented from entry into Canada due to the exigencies of the war, or is legally debarred from entry into Canada;
Seven per centum of the income, if the income exceeds $1,200 per year;
And in the case of
(e)	a husband and wife having each a separate income,
Seven per centum of the income of each, if the income of each exceeds $060 per year;
And in the case of
(f)	a single person, or
(g)	a married person whose spouse is not resident in Canada or in any other part of the territory of the British commonwealth of nations, or in a country contiguous to Canada or in a country allied with Canada in the present war, or whose spouse is not legally debarred from entry into Canada.
Seven per centum of the income if the income exceeds $660 but does not exceed $1,800 per year;
Eight per centum of the income, if the income exceeds $1,800 but does not exceed $3,000 per year; and
Nine per centum of the income, if the income exceeds $3,000 per year.
And in the ease of
(h)	Estates having income taxable as provided by subsections 2 and 4 of section 11 of this act;
Nine per centum of the income.
(2)	From the normal tax there shall be allowed a deduction of $28 for the year 1942 and for each year thereafter for each of the following persons who is resident in Canada or in any other part of the territory of the British commonwealth of nations or in a country contiguous to Canada or in a country allied with Canada in the present war or who is legally debarred from entry into Canada and wholly dependent upon the taxpayer for support, namely
(i)	a child, grandchild, brother or sister of the taxpayer under eighteen years of age, or if eighteen years of age or over, is wholly dependent on account of mental or physical infirmity, or under twenty-one years of age on proof that such child is a student at a secondary school, university or other educational institution;
(ii)	a parent or grandparent of a taxpayer, wholly dependent on account of mental or physical infirmity;
(iii)	a child under eighteen years of age maintained by the taxpayer in Canada under a cooperative scheme sponsored by the governments of the United Kingdom and of Canada or any of the provinces of Canada, for children brought from the United Kingdom under a government plan, or under

Income War Tax Act
twenty-one years of age, and likewise maintained, upon proof that such child _ is a student at a secondary school, university or other educational institution; except one such dependent provided for in (b) and (c) of subparagraph (1) hereof.
(3)	If the tax exigible under the normal tax should cause the income of a single person or a husband or a wife to be reduced below the amount of $660 or in the case of those persons referred to in (a),	(b),	(c) and (d) of
subparagraph (1) hereof, below $1,200, then to the extent that it would so reduce the income of the taxpayer, such tax shall not be payable.
II.	Graduated rates of tax-
In addition to the normal tax there shall be imposed in respect of the income above the exemption hereinafter provided, the following:
On the first $500 of income or any portion thereof, 30 per centum per annum, or
$150 upon the income of $500; and 33 per centum upon the amounts by which the income exceeds $500 and does not exceed $1,000; or $315 upon income of $1,000; and 37 per centum upon the amount by which the income exceeds $1,000 and does not exceed $2,000; or $685 upon income of $2,000; and 41 per centum upon the amount by which the income exceeds $2,000 and does not exceed $3,500; or $1,300 upon income of $3,500; and 45 per centum upon the amount by which the income exceeds $3,500 and does not exceed $5,000; or $1,975 upon income of $5,000; and 50 per centum upon the amount by which the income exceeds $5,000 and does not exceed $8,000; or $3,475 upon income of $8,000; and 55 per centum upon the amount by which the income exceeds $8,000 and does not exceed $13,000; or $6,225 upon income of $13,000; and 60 per centum upon the amount by which the income exceeds $13,000 and does not exceed $20,000; or $10,425 upon income of $20,000; and 65 per centum Upon the amount by which the income exceeds $20,000 and does not exceed $30,000; or $16,925 upon income of $30,000; and 70 per centum upon the amount by which the income exceeds $30,000 and does not exceed $50,000; or $30,925 upon income of $50,000; and 75 per centum upon the amount by which the income exceeds $50,000 and does not exceed $70,000; or $45,925 upon the income of $70,000; and 80 per centum upon the amount by which the income exceeds $70,000 and does not exceed $100,000; or
$69,925 upon income of $100,000; and 85 per centum upon the amount by which the income exceeds $100,000.
Richard Burpee Hanson: When the budget was under consideration a short time ago, I took occasion to analyse the proposals of the minister in considerable detail. I do not propose to cover the same ground again in the committee stage, but I would recall to his mind that with respect to various matters I asked that careful consideration be given to the representations which I made. I hope that as we reach the appropriate resolution he will indicate his response to the suggestions I then made. '
Coming now to the specific proposals in the resolution 1, I desire to make a few observations.
I think the minister should explain directly and first of all why he did not go the whole distance in consolidating the old national defence tax, which is to expire on August 31 of this year, and the graduated income tax, into a single assessment. No doubt the reason is that the old national defence tax and its successor, the new normal tax, differ in some degree, at least, in principle from the graduated income tax, in that they are assessable against the total income of any person whose income exceeds a specified amount. I think we do not have to go very far afield to seek the reason. Because of the non-consolidation of these two taxes, the minister is enabled to strike more heavily at the lower income tax groups. That, I think, is the objective, the very skilfully concealed objective of the major part of this budget. The minister is striking the heaviest blow at recipients of small incomes that this nation has ever witnessed, and in doing so he has, and I think by design, put a crippling tax on a class of our people who will find the very greatest difficulty in meeting the imposition. In that regard there has been gross discrimination, and especially is that true, as I shall point out at a later stage, and as I have already pointed out in the remarks I made on the budget some days ago, between married men in the smaller income tax groups and single men in the same groups.
. I would have thought that to combine the two taxes would have led to much greater simplicity for the tax-collecting officials of the Department of National Revenue, and certainly for the individual taxpayer. That is a criticism which I make of the proposals of the minister. Does the minister think it would not have been possible to combine the two taxes, to refrain from bearing so heavily upon a low income tax group, and to achieve a more simplified and logical tax structure? That is the summation of what I have said heretofore, divided into three parts.
I believe that the two taxes should have been combined, that he should have refrained from bearing so heavily upon the lower income tax groups, and should have achieved a more simplified and logical tax structure.
The second point in connection with the normal tax to which I desire to refer is that the proposed rates indicate an apparent and, I believe, a very real discrimination between married and single persons. That is in connection now with the normal tax, because we must bear in mind that there are two taxes, the normal tax and the graduated income
Income War Tax Act

tax. I assert that there is not only an apparent but a real discrimination with respect to the normal tax as between married and single persons. The rate of tax on married persons is 7 per cent if the income exceeds $1,200 per annum. In the case of a single person it is 7 per cent if the income exceeds $660 but does not exceed $1,800. Between $1,800 and $3,000 the tax is 8 per cent, and over $3,000 it is 9 per cent. Consequently, hon. gentlemen will see that in the bracket between $1,200 and $1,800 the normal tax of a married person and the normal tax of a single person are identical.


James Lorimer Ilsley: In what range is that?


Richard Burpee Hanson: Between $1,200 and $1,800. At least that is my conclusion and, if I am incorrect, I shall be delighted to have the error pointed out. I do not think the minister will contend that this is fair and equitable. Surely a married person in the low income status should be given on the normal tax rate greater consideration than the single person. That is a principle for which I shall contend, and for which I shall invite the cooperation of members on all sides.


James Lorimer Ilsley: The hon. gentleman is
referring only to the normal tax.


Richard Burpee Hanson: Yes; I laid emphasis on that. The point I raise is in connection with the normal tax alone. I am coming to the other; it is bad enough.


James Lorimer Ilsley: You have to take both to-get the results.	[DOT]


Richard Burpee Hanson: You have to take them together to get the real tax bill for the two, but I am trying to analyse this and I hope I am doing so fairly and accurately. I will take the responsibility for doing so fairly; I hope I am accurate and I think I am. I suggest that the married person in the low income status should be given on this normal tax rate greater consideration than the single person, and I shall carry the judgment of the house and the country with me in that proposition. If there is any income status in which the married person should be given consideration, I suggest that it is certainly in this very low status-the married man getting between $1,200 and $1,800. In the larger communities, in the big cities, a salary of between $1,200 and $1,800 is not considered a large salary; but in the smaller communities, in the large towns and small cities, we have no big salaries at all. There is no one, with possibly one exception, in my town with a salary in excess of $15,000 [Mr It. B. Hanson.]
a year. On the average the salaries are low. Take the' salaries paid by the provincial government of New Brunswick. They are and always have been meagre; and if you leave out the salaries of judges, which are statutory and paid by this dominion, and look at the salaries of the rank and file of our citizens, occupying various positions, men of good standing in the community, you will find a large number of them who get only between $1,200 and $1,800. But they are the men in the community who support the churches. They are the men who support community effort. They are the men in the community, none of them with large salaries, who are called upon to do jobs through the Rotary club and the other service clubs. They are married men, with children whom they are endeavouring to bring up to be the backbone of the future citizenship of the country. They are the people who have to struggle, even in normal times, to give their children education and to provide life insurance, and who usually die leaving behind them very little but a good name-the most worthy class of citizens we have.


An hon. MEMBER:: The salt of the earth.


Richard Burpee Hanson: They are the salt of the earth. I could name many of them in my own community who will be terribly hard hit by this budget. These are men who are doing what they can t< comply with the appeal of the minister to buy war savings certificates. They have authorized their employers to deduct regularly from their pay envelopes their contributions to the national effort. Then there is the group of men in my community-I mention this class because it illustrates a large proportion of the whole field throughout the country-comprising the artisans. The artisan in good times makes from $100 to $150 a month. He is in the same category as the salaried class, and in my part of the country he is a grand citizen. He is the man who takes an interest and has always been represented in the city council, who makes his contribution to the community, and he is in exactly the same position as the salaried man. These people are being terribly penalized by this budget. Then there is the bachelor, who has no family responsibility at all. I venture to suggest that if you analyse the position of the family man with a wife and two children, as compared with the position of the bachelor, you will find that the family man is given a total advantage of only $400 per annum as against the bachelor, the young unmarried man in the same income tax bracket.
That is a gross discrimination. These ' bachelors are spenders. The married man

Income War Tax Act
spends his money, to be sure, but necessity requires him to do so. He spends it on necessities for the support of his family, in bringing up the future generation, whereas many of the other class fritter away their income on useless expenditures. I make a plea for better treatment of the married man in the income tax groups that I have indicated, as opposed to the other citizens. I hope that is one feature of the budget which the minister will reconsider.
Still dealing with the normal tax-I will confine what I have to say to this resolution 1-so far as deductions from the normal tax are concerned, I suggest to the minister that the allowance of $28 for each child or dependent is very small.


John Horne Blackmore: Too small.


An hon. MEMBER:: Chicken feed.


Richard Burpee Hanson: If I
appreciate the minister's position, it is based on the capitalized value of the previous exemption. I do not know how he figures it out. I recall many a debate in this house in days gone by, from 1921 on, in which pleas were made by members for greater consideration to heads of families in respect of exemptions for children and especially to those men who had large families. I remember a most eloquent plea made by an hon. gentleman who now graces the superior court bench of the province of Quebec, Mr. Justice Archambault. I remember having joined with him in his request to a former minister of finance in that regard, and our having convinced the minister of finance of that day of the justice of our plea for consideration for the family man, especially the man with the large family.
There was an old, trite saying that two people could live as cheaply as one, but I found the fallacy of that saying very shortly after I got married. I think we will all agree that it is a fallacy. You cannot do it, especially under modern conditions. I am making [DOT]a plea on behalf of the family man, especially the family man with a small income. I know what the struggle is. I have gone through it myself, trying to live and keep up a position and be a useful member of the community on a small income. So I appeal to the minister to reconsider the schedules in so far as they affect the men of small income. I especially appeal now for more credit than $28 a year being given for each dependent child. I realize that that is $28 off the tax. But I suggest to the minister that it should be more. I will say this in justice to the minister-I want to be fair in my remarks-that the allowance of $28 per
annum for each child or dependent is an increase over the allowance made under the national defence tax during the last two years, and for that I give the minister that much thanks.
The deduction to be allowed under paragraph (iii) of subsection 2 of resolution 1 perpetuates an anomaly and an inequality with respect to guest children against which we have protested for the past two years. Only to-day I had a long distance telephone call from a man in this province who felt the injustice of that. I submit that to limit that deduction to the case of children brought from the United Kingdom under a government-sponsored plan, and to deny it to those brought to Canada voluntarily or under an unsponsored plan, is a discrimination that should be done away with. I know it will be said at once that many of these children are the children of the rich. That, however, is not universally true. I could show you in my city three lovely English boys whose father occupies just a moderate position in an insurance company in the city of London.
I had the pleasure of visiting him when over there in order that I might report to him as to the physical well-being of his three boys. Those boys were taken into a good home in Fredericton. The head of that family neither has received nor expects to receive any recompense-although he probably will, I think, receive it when conditions arise making it possible-not only for the cash outlay. Not one cent is being allowed him on his income tax for having taken those children in and perhaps having preserved their lives, because I understand their home on the Thames has been bombed out-fortunately the family had moved-while someone else who brought two or three children out under a government plan is given some consideration.
This is not a plea for the rich man whose children are taken in. Many of the children brought out here were brought just out of the good-will of those who wanted to see them survive. I regret that further use was not made of the plan or system. We should have brought out many more British children to Canadian homes. I think this should have been done by the government itself, but I am not going to find fault with the government because I do not know all the circumstances. The reason given was scarcity of transportation, and that may be an adequate reason; no doubt there are others. An hon. member suggests there was perhaps discrimination in England. I do not know enough about that to discuss it. I realize that it was not possible to take all the children. Many of the children of the poor
Income War Tax Act

did not want to come anyway, did not want to be separated from their families. I confine my criticism to the rigid attitude of the government in not giving more consideration to the question of exemption on account of these children. I would urge the minister to reconsider that position.
Subsection 3 of resolution 1 carries forward the principle of the national defence tax, that the tax shall not be permitted to reduce the income below $660 and $1,200 respectively. This brings to my attention one of the anomalies of our tax structure as it exists in this budget. A married man in receipt of $1,200 annually pays no tax. A married man in receipt of $1,250 pays $50 tax. A married man in receipt of $1,300 pays $100 tax. The result is that the tax reduces the income of a wage-earner or a salaried man receiving $1,300 to the same level as the man receiving 81,200. While it is true that one-half of the tax payable is the minimum savings requirement, eventually refundable to the taxpayer, it does seem to me an anomaly that a man drawing $1,300 actually receives no more than a man with an income of $1,200. I shall stop there. That is just the first instalment.


George Henry Ross: I rise to urge the minister to grant further exemption to officers of the armed forces who are not now receiving exemption. Under the present law, as I understand it, warrant officers, noncommissioned officers and men of the active service forces-that is, other ranks-are exempt from income tax. That is as it ought to be;
I have no quarrel with that. Commissioned officers while on active service beyond Canada are also exempt from the payment of income tax, and that is as it should be. On the other hand, commissioned officers who have volunteered for service, who have been found to be within the required medical category and have been accepted, must pay income tax so long as they are serving in Canada. Exemption should be granted to these men as well. They are holding themselves ready and willing for active service anywhere in the world, and they should not have to pay this tax. At the present time, if we take the tax into consideration, the pay of a warrant officer is higher than that of a lieutenant.


Richard Burpee Hanson: Higher
than that of a major, is it not?


George Henry Ross: The pay of a warrant officer is higher than that of a captain and, as I figure it, equal to that of a major.
I am not taking any objection to the pay of the warrant officer; he is not paid too much. Nor am I belittling his responsibilities, for they are considerable. But I think it must [Mr }{. B. Hanson.]
be admitted that the lieutenant, the captain and the major all have much more responsibility than the warrant officer has, yet under the present set-up their pay is less. The non-commissioned officers, warrant officers and other ranks do not have to pay a cent for clothing or equipment. Commissioned officers have to pay for nearly all their clothing and personal equipment. I submit that this is not right, and I hope the minister will see the injustice and unfairness of it and take the necessary steps to have it corrected.


Howard Charles Green: I should like to endorse the remarks of the hon. member for Calgary East.


The CHAIRMAN:: I would point out that military exemptions hardly come within the scope of this resolution. I have been reading the resolutions in an attempt to see where the subject being discussed could be brought up, but I do not see how it can be done.


Howard Charles Green: May I point out that the question has arisen and has become of importance because of the great increase in the rate of income tax. Of course that comes under the first paragraph of this resolution, and I submit that this is the only paragraph under which that subject can be discussed.


James Lorimer Ilsley: If I may interrupt for a moment, I intend to present to the committee a recommendation in regard to this matter, by way of an amendment.


Richard Burpee Hanson: To what section?


James Lorimer Ilsley: It will be an additional resolution, I think, and perhaps the matter can be discussed at that stage. It is not to the effect that the hon. member for Calgary East has recommended, but it will deal with the matter.


Richard Burpee Hanson: Could we have it now?


James Lorimer Ilsley: No, it is not ready. It is one of those things on which I am working.
. Mr. HANSON (York-Sunbury): Is there any section under which a discussion of the topic raised by the hon. member for Calgary East would be relevant or pertinent, if it is not resolution 1? I think we ought to do this in as orderly a manner as possible, with a view to getting through quickly. If we jump from one thing to another we are not likely to get through so quickly.


James Lorimer Ilsley: I do not know that there is any resolution here that would cover it.


Richard Burpee Hanson: He has to have a chance to make his statement somewhere.

Income War Tax Act


James Lorimer Ilsley: I quite agree; and if for any reason I should say the government does not propose to do anything about the matter, I will undertake that it can be discussed on some resolution before we finish, but I expect that a resolution will be added dealing with the matter.


Howard Charles Green: The minister has intimated that he proposes to bring in an amendment. It might be helpful to him in drawing up the amendment if we were permitted to make our statements at this stage instead of waiting until the amendment is brought down.


Thomas Vien: My difficulty is that I
have allowed the hon. member for Calgary East to make a statement, and I should not like to preclude the hon. member for Vancouver South from the same opportunity, because I want to mete out the same treatment to all hon. members. So, if the hon. gentleman has a few remarks to offer on the subject, I will permit him to do so.


Howard Charles Green: The question has been well
covered by the hon. member for Calgary East, but there are one or two other aspects to which I should like to direct the attention of the minister and the committee. These officers are taxed not only on their pay but also on the allowances paid for their wives and children, and in addition, I believe, they are taxed on their rations, calculated at the rate of SI a day. In other words, for taxation purposes the sum of $365 is added to their pay. With regard to the dependents' allowance, when this is taxed it means that the allowance is paid out with one hand and taken back with the other.
This taxation also hits officers who come back from overseas. Many officers have been brought back this year to train the troops in Canada, and I understand that the moment they arrive in Canada they become subject to income tax, .whereas while overseas they were not. It affects the men who come up from the ranks. The policy of the government has been to bring up officers from the ranks. I think that is a sound policy. But if this taxation is to apply to those men who take commissions, looking at it from the monetary point of view a man might be foolish to accept a commission; he might be far wiser to remain in the ranks. After all, we have now only the one army. The men on the Pacific coast may be in action before the men in Great Britain, and it does seem unfair that there should be this distinction. These men are the leaders of the army. I believe they feel that this taxation is most unfair; the fact that it is imposed upon them is causing great uneasiness, and that is bound, in the
long run, to affect the army. Looking at the question from the point of view of the defence of Canada and the need to have an efficient army here, I submit to the minister that this tax should be removed.
Then I would point out that at the present time the exemption does not cover merchant seamen, civilian firemen who have gone overseas, or men in the auxiliary services. Men in these groups should be included among those exempt from the payment of income tax. I do not think anyone in this house would suggest for a moment that the merchant seamen are not deserving of the utmost consideration, yet they do not get the benefit of this exemption. I would urge that the minister keep these facts in mind when he is drafting his amendments, so that all the officers in the army may be granted exemption as well as the men in the merchant service, the firemen serving overseas and the men in the auxiliary services.


Gordon Knapman Fraser: And
the women.


James Arthur Ross: I should like to support the remarks made by the two previous speakers. I think this is very unfair legislation, especially to those officers who have been overseas andi have been brought back to this country for instructional purposes, and I hope that the minister in drafting the amendments will give this class due consideration.
I should like to endorse the remarks made by my leader. As I pointed out when speaking on another matter yesterday, while I have great sympathy for the minister in his gigantic undertaking, if he is not very careful he will find that this budget will be termed the home-wreckers' budget, and that applies most directly to the personal income tax provisions. One would think that a set of bachelors and bankers had drawn up this budget for the Minister of Finance.


James Lorimer Ilsley: Why bankers?


James Arthur Ross: The moneyed interests are taken care of to a certain extent, and certainly this budget does discriminate against the family man. It is much easier for the bachelor to maintain himself and get along than it is for the man with a large family, and I w'ould not give very much for the future of our nation if we had to depend entirely on the bachelors.
I consider the $80 deduction which the taxpayer can make from his >x as an exemption for a child, instead of being allowed the old $400 exemption, is another direct blow at the family man because it
Income War Tax Act

makes certain that he comes within the higher brackets. Many a family man with a fairly large family will find it almost impossible to raise his family properly and continue as a good citizen of the community. The budget is discriminative in that respect.
With reference to the compulsory savings feature, I do not know whether it is intended that an employee must give his employer a detailed statement of his personal financial affairs, stating what life insurance premiums he is paying, how much principal on a mortgage and matters of that kind, so that the proper deduction may be made. But if that is the intention, I consider it very improper. Employees should not be called upon to lay bare all their private affairs before their employers. It is not clear whether that is required by the legislation.
Further, if. a man is buying his home under an agreement of sale, he should be allowed to make a deduction just as if he were buying his home under the mortgage plan. The resolution states nothing about that, although the man who is purchasing his home under an agreement of sale is to all intents and purposes under exactly the same financial set-up as a man with a mortgage on his home, and should be given the same consideration.


James Lorimer Ilsley: I agree.


James Arthur Ross: Thank you. I trust
that the minister will give serious thought to the position of the average family man and that he will make the necessary adjustments. The budget works a distinct hardship on the family man, the greatest asset that any nation can have. We shall not have much of a future if we do not encourage and look after the family man. *


Mr. FULFORD:: I wish to speak on behalf of the men who are taking the officers' training course in the two training centres in Canada, one at Brockville and the other at Gordon Head. I have been most reliably informed that since the introduction of this new schedule of taxes for officers the applications for taking the course have materially decreased in number. In other words, the men who now hold the rank of warrant officer do not wish to be promoted. I have heard it argued: "Surely these men must have some ambition and must want to be promoted from non-commissioned officer to commissioned officer." But I come back to the argument that was made by the minister himself last night, when he spoke of the necessity for some incentive. The incentive in this particular case must be that an officer should receive a little something more than he was getting as

a non-commissioned officer, because when he assumes the rank of commissioned officer he immediately assumes greater responsibilities. I am afraid that if the officers who have been returned from England and are destined to remain in Canada are required to pay income taxation under the present schedules, we are going to have a dearth of officers in the Canadian army.
The leader of the opposition has referred to refugee children who were not brought out under a government-sponsored scheme. In Brockville there is a boys' school which, for S400 a year, has been looking after, educating and feeding refugee children, and in some instances actually clothing them. The headmaster of the school told me the other day that the sponsors of no less than three children at the school had notified him that they could no longer continue to keep the children at the school because they were unable to pay for their board and keep.
I have also in mind a school that was opened in Toronto for refugee children who were brought over, not under any government-sponsored scheme, but under a private scheme. The children are placed among various families, and no distinction is made between rich and poor so long as the child gets a good home. That school had at one time between thirty and forty children, but to-day it is closed because the children have all been placed. Those children cost those who have undertaken to look after them just as much as it would cost to look after a child brought out under a government-sponsored scheme, and I plead with the minister to provide the same exemption in both instances. The people who have taken those children into their homes have done so out of the bigness of their hearts, and should receive equal consideration with those who are looking after children brought out under government-sponsored schemes.	[DOT]


Gordon Graydon: I was very much interested in the remark made by the leader of the opposition with respect to exemptions for children. Being of an inquisitive mind I looked up the records to see how these exemptions would affect the members of the House of Commons, and I find that one member has thirteen children, two have eleven and two have nine. None of these hon. gentlemen has risen in his seat to protest against the exemptions for children as provided under this budget.
So far as exemptions for men in the armed forces are concerned, I trust that the minister will take cognizance of the powerful arguments that have been put forward this afternoon with respect to officers of units which

Income War Tax Act
are not overseas. No doubt some errors will be made in connection with this income tax, but I know they will not be by design. But if they are made, I think they should be made in favour of the man who is on active service rather than in favour of the civilian. It might be all very well as a technical argument to say that if a man is serving in the armed forces in Canada he is perhaps a brass hat at headquarters who woidd enjoy this exemption from income tax, but there is more to it than that. Over the week-end I took the opportunity to talk with a number of officers who are on active service in Canada, and I may tell the minister that their voices on this matter were pretty vigorous. One officer told me that it was the subject of acrimonious conversation in practically every mess in Canada. These increased income taxes have placed officers in Canadian units in a position in which they feel they are actually the object of discrimination. I said to one officer that no doubt the government had in mind the fact that some men would never see overseas service, that while they wore the king's uniform they were actually occupying semi-civilian positions. He said that that might be true in an odd instance, but he did not see why the government should discriminate against those who were not in that category. He said there might be only one out of a hundred to whom that could apply. He argued, and I agree with him, that men who have volunteered for active service anywhere should be granted similar exemptions to those granted to others in the service.
I think it will be found that this new tax structure will interfere to no small degree with the morale of our armed forces in Canada. It must be remembered that it is not an easy thing for some of these men to stay here and wait long months for the order to proceed overseas and for some action to occur. It is also not easy for them to see some of their neighbours and their friends in civilian life making greater earnings than they are. In many instances they have been stopped in their tracks, economically and financially speaking, and they are not feeling any too happy over the comparisons they can make. It seems to me that the government might grant these men the same exemption that is granted to others in the armed forces, for the purposes of morale if for no other reason. I am fortified in my argument by comments which have been made in the press from time to time, and I should like to refer particularly to an item which appeared
in the Toronto Daily Star of June 30. One sentence has particular reference to the subject under debate. It reads:
Among the "new poor" emerging from the smoke and fumes of the recent budget blast at Ottawa, will be commissioned officers, men who have "gone active" but who have been kept on duty in Canada by order of the higher command.
Then at the end the article quotes some figures. I have not checked them, but I think they are fairly accurate. I quote:
As against this a warrant officer (class A), with trade pay and a separation allowance for his wife of $40 a month would have a net income of $2,306.75. A promotion for him would be a financial set-back unless he jumped all the way to the rank of major.
This is not a fair way to treat men, whether they are overseas or in Canada. I make a last minute appeal to the minister to reconsider and review the whole position of officers in Canadian units.


James Lorimer Ilsley: I should like to suggest an amendment as follows:
That part I of resolution 1 and resolution 3 be amended by adding the following words to each:
"Provided that in the case of a wife who is in receipt of earned income in excess of $660 per year, the wife may be treated as a single taxpayer and the husband may be treated as a married taxpayer for income tax purposes."


Mr. MACKENZIE (Vancouver Centre):: I move accordingly.


James Lorimer Ilsley: By way of explanation I may say that we are informed that quite a substantial number of married women are proposing to leave employment because it will pay them to do so as a result of these income tax schedules. This amendment may prove a considerable cost to the treasury, but I am afraid we shall have to make it in order to prevent this exodus from employment. This will be the only amendment to part I.
At six o'clock the committee took recess.
After Recess
The committee resumed at eight o'clock. Progress reported.



HONG KONG COMMISSION


William Lyon Mackenzie King: Mr. Speaker, may I ask the house to return to motions, to permit me to make a brief statement.
Hong Kong Commission

The house having reverted to the order for motions:


William Lyon Mackenzie King: Mr. Speaker, yesterday, in replying to the request of my hon. friend the leader of the Cooperative Commonwealth Federation (Mr. Coldwell) for a copy of a letter addressed to me by Colonel Drew, I said to my hon. friend that if he would take the responsibility of asking that the letter be tabled, it would be tabled. Subsequently I felt that, having regard to the contents of the letter and having regard to the inquiry to which it referred and the nature of the inquiry, I had better obtain legal opinion in the first instance as to whether it would be proper for me in any case to table the letter. I accordingly, through the Department of Justice, secured an opinion from Mr. George A. Campbell, K.C., who was counsel for the government in the Hong Kong inquiry, and I should like to read to my hon. friend and to the house the opinion which Mr. Campbell has given me.
The communication is as follows:
Ottawa, July 15, 1942. Right Honourable W. L. Mackenzie King,



P.C., M.P.,

[Stage Direction]
Prime Minister of Canada,
House of Commons,
Ottawa, Ontario.
Hear Prime Minister,
re: Hong Kong inquiry I have just had an opportunity of reading the communication dated July 11, 1942, addressed to you by Mr. George A. Drew, K.C.,. who acted as counsel nominated by the Hon. Mr. Hanson, K.C., during the recent Hong Kong inquiry and I have considered the question submitted as to whether or not it would be proper for you to table that communication before the House of Commons.
This document purports to disclose a very considerable number of facts and to refer to the contents of several documents said to have been put in evidence before the commissioner during the recent inquiry. For reasons hereinafter stated, I am not free to discuss the accuracy or inaccuracy of any such references.
At the outset of the inquiry an order in council, P.C. 1039, was passed on March 2, 1942, which had the effect of clothing the commissioner in this and any other investigation concerning the armed forces of Canada with all the powers and authority of a judge of any superior court in Canada while exercising his judicial functions, including specifically the power and authority of making and enforcing any order made by him concerning any inquiry held in camera in order to safeguard the secrecy of such inquiry.
In the exercise of that authority, Sir Hyman P. Duff, Chief Justice of Canada, who sat as commissioner in the Hong Kong inquiry, ruled and directed that the inquiry before him should be held in camera and it was held in camera. In my opinion, all counsel who participated in the inquiry were bound by, and by their 
continued presence, acquiesced in that ruling. It flows from such ruling that all persons,
including counsel were specifically enjoined as to their duty to preserve secrecy as to testimony given, documents produced and all other evidence placed before the commissioner, and that order directed all persons not knowingly to infringe upon such secrecy.
At the conclusion of the hearing for the taking of testimony in this matter, and some days before the date fixed for completion of the hearing of oral argument, all counsel concerned received notice from the commissioner requiring them on the day of the final hearing of oral argument to deliver up to the secretary of the commission any and all transcripts of evidence, exhibits and copies thereof, written arguments and copies thereof, notes of evidence and any and all other writings and documents relating in any way whatsoever to the matters in question.
It appears from page 32 of Mr. Drew's communication that it purports largely to be based upon his written argument to the commissioner, of which presumably therefore he retained a copy in his possession. In his letter he gives a number of verbatim quotations from the transcript of evidence and exhibits.
Mr. Drew's letter purports to give the effect of a number of confidential communications received by the government of Canada from the government of the United Kingdom, the disclosure of which was only consented to by the government of the United Kingdom subject to a specific condition that the disclosure was to be limited to the commissioner and counsel only, and solely for the purpose of the inquiry; and the commissioner was not permitted to reproduce these communications in his report. [DOT]Any disclosure, therefore, even to the House of Commons, would in my opinion be a violation of the substance of that condition, i Jf' therefore, Mr. Drew's communication is tabled by you before the House of Commons I am of the opinion that you will be violating a condition under which the government of the United Kingdom consented to the disclosure to the commissioner and counsel of those telegrams.
I am, moreover, of the opinion that Mr. Drew's communication purports to contain a considerable number of extracts from evidence and reference to exhibits which do not appear in the published report of the commissioner and th£ appendix to it. If, therefore, you should table the document you are, in my opinion, to that extent participating in and thereby condoning a violation of the order of secrecy with which the proceedings in camera were to be and were in fact conducted.
A ours faithfully,
Geo. A. Campbell.
I should, I think, place on record with this communication the copy of the order in council which is referred to in the early portion of it.
At the Government House at Ottawa Monday, the 2nd day of March, 1942.
His Excellency the Governor General in Council
Whereas the Prime Minister reports that, in his opinion, it is desirable that a commissioner conducting any inquiry under the Inquiries Act,

[Stage Direction]
Hong Kong Commission
R.S.C., 1927, Ch. 99, involving investigation into any matter concerning the armed forces of Canada should have certain immunities and powers;
Now, therefore, His Excellency the Governor General in Council, on the recommendation of the Right Hon. W. L. Mackenzie King, the Prime Minister, and under and by virtue of the powers vested in the governor in council by the War Measures Act, Ch. 206 of the Revised Statutes of Canada, 1927, is pleased to order and doth hereby order that, where under any order of the governor in council, heretofore or hereafter made, a commissioner is appointed under the Inquiries Act, Ch. 99 of the Revised Statutes of Canada, 1927, to enquire into any matter concerning the armed forces of Canada, such commissioner shall have all the immunities enjoyed by any judge of any superior court in Canada while exercising his judicial functions, and that any and all powers and authority of any such judge relating to any contempt of court, whether committed in the face of the court or elsewhere, shall be vested in such commissioner in respect of such inquiry; and in particular, but without limiting the generality of the foregoing, that such commissioner shall have all the powers, jurisdiction and authority of any such judge for the purpose of enforcing any order made by him concerning any inquiry held in camera in order to safeguard the secrecy thereof.
A. D. P. Heeney,
Clerk of the Privy Council.
Richard Burpee Hanson: What are the dates of the order in council my right hon. friend has just read, and of the order in council authorizing the inquiry?


William Lyon Mackenzie King: The date of this order in council is Monday, March 2, 1942. I have not the date of the other.


Richard Burpee Hanson: Well, that was made subsequently to the original. That is the second order in council, and I never heard of it.


William Lyon Mackenzie King: I think my hon. friend will find that it was tabled with the other orders in council.
Then I should add the following communication, which relates to what I have just read; a communication from Mr. Campbell to the commissioner, the Chief Justice, written to-day:	.
Ottawa, July 15, 1942.
Right Honourable Sir Lyman P. Huff,



P.C.. G.C.M.G.,

[Stage Direction]
Chief Justice of Canada,
Ottawa, Ontario.
Dear Sir Lyman:
Re-Hong Kong inquiry
May I, as counsel for the government of Canada, ask you who, as royal commissioner, conducted the Hong Kong inquiry that you permit the secretary of the commission to certify and hand to me for the use of the
Prime Minister a copy of the order which you verbally gave directing that the proceedings be held in camera?	_
If you approve, the secretary might also indicate that immediately preceding the making of that order you read order in council P.C. 1639, dated March 2, 1942.
Yours faithfully,
Geo. A. Campbell.
Then the letter from the commissioner, the chief justice, to Mr. Campbell, in reply:
15th July, 1942.
Dear Mr. Campbell:
Re-Hong Kong Inquiry I have your letter of to-day and as requested I have authorized Mr. W. Kenneth Campbell, the secretary of the commission, to hand you for the use of the Prime Minister, a copy of the order which I made regarding the holding of the inquiry in camera.
The secretary will also indicate that immediately preceding the making of my order I read the operative part of order in council, P.C. 1639, dated March 2, 1942.
Yours faithfully,

[Stage Direction]
Geo. A. Campbell, Esq., K.C.,
Chateau Laurier,
Ottawa.
The enclosure with that letter is as follows: Ottawa, July 15, 1942.
Re Hong Kong inquiry I certify that at the session of the inquiry held on March 4, 1942, the commissioner read the operative part of order in council P.C. 1639, dated March 2, 1942, and made the following order:	-
"I think it desirable, also, to state formally for the purpose of the record that this inquiry has from the beginning been held in camera and is and will henceforth be held in camera. That imports, it is perhaps unnecessary to say, the duty on the part of everybody present to preserve secrecy as to the testimony given, documents produced, and all other evidence placed before the commission, as well as the duty on the part of all persons not knowingly to infringe upon such secrecy."
W. Kenneth Campbell,
Secretary to the Commission.
I have placed on Hansard the legal opinion that has been given to me. In the circumstances I hope my hon. friend will not expect me to table the communication, because I should feel that.it would not be proper for me to do so in my position as Prime Minister.
Richard Burpee Hanson: With the indulgence of the
house, and, I think, as a matter of right, I desire to make a few observations. First of all, the inquiry itself should never have been held in camera and the original order in council did not so provide. The order in council dated March 2, which the Prime Minister (Mr. Mackenzie King) has now
Hong Kong Commission

read, was never brought to my attention by anybody. The fact that such an order in council was passed by the government was kept a secret as well, and it should never have been passed, because this was intended to be a full public inquiry. That was the promise made in this house. It was not a full public inquiry.
After the inquiry was held and the report was brought down and tabled, I asked that the evidence be laid upon the table so that the members of the house and the public might be in a position to judge as to the accuracy or otherwise of the report.
Let me make it quite clear that the commissioner was not acting as the Chief Justice of Canada. He was a royal commissioner appointed under the Inquiries Act and, as such, his report is not immune from criticism or discussion. There is ample precedent for that; there is ample precedent right in this parliament. If hon. members want any confirmation of that statement, let me say that during the last war there was a shell inquiry presided over by Sir William Meredith, Chief Justice of Ontario, and Mr. Justice Duff, as commissioners, and the Liberal party of that day tried to tear that report to pieces-with what success I do not know; I was not here at the time. Again, during the last war Lord Cromer and his associates made a report in Great Britain, and after a four-hour debate in the British parliament, what was the result? The investigation was with respect to the Gallipoli campaign. An attack was made on the report of that royal commission by Mr. Asquith, who was then Prime Minister of Great Britain, and by no less a person than Mr. Winston Churchill, the present British Prime Minister, and in Mr. Asquith's memoirs will be found this statement. I am not quoting verbatim, but I believe my memory is correct. He said that after four hours' discussion of the Cromer report there was nothing left of it.


James Arthur Ross: That is correct.


Richard Burpee Hanson: Now we come to this report. The report was brought down, and the evidence was refused on the ground that the hearing had been held in secret. That hearing must have been held in secret on the motion of the government, or the government would never have passed the order in council of March 2, the contents of which I never heard of until to-night-


William Lyon Mackenzie King: It was not.
Mr. HANSON (York-Sunbury); -and which I would have protested against. I did protest in one quarter against the proceedings being
[Mr R. B. Hanson.]
in secret. I admitted that there were certain portions of the hearing which probably ought to be in secret, and I referred to intergovernmental communications to which there were two parties, one party being this government, and the other the government of the United Kingdom. Those communications could not be made public without the consent of -the British government. However, the inquiry went on in secret. The report was made. A question was raised by the hon. member for Rosetown-Biggar (Mr. Coldwell) as to an opportunity being given to discuss that report in this House of Commons. I had not asked for that because I felt that to discuss that report without the evidence would be perfectly useless, that we could not have an honest, intelligent discussion of the report unless we had the evidence. We have a report which is the interpretation of a commissioner as to the evidence produced before him. On the point of this report being sacrosanct, it is in no other category than the judgment of a court of law from which I as counsel might appeal. I might appeal from the judge's interpretation of the law as applied to the evidence, and that is done in the courts of the country every day, every week, every month. My hon. friend the Minister of National Defence (Mr. Ralston),
I myself, and every other lawyer practising at the bar have to do that. It does not mean an attack on the judge. It means an attack on the findings, on the interpretation of the judge, and that is open to any counsel; otherwise, there would never be an appeal. To say that this report cannot be criticized-


William Lyon Mackenzie King: No one is saying that.


Richard Burpee Hanson: Let me develop my argument. To say that this report cannot be criticized is beside the mark. But how can one criticize the report if he has not the evidence upon which it is based? I submit that it is in the public interest, in the national interest, that this evidence should be laid on the table and that the Canadian public should have it. Without that evidence no discussion, no argument, based solely on the report itself, can be complete. It will be wholly unsatisfactory not only to those who make the attempt to discuss the report, but to the Canadian people, because the facts upon which the report is based are not disclosed to the country. It is not in the national interest that this thing should be kept secret. I protest against that decision.
The hon. member for Rosetown-Biggar rose in his place one day this week. He had received from Colonel Drew, as I had, a copy of his letter to the Prime Minister. The

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hon. member made a perfectly natural request that the letter be tabled, in order that it might become a public document. Until it is tabled it is not a public document. It is a communication from one individual to another, although the latter may be the Prime Minister, but until it is tabled it is not a public document. That was the position.
Immediately the Prime Minister said he would table the letter, if-and he predicated his statement on this "if"-the hon. member for Rosetown-Biggar would take the responsibility of asking for it. I queried in my own mind at the time why it was predicated on that condition. Was it an attempt to intimidate the hon. member for Rosetown-Biggar, to make him responsible for the contents of the letter? I do not know. But I took occasion to look into the matter later, and I say that in my opinion there was no responsibility resting on the hon. member for Rosetown-Biggar when he asked that the letter, of which he had a copy, be tabled in order that it might become a public document.
Second thoughts have now occasioned a reversal of the position which the Prime Minister took. What has happened in the meantime? I gave out no copy of this letter to any newspaper, but I was informed within the last hour that a press agency in this country has carried a large portion, if not the whole, of this letter to the public press in Canada; that thousands of newspaper employees from one end of this country to the other know the contents of this letter; that it is now in fact, if not de jure, in the hands of the public. All that remains is to release the obligation imposed on the press agency which gave the letter to the newspapers that it should not be released until the document had been tabled.
The Prime Minister now refuses to table the document. I think he is within his rights in doing so; it was a letter from one individual to another. But let the public have this letter, let the chips fall where they may; I am not responsible for that. The press got the letter from some source, I do not know where and I do not care. They got it in good faith, in the public interest, in order that the public might know what the communication was. Is there any reason why the- public should not know what hundreds of people in this country know, what I know, wha't the Prime Minister knows, what the hon. member for Rosetown-Biggar and the hon. member for Lethbridge (Mr. Blackmore) know about this matter? If Colonel Drew has transgressed, let Colonel Drew answer. I venture to say he will answer.


Mr. SLAGHT:: Will he answer to the
British government?


Richard Burpee Hanson: Certainly, he takes the responsibility; it is his and his alone. I think he will welcome it.


Clarence Decatur Howe: He will welcome the publicity.


Richard Burpee Hanson: Well, he
is getting it, and the publicity has made him one of the biggest men in Canada, absolutely. What is the position?


Clarence Decatur Howe: Next leader of the Conservative party.


Richard Burpee Hanson: Well, we
might go farther and fare worse.
I say, let us get away from this farce of covering up. Let us have a free press in this country. WTe do not have it. I understand that until the last few minutes there was no censorship on this letter, but I have heard since I came into this chamber to-night that censorship has now been imposed on it. I protest against that in the name of the Canadian people, who want to know the facts and the truth about a great public occurrence. So I ask the Prime Minister to release the censorship, even if he will not table the letter, and let the Canadian people judge. They will judge fairly and truly and accurately, and appraise this incident at its true value. Therefore I ask that the censorship on this letter be released immediately.


Major James William Coldwell: When I was asked yesterday if I would assume responsibility for the tabling of this letter I immediately said I would, because I had read the letter' carefully and in my judgment there was nothing in it which would reveal anything of use to the enemy. It was for that reason that I asked for the tabling of the letter. That letter came to me in the ordinary way through the mail. It was not marked confidential or personal or private. It was a copy of a letter addressed to the Prime Minister criticizing in some detail, it is true, the report of the royal commission inquiring into the Hong Kong matter.
This afternoon the Prime Minister showed me the opinion which he has received from Mr. Campbell, the government counsel engaged in the inquiry, advising the Prime Minister that he should withhold the letter. I am not a lawyer, and therefore am not qualified to dispute a legal opinion, and the Prime Minister must take the responsibility for withholding that letter on the advice of counsel. I have no quarrel with the Prime Minister if he believes it is his duty to withhold the letter, although, as I said, in my opinion there is nothing in the letter which
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would be of use to the enemy. On the contrary, I believe that there are matters covered in it which are of interest to the people of Canada and of interest to this parliament. It deals with the dispatch of the expeditionary force to Hong Kong; it makes certain criticisms, criticisms which I believe ought to be known to this parliament in order that this parliament may be guided in the future with regard to the dispatch not of 2,000 men but of many more thousands of men overseas.
One thing that has occurred to me since I was talking to the Prime Minister this afternoon is this. I believe he would have been better advised had he sought an opinion from a counsel who was not interested in this inquiry. I think that obtaining it from a counsel whose integrity is unquestioned but who was engaged in the inquiry was probably a mistake.
As I said before, I am of the opinion that this matter should be gone into. I represent a western constituency, a Saskatchewan constituency. From our prairie constituencies young men went in one of these regiments. Their parents are disturbed by what has occurred; their friends are worried, and those who have sons in other regiments are worried lest repetition of this unfortunate affair should occur. I hold no brief for Colonel Drew or any other person; and since the Prime Minister has stated that it is not in the public interest to produce this letter at this time, not being a lawyer I cannot give a legal opinion upon it. But a great deal has been made of the fact that Sir Lyman P. Duff who made this report is the Chief Justice of Canada.
Sir Lyman P. Duff was not the Chief Justice of Canada when he sat as commissioner. I think the Prime Minister's own statement tonight clearly conveyed that to the house, when he said that the commissioner was vested with the powers of a judge. If he had been sitting as a judge, then manifestly there would have been no need to clothe him further with the powers of a judge. So I think we should keep that aspect entirely out of the discussion.
All I am interested in is endeavouring to bring before parliament in a proper and legitimate manner matters that ought to be discussed here. So I say that as far as I am concerned I asked for the production of the document; I was prepared to ask that it be tabled, as the Prime Minister put it, on my responsibility as a member of this house. Now the Prime Minister, on his responsibility as such, has stated to the house that he is not prepared to submit the document to us, and there, I suppose, unless the house decides otherwise, the matter must rest.
[Mr. Coldwell.3


John Horne Blackmore: I have been greatly interested in the question of Hong Kong. I have said very little on the floor of this house concerning the matter, because it seemed hardly wise to say much until one knew more. But I will say that after I received a copy of the letter I went into the question far enough to make one or two discoveries which are of such a nature that I think they certainly should be aired fully somewhere. I am not saying that this should be done on the floor of the house; I am not saying that the information contained in that letter should go out to all the people of the country, with the risk that it might do us harm by getting into the hands of the enemy. I am saying, Mr. Speaker, that in that letter revelations are made of which every member of this house should be fully aware.
There is something wrong in this country, something wrong in the conduct of our military affairs. Whoever was responsible for the blunders that were committed in connection with the dispatch of troops to Hong Kong should be made known to members of this house and should be called upon to answer for those blunders. The cause should be made known, why he committed them; that man should be punished; and such reforms should be made in the set-up concerning the whole conduct of our war effort as would render unlikely a repetition of anything so regrettable as what occurred in connection with the dispatch of those troops.
I am not going to say more. I am not saying, whether or not this letter should be tabled. I am saying that before this house adjourns it is the just right of every constituency in Canada that at least its member should know the whys and wherefores pertaining to this most tragic event in our history.
Hon. J. L. RALSTON (Minister of National
Defence): May I say just a word, Mr. Speaker.
I do think some of the remarks that have been made here to-night are, if I may say so, rather premature. There seems to be an assumption that there is to be no opportunity of discussing the Hong Kong expedition. It has been made abundantly clear that there will be ample opportunity for that purpose; and I want to say, as the minister in charge of the department which had to do with the sending of the Hong Kong expedition, that I am perfectly ready to have this house deal with it and consider it as fully as they care to.


Richard Burpee Hanson: Without
the evidence.


James Layton Ralston: My hon. friend says,
"without the evidence." I want to deal with that for just a moment. The situation was-

Hong Kong Commission
this. The right hon. chief justice was appointed a commissioner to examine into the sending of the expedition to Hong Kong. As was stated by the Prime Minister (Mr. Mackenzie King) at the time, the commissioner was given absolute power to conduct that inquiry as he saw fit, and no suggestion was made to him in any way by the government with regard to what method he should adopt. He, of his own volition, decided that the inquiry should be held in camera. That decision was not found fault with in the country, because it was realized that there were certain things in connection with the matter which should not be disclosed. Knowing something of the documents and something of the evidence, I can conceive that it would have been hopeless to consider holding a closed session in connection with this document, then an open session in connection with that particular bit of evidence, then going back to a closed session again when a question might be asked later about the first document; it would be absolutely impracticable to conduct the inquiry.
There were two different degrees with regard to secrecy. One was that the general inquiry was held in camera. As I say, the evidence was such that it would be absolutely impossible for a commissioner to deal with it succinctly and properly, and change from time to time from an open session to a closed session as evidence came out on the various points. The whole inquiry was in secret, but there was another point. That was in connection with certain documents which came from the British government. A number of those documents had an additional seal of secrecy on them, to the effect that they could not be even shown or read to those in the courtroom but could be shown only to the commissioner and to counsel. That is the first thing referred to in Mr. Campbell's opinion, which has been read by the Prime Minister. That is all this house is discussing; that is all that has come up so far. What is set out there is this, that the government having requested the British government-and I can assure this house that those requests were in the most unqualified and unreserved terms-to give them permission to produce to the commissioner the communications which passed between the two governments; and having received that permission with certain conditions attached in the case of some documents, namely, that they could be shown only to the commissioner and to counsel, the government now, by tabling a document which has been presented, would be violating that condition and in effect would be saying to the British government, "Although we tendered
those documents to be used for that purpose, at the same time this letter has come to us which indicates the effect of those documents, and we are going to table the letter." What would be our situation with respect to the British government if that were done?
Then with regard to the general rule in regard to the inquiry being held in camera, it was understood, as was indicated there, that all the evidence would be given in camera and would be kept secret. What happens is that the document which is referred to contains, it is said, certain portions of the evidence which were not included in the report of the commissioner; and the government, by tendering and tabling that letter, would itself become a participant in a violation of the conditions which were laid down by the commissioner.


Richard Burpee Hanson: Is the minister referring to the Drew letter?


James Layton Ralston: Yes.


Richard Burpee Hanson: But in the appendix to the report reference is made to the evidence.


James Layton Ralston: Certainly reference is
made to the evidence; and reference is made to all the evidence, I am sure and satisfied, which the commissioner-I will call him the commissioner, but in any event he is the Chief Justice of Canada, with a reputation second to none among jurists on this continent, and with wide judicial knowledge- thought was relevant or necessary to the report. All that evidence is there, and my hon. friend and anybody else in this house have the fullest opportunity to deal with that evidence, to deal with the recital of facts which are given there, and to deal with the whole question as to whether this expedition was properly sent.
Some suggestion has been made that the Roberts commission in the United States did not publish any evidence. The Roberts report did contain reference to evidence from time to time. It did not contain all the evidence. Nobody in the United States ever asked for the rest of the Roberts evidence. They considered that the report was made by commissioners who knew their business, and the result was that that report was accepted.
I am, of course, interested in this matter, and I realize that my view's on this question will be accepted with certain reservations, but I do deprecate the suggestion that somehow or another we should distinguish between a man who is a commissioner at one minute and the Chief Justice of Canada the next
Hong Kong Commission

and consider that he is a different man and of a different calibre and integrity because of the fact that he happens to be in this case a commissioner. I say to you, Mr. Speaker, and to members of this house that when you have a gentleman of the standing of Sir Lyman Duff selected to hold this inquiry, a selection that was agreed to and approved by everybody who had anything to do with it as being an admirable selection, a man whose reputation is second to none, a man who has been weighing and considering evidence for years and knows how to appreciate evidence, and who was assisted by two eminent counsel from Toronto who had nothing to do with the' government whatever, by Mr. Campbell of Montreal, and by Colonel Drew representing the leader of the opposition, it seems to me that the public of Canada and, I would suggest, even this house have a right to consider that this matter, which was gone into for five or six weeks, has been pretty fully investigated and that the findings can fairly be taken as the findings of disinterested men. However, that will come later. I could not help saying that, when I heard this distinction being made between the chief justice and the commissioner because, after all, it is one and the same individual who made these findings whose findings are now being questioned.
My hon. friend mentioned the order in council of March 2. He says he did not know anything about it.


Richard Burpee Hanson: Not at the
time it was passed.


James Layton Ralston: All I have to say is that the extract read from the record to-night indicates that the operative part of the order in council was read to counsel whom my hon. friend nominated on the 4th day of March.


Richard Burpee Hanson: I would not dispute that. I never attended the meetings.


James Layton Ralston: My hon. friend seems to suggest that there was some covering up of_ this order in council. The order in council was read, and the extract is there indicating that.
I had not intended to take any part in this matter, but I did feel that it was due to me and due to the department I represent that the house should realize that this matter has been investigated and, I think, most thoroughly.
I want to say to my hon. friend the member for Lethbridge (Mr. Blackmore) that he will have full opportunity to deal with the sweeping statements which he made in connection

with this matter, and I trust that I shall also have an opportnuity of saying a word or two. I ask him not to get completely out of focus in connection with this matter simply because of the fact that the gentleman who happened to be counsel and who acted as prosecuting counsel and does not appear to be satisfied with the judgment which was rendered in this case, sees fit to write to the Prime Minister a letter, which letter is not being tabled. I am sure that that letter is in the hands of a great many hon. members, and I am sure that they can use the arguments put forward there to their hearts' content, and make them their own. But I do suggest that the government is taking the only course it can take in not tabling the communication, because to do so would be a direct breach of the conditions imposed by the British government, and a direct breach of the conditions imposed by the commissioner at the time he opened the inquiry.
I said a moment ago that it was indicated that the public generally were in favour of this inquiry and saw the necessity of the inquiry being conducted in secret. I happen to have in my hand an editorial from the Toronto Globe and Mail of February 26, which states:
A royal commission to inquire into the circumstances surrounding the debacle at Hong Ivong will shortly sit to hear the evidence. The inquiry will be held in camera, and several letters of complaint have been addressed to this newspaper from readers who believe that the proceedings should be open to the public. In view' of the nature of the inquiry and the extent to "which details of production, organization, transport and kindred matters are likely to be produced in evidence, it is obvious that the public cannot possibly be admitted. In order that the commissioner may write a just account of the episode, placing blame where it is due, exonerating those who have been unreasonably blamed, and attributing to material factors their proper share in producing the final result, it will be necessary for him to hear many things which the enemy would like to know'. It is therefore not merely justifiable but imperative that evidence be heard in secret.


Mr. J. S. ROY (Gaspe):: Mr. Speaker, my first word will be in answer to this laughter in which some hon. members are indulging. I represent a constituency which furnished [DOT] a very large number of the young men who were sent with the Royal Rifle Regiment to Hong Kong, and therefore I think I have a right to say a few words on the subject without laughter from some hon. gentlemen. My constituency, up to date, has given to the country the largest number of volunteers of all the constituencies of Ganada.
I shall be very brief in my remarks. The decision reached by the Prime Minister (Mr. Mackenzie King) to-night will be a great

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disappointment to the families of my constituency who are expecting to hear some explanation of the circumstances of this expedition to Hong Kong. Apparently, however, they will have to accept the decision which has been taken by the government that neither the evidence taken at the inquiry nor Mr. Drew's letter will be made public. That action will surely leave an uneasy feeling throughout the country. I would suggest that there seems to be a very easy way in which to satisfy everybody, at least the people's representatives in this house. It would be to bring up these matters before parliament in a secret session together with the important question of enemy activities in the St. Lawrence river. That course seems to me the best way in which to settle this difficulty of informing the members without risk of anything going abroad.


William Lyon Mackenzie King: My hon. friend the leader of the opposition (Mr. Hanson) began his remarks by taking exception to an order in council from which I read as one which he said had not previously been presented either to the house or to himself. To be exact, P.C. 1369, the order in council which I read, was tabled in this house on April 21 and has been before the house ever since. But apart from that, as my colleague the Minister of National Defence (Mr. Ralston) has just stated, the effective part of the order in council was read to counsel by the chief justice himself at the time the inquiry was held. Counsel for my hon. friend the leader of the opposition was fully aware of all that was contained in the order, and I should be greatly surprised if he did not communicate the contents of it to my hon. friend.
The leader of the opposition assumes-I think he went even farther-and alleged that the inquiry was held in secret at the instance of the government. My hon. friend knows that that is not the case, because early in this session he himself brought up the subject of secrecy, and I made it very clear at the time that the question of whether the inquiry was to be held in camera would rest entirely with the chief justice; that I had made it abundantly clear to the chief justice that the government wished to place no restriction of any kind upon him or to give him a direction of any kind, and that the reason why he was being selected as commissioner was that as Chief Justice of Canada we believed that there was no man in Canada in whose integrity and sound judgment the people of Canada had more complete faith and confidence.
On February 19,1942, my hon. friend brought up the question of secrecy. He stated that he
had not had any confirmation as to whether the inquiry was to be in secret, but he understood
that it was. I quote from page 705 of Hansard:
Mr. Hanson 'York-Sunbury): I assume it is;
I have not had confirmation from the chief justice.
Mr. Mackenzie King:	I assume it is, too.
Neither of us apparently is aware of the facts. However, at the time I asked the chief justice if he would unuertake the inquiry I gave him the assurance that the government would not wish to restrict him in any particular, and that it would be for him to decide how the proceedings should be conducted, what assistance he would require in connection with the conduct of the proceedings, and in fact all matters with respect to the commission. I assume if the chief justice has decided to hold the sittings of the commission in secret, as was the case with the United States inquiry into conditions at Pearl Harbour, he has evidently had the best of reasons for so doing. I do not know that I can say more than that.
I think that should dispose once and for all of the question as to whether the chief justice acted entirely on his own and in what he believed- to be the best interests of the country and of all parties concerned, and as to his not having had any direction, either directly or indirectly, from the government with respect to any part of the proceedings.
In reference to the letter under discussion being tabled, may I say that as the leader of the house I have felt a special responsibility with respect to preventing any attacks or anything in the nature of an attack on or an insinuation about anyone in a judicial position coming directly or indirectly from any part of this house. When I read the letter that came from Mr. Drew I had in mind very much the rules of this house with respect to what was and what was not proper in the course of debate. I leave it to the three hon. gentlemen who have read this letter to say whether they agree or disagree with me when I say that in that letter are statements which could not be construed, as far as I can see, in any way other than as a most serious reflection upon the commissioner, who is the chief justice of this country. I should like to quote citation 305 of Beauchesne's Parliamentary Rules and Forms as follows:
All references to judges and courts of justice and to personages of high official station, of the nature of personal attack and censure have always been considered unparliamentary, and the Speakers of the British and Canadian houses have always treated them as breaches of order. Members have even been interrupted in committees of the whole by the Chairman when they have cast an imputation upon a judicial proceeding. The proper course for persons who feel called upon to attack the conduct of a judge is to proceed by way of a petition in which all the allegations are specifically stated so that the person accused may have full opportunity to answer the charges presented against him.

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I may say to my hon. friend that the worst feature of the letter which I read was the imputation which it seemed to me it cast upon the judgment and, I would equally say, the integrity of the commissioner who is the chief justice of this country. May I add the fact that our chief justice, in the person of Sir Lyman Duff, is not only a member of the privy council of this country; he is a member of the judicial committee of the privy council of the United Kingdom, and no member of that body is held in greater respect in any part of the world. It seems to me that it would be impossible to have this communication tabled without one being a party to imputations upon the integrity and honour and good judgment of the chief justice of this country.
My hon. friend the leader of the opposition spoke about censorship and said that he thought I should take steps immediately to relieve the censors of some ruling which they have given. I have not interfered with the censorship at any time, and I do not intend to do so at this time.
The hon. member for Rosetown-Biggar (Mr. Coldwell) said that one exception he would take to my course in seeking legal opinion was that I had not consulted some counsel other than the particular counsel chosen. There were, among others, two reasons in particular for the choice of Mr. George Campbell. The first was that Mr. Campbell, as counsel for the government on the commission, was in a position to know the conditions under which the evidence was given, communications produced, and all circumstances surrounding the inquiry. If I had sought legal opinion outside of the counsel who had appeared before the commission, no one would have been able to state with definite knowledge what the limitations and the restrictions and the undertakings were. I think that of itself is a sufficient answer. I would say further, I believe this house will agree that few if any counsel in Canada have a higher reputation for integrity and ability than has Mr. Campbell, who was counsel for the government in this inquiry.
Just a word in conclusion as to the withholding of this letter. The hon. member for Rosetown-Biggar spoke of it as being withheld in the public interest. I have never given that as a reason for its not being tabled. I have said I did not "wish that this house or anyone connected with it should be a party to violating the conditions under which some of the information in the report was given before the commission. The undertaking by the government to the British government which governed the conditions under which

[DOT]certain communications were placed before the commission and considered by the chief justice and the counsel who appeared before the commission was not an undertaking of one government to another as such; it was an undertaking by Canada to the United Kingdom, the government acting as the representative of this country. I mention that because I feel that this House of Commons, representing the people of Canada, would not wish to be a party or have any of its members a party to the violation of any undertaking or agreements which existed between the governments of the two countries.


Major James William Coldwell: May I ask the right hon. gentleman a question just to clear up one point, since I read the letter and take the responsibility for asking that it be tabled? The right hon. gentleman has given the impression, I think, that Colonel Drew quoted from documents passing between the government of Canada and the British government. I do not think that is so. My recollection is that he referred to certain matters but that there were no documents given and no quotations from them.


Richard Burpee Hanson: Quite
right.


William Lyon Mackenzie King: There is reference in a way which I have every reason to believe the commissioner himself would not regard as proper, or Mr. Campbell would not have given the opinion which he did.


Thomas Langton Church: May I ask the right hon. gentleman a question. Under the public inquiries act must not a commission-


Some hon. MEMBERS:: Order.


Thomas Langton Church: -conduct proceedings in public? That is the law, by statute and usage and custom.


Georges Parent: Order.


Thomas Langton Church: I remember that an opinion was given to me years ago by, I believe, the Department of Justice. An inquiry under the Inquiries Act is a public proceeding. I should like to get an answer, Mr. Speaker. I moved for these papers last Wednesday.



WAYS AND MEANS


[Stage Direction]
The house in committee of ways and means, Mr. Vien in the Chair.
Thomas Vien: We were considering resolution 1, part I, normal tax.


Arthur Graeme Slaght: I have not heretofore addressed the house either in the budget debate or in the discussion of any of the resolutions

Income War Tax Act
arising from the budget, and therefore I desire for a moment to pay a high tribute to our Minister of Finance for the manner in which he has conducted the financial aSairs of this country during the last fiscal year. He has in my view done a real job in that capacity, and a difficult capacity it has been. When I deal with two or three matters to which I shall confine myself, I desire it to be distinctly understood that there is no criticism of the minister, but merely criticism of some of the methods by which under this budget he proposes to raise revenue. I wish to conclude my tribute to him by pointing out this extraordinary fact, that in his budget of a year ago he estimated for this parliament the sources of revenue and the probable amount of revenue for the fiscal year ahead. Now that that year is ended and we have the reality, we find the actual figures of revenue received were $1,480,000,000, or in round figures almost one and a half billion dollars, or within four and a half million dollars of his estimates made a year in advance. I venture to say that never since confederation has a finance minister shown the vision and the control of finance which is evidenced by the reality as compared with his estimates the year before.
I want to deal with two or three matters. First, apropos of the items under discussion, I suggest to the minister-and I wish it understood that any suggestions I make are not destructive or critical, but are intended to be constructive and helpful, and that alone -that even though it be necessary to increase the burden of these items, or perhaps to adopt another method to which I shall refer later, in order to gain the additional revenue required, he increase his estimates of the amounts required to support the army for the coming year by an item of $4,500,000 in order that our soldiers may be placed upon a minimum payment of $50 a month, the amount that the United States private soldier is receiving.
The second item to which I refer has been touched upon by the leader of the opposition and other hon. members, but I have tried to run it to earth a little farther than they have done. It was suggested to me that this is what might be called a bachelor's budget. We have in this house twenty-two eminent bachelors, and I am sure they would be the first to join me in desiring to have the burden of taxation placed so that it would bear fairly upon the bachelors in Canada as well as upon the married men.
I will take only a moment to illustrate what I believe is a discrimination which operates unfairly against married men, particularly
married men with children, and in favour of the bachelors. I remind you, Mr. Chairman, and I deal for illustration first with an income of $3,000 a year, that on that income the bachelor is taxed $1,064 and the married man is taxed $884. In other words, the difference allowed the married man on which to support his wife for a year is $180. I had thought that we desired to discourage bachelorhood and endeavour to bring about unions of marriage in this country in order to become a growing and virile nation. The very opposite result is the effect of the figures I shall give, because a bachelor who might say to himself, "I am tired of this single blessedness;
I am going to marry", on looking over this budget will find that it is an expensive process for him to enter upon. The sum of $180 a year to keep a wife means exactly 49 cents a day for everything she requires, upon which to furnish her with food-


An hon. MEMBER:: You cannot do it.


Arthur Graeme Slaght: An hon. member says that you cannot do it. I fancy he is right.


John Ritchie MacNicol: As a married man you ought to know.


Arthur Graeme Slaght: There is something even more spectacularly discriminatory as against the married man with two children. The same income, $3,000, works out in this way for him. He is taxed $668 instead of $1,064. In other words, the state is allowing him $396 with which to maintain a wife, a boy of, let us say, ten, and a growing girl of twelve, or, in other words, $396, as against the bachelor's tax, to maintain those three persons. If we divide this amount by three, it allows him $132 a year on which to maintain each of the three. If we bring that down to a daily quota, he has the magnificent allowance of 36 cents a day on which to maintain the wife, 36 cents a day for the boy of ten, and 36 cents a day for a girl of twelve. If we divide that again, then aside altogether from food, he has practically nothing left to buy clothes, shoes and all these other things-


An hon. MEMBER:: Penny candies.


Arthur Graeme Slaght: "Penny candies" an hon. member reminds me. I am serious in this. What has this married man? 36 cents a day on which to feed his wife. For breakfast he can allow her 6 cents; for luncheon, 10 cents; and opening his heart at dinner time, he can spend 20 cents with which to buy her dinner. That eats up the 36 cents, and he has. nothing left for any of those necessities which a man with a wife and family must take care of. Why, in a year's time life would be nothing but a shadow on 36 cents a day. The
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children could not be furnished with overshoes or warm clothing in the winter and probably would have to stay in bed. I analyse that situation to endeavour to bring home to the minister in the most friendly way that, if his bachelor tax is fair, he ought to increase the living allowance in favour of, at least, the married -man with two children. Somebody says that means loss of revenue under this budget, and of course it does; but if the minister does not see fit to put on the shoulders of bachelors the burden of the loss incurred by treating fairly the married man with children, I have another suggestion to make in that regard. Before I conclude I will show him another method by which he may treat fairly the married men with children and still have just as much money with which to meet the expenditures that are so necessary under this budget.
Let me say at this point that I have no word of criticism of the spending of $3,900,000,000 which the minister proposes to spend. I would go a little farther and increase those expenditures if needs be. But I am going to quarrel in a friendly way with the method by which the minister proposes to raise the money. Just before I pass on to that, may I add a word in support of what was well put this afternoon by a number of hon. members, that we must remove the unfair inequalities which we are permitting if we carry out the budget proposal to tax a lieutenant or captain or officer in the active service forces because he is in Canada and not in England. To my mind that is grievously unfair. Take a young man who gives up his business or whatnot and volunteers for active service anywhere in the world. He lives perhaps in Ottawa or some village outside, and at the moment is on the Pacific coast in the service. He has made a great contribution by entering the active service. As has been pointed out, he has no control over where he goes. Most of the young officers to whom I have spoken are itching to get to England or somewhere where there is active service to be encountered, and that is the experience of probably all hon. members. That being so, how can we tax such an officer on his allowance from the state for his service? Do not misunderstand me. There may be young officers who are serving either in England or in Canada-if they are serving overseas they are exempt, and so they should be-who may have private incomes of their own, quite apart from the amount of money the state pays them. There is no suggestion from anyone, much less from me, that they should be exempt as regards their own private income; but when we come to the amount they are paid for entering into an unusual situation in defence

of the country and of the empire, I want to add the strongest protest I can against this country placing an income tax on the amount they receive.
I have been informed, though I have not checked it up, and military men will correct me if I am wrong, that the slogan used by the Department of National Defence, is, "Join the best paid army in the world." That statement is no longer true, if it was before the United States came into the war, because we are paying our privates $39 a month and they are paying theirs $50.


Mr. GIBSON:: What about allowances?


Arthur Graeme Slaght: All right. Compare the allowances in the United States with those in this country, and you will find that the United States soldier is still better paid than the Canadian.


Colin William George Gibson: Have you the figures?


Arthur Graeme Slaght: I have not. My hon. friend has, and I challenge him to show that I am wrong.
Let me touch on one or two more factors connected with this matter before I proceed. There is a danger that if we cut these young officers down to the very lowest that they can stand, young men with a clean record may be suddenly brought before a court martial by reason of financial difficulties arising from a low scale of pay. Anyone familiar with the British situation knows that, regrettably, that is happening over there. May I point out that officers in the United States forces not only get better pay but do not pay taxes.


James Lorimer Ilsley: That is not correct.


Arthur Graeme Slaght: I have been informed-


James Lorimer Ilsley: We have a dispatch on that.


Arthur Graeme Slaght: If the minister has a dispatch on that, I eliminate it from my statement.	[DOT]


Richard Burpee Hanson: I should like to have the position in the United States and the position in Britain made clear. I have heard that they both tax them.


James Lorimer Ilsley: That is correct.


Richard Burpee Hanson: In our discussion we ought to know what the position is in these two places. The minister says that my statement is correct. Then our point of view may or may not be altered by that fact.


James Lorimer Ilsley: Application for deferment may be made in the United States, but in the United Kingdom, so far as I know, there is nothing even of that kind. They are taxed in both countries.

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Richard Burpee Hanson: Deferment of payment?


James Lorimer Ilsley: Yes, If a man cannot pay and he is in the forces, he has the privilege of applying for deferment.


Arthur Graeme Slaght: I regret if I have made a statement which my hon. friend has had to correct, and has been good enough to correct. At any rate, we in Canada have to make up our minds in this parliament how we are going to treat our own Canadian officers. Is there anybody who can really justify this parliament taxing the income of a young man, who has no control over where he is sent, because he is in Vancouver island, which was recently bombed, and not in England? I cannot see it at all, and I may say that on information I have-and I know I am right in this-young officers in our Canadian army in this country are greatly upset at the suggestion of their proposed treatment under this budget. Surely it is worth-while to maintain morale, and on that ground alone I suggest that this committee should recognize that these men are making a sacrifice. When we talk about equality of sacrifice, none of us, no civilians, however earnest they may be and however hard they may work in civilian enterprises, can be compared at all, from the point of view of sacrifice, with the officer in the army.
I promised that with regard to the two suggested losses of revenue I would, I hoped, be able to show the minister how to replace them without having to increase taxes by way of the sales tax, or by heavier imposts on the bachelor, or by imposing any direct taxation. I suggest to him that he consider doing it in this way, that he should issue at once a very substantial amount of national currency. I am not a follower of the Social Credit party, but I welcome any view they may hold which supports mine. Let me give, quite independently of anything I have heard from those worthy gentlemen, the reason why I make this suggestion. We are in committee of ways and means, and I make the suggestion as a way and means to get a substantial revenue for this country and not increase the already very heavy burden which falls upon the taxpayers, especially those in the lower brackets. I shall give a few figures which I think will make my suggestion very clear.
In the appendix to the budget, at page 56, it is shown that we borrowed in the two years and five months of war, $3,933,508,690, of which more than $10,000,000 was noninterest bearing certificates. Therefore the net borrowing on which we took on a new interest burden amounted to, roughly, $3,922,000,000, and we used $1,503,000,000 of
that to redeem maturing bonds so that we created new interest-bearing debt for spending purposes-and we certainly spent it-amounting to, roughly, $2,418,000,000. It is interesting to note that of those amounts we borrowed from the chartered banks $600,660,000 and they have the bonds with the interest coupons; we borrowed from the Bank of Canada $664,340,000, or a total from those two sources of $1,265,000,000.
Let me give the story for the last fiscal year. We borrowed $2,457,000,000, of which $4,000,000 was by means of non-interest bearing certificates. Therefore we borrowed at interest $2,452,000,000, and of that we used last year $964,000,000 to redeem maturing bonds, so we created new interest-bearing debt and spending money amounting to $1,488,000,000. Our projected budget this year is $3,900,000,000. About half of that, or $2,049,000,000, it is proposed to raise by taxes, and the minister in his summation of the item we are now discussing and other items says that this leaves a budgetary deficit of $1,850,000,000 which will have to be covered by borrowing.
I have examined our maturing obligations for the coming fiscal year for which we are budgeting. They amount to only $595,000,000. I propose to the minister that any additional sum that he has to get to cover the loss under the two or three items I have discussed under item 1 he should get in this way: he should issue at least $1,200,000,000 of national currency.


Richard Burpee Hanson: How would the hon. member make that jibe with the policy of the administration against inflation?


Arthur Graeme Slaght: I will answer that. 1 expected that some hon. member would rise in a hurry and say that that would create inflation.


Richard Burpee Hanson: I am not asking the question in that sense at all. I am asking for information. Before I returned to the house after the election of 1940, I suggested to the deputy minister of finance that we should try that method.


Arthur Graeme Slaght: Well, the hon. leader of the opposition saw the light; he saw the folly of what we have been doing for several years sooner than I did. I compliment him.


Richard Burpee Hanson: Unfortunately, I did not get the slightest encouragement, and I dropped the matter, on the theory that I was wrong. I apologize for interrupting.


Arthur Graeme Slaght: My hon. friend may change his mind back again. I will try to change it for him. My hon. friend says, "Oh, that will
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create inflation". There are others who will probably put it much more severely than my hon. friend is putting it. If by inflation we mean you are going to cheapen our present supply of money because you issue more national currency, let me suggest that that dog won't bark; that is not true at all, and I will tell the committee why. I am saying, let us issue bonds for the $595,000,000 of maturities, because those will be brought to the minister by the insurance companies, trust companies and banks, who represent a large number of clients, and they will expect, not to get cash for them, but to get new bonds, as they have been getting for the last twenty years, which bonds will bear interest; that is the way in which the government will maintain its obligations. So I would not disturb in this year of war time the reissue of $595,000,000.
I shall try to illustrate to my hon. friend by an actual visible illustration that it will not create any inflation at all, the reason being that we now control all expenditure in this country. We control prices against rising. We have a food controller, an oil controller. In fact we control every commodity there is except the air we breathe. We control prices of all commodities, and we control wages. That is something which the minister said in effect in 1939-I can give the page- that if you can control the ceiling of prices so that if you issue more national currency there will not be an immediate spiraling up of prices, then there is not danger of inflation by the issue of further national currency in the same way as there would be otherwise.


James Lorimer Ilsley: When did I say that?


Arthur Graeme Slaght: As reported at page 139
of Hansard, for 1939, the second session, the first column, the minister put it in this way. He was dealing with this question with which I am dealing, and he said with regard to inflation:
If it is replied that we should control prices rigidly, then, assuming that all prices under such conditions could be effectively controlled- a very optimistic assumption-we would have to prevent the public from spending its money by some other means such as a drastic system of rationing all commodities.
We are now in the very midst of the most drastic system of rationing all commodities that this country has ever known. It is working. The minister then displayed a lack of optimism, and I think he was perhaps right at the time. That system of rationing has, however, become a reality in this country. Everyond knows that we are rationing certain commodities and preparing to ration more, and the housewives and citizens of

Canada are taking it with chins up and obeying the rationing laws, because we are finding no necessity for prosecutions to make people observe them.
Let me now return to the question of inflation. By inflation is meant that you are putting too much cash in the hands of the people of this country, particularly the working people and the farmers, and the 85 per cent that are termed the very modest earners; you are giving them too much money, and they will go and spend it. Will any of my hon. friends tell me, because I have a $100 bill in my hand


Some hon. MEMBERS:: Oh, oh.


Arthur Graeme Slaght: I had to borrow it, Mr. Chairman, and the public interest would not permit me to table it. The security back of this Bank of Canada currency is the credit and the assets of Canada. Then I have a $100 bond here, with the pretty little coupons attached covering a period of years, with interest at three per cent payable half-yearly. The security behind this bond is the credit and the assets of the Dominion of Canada. There is no difference at all in what is behind either of these securities; and there is not a pennyworth of gold anywhere in the custody of the government to-day, or in the custody of the Bank of Canada, behind either of these securities. Two years ago we gave up the requirement which had obtained up until then of 25 per cent gold before national currency could properly be issued against it. That day has gone, both with Britain and with us. But we have the credit of this country behind both these securities.
If, instead of issuing bonds, taking them to the bank, pushing them through the wicket and getting $100 bills for them, which the Minister of Finance would do if he issued bonds, he issued $100 bills, what does he do with the money? He pays the obligations of Canada. He pays the John Inglis company for Bren guns, and they in turn pay out the money to their workmen. Similarly, if we issue a $100 bill and take it to the bank and deposit it-because we would not want to keep it in a strong box-we hand it to the banker. Then he has the $100 bill and we have the credit. Then we cheque against the same account, to the John Inglis company and everybody else, and we meet the obligations of Canada in exactly the same way. How do the working people in Canada get a^y more money under the system of issuing bills than they get under the system of issuing bonds? They have to earn every dollar they get from the John Inglis company

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or from anyone else. But someone gets a good deal more out of this system that we are going to follow. What does the private banker do, and by that I mean the chartered banks? If my hon. friend issues this bond and takes it to a bank; if that bank has only $5 in its till in money of the Bank of Canada, paper money, the bank then has power, because we have delegated that power to it, to thank him for the bond, take it in, put it away and make a bookkeeping entry in a ledger with pen and ink showing that my hon. friend has a credit of $100 in the bank against which he can cheque the next day, if he wishes, and draw it all out or leave it in. But the bank gets that bond for nothing, except for this. It does just one thing to get that bond; in the first place it has to get a $5 bill of the Bank of Canada, and perhaps it has to keep it there, but it does not even give up that bill. It simply makes a written entry in a book, because we have delegated the power to issue money to the private bank instead of retaining that power in the parliament of Canada, where the British North America Act placed it. I have the sections of that act here, but it will not be gainsaid that the power to create and regulate money is given under section 91 to the parliament of Canada. But we do not use that powder. We delegated it years ago to the chartered banks, under our financial system.


Richard Burpee Hanson: In 1934 we took it back at so much a year, and it will soon disappear.


Arthur Graeme Slaght: Oh, no; I will tell my hon. friend what happened in 1934, and he can look it up. All we did was to say to the chartered banks, who had enjoyed much greater freedom in issuing their own bank bills, that each year thereafter they had to decrease the issue of their own bills by 10 per cent. We did nothing else. We never stopped their writing entries in books and creating paper money by credits of that kind. We never stopped their taking these bonds, keeping these interest coupons for ten or twenty years, as the case might be, and fattening on this procedure. My hon. friend may say something about the great debts that are being created. With dominion government bonds outstanding now amounting to $5,866,000,000, according to the budget; with provincial interest-bearing securities amounting to a large figure, and municipal securities, the public debt of Canada to-day amounts to $10,016,000,000. That is a terrible load; and the interest we are paying to-day on bonds
of just this kind, which are largely held by banks, trust companies, trust estates and the wealthy people of this countiy, is shown in the budget as $170,000,000. If we issue the additional $1,850,000,000 of bonds which the minister says we shall have to raise by borrowing this year, we shall add to that amount of interest another $55,000,000, so that next year we shall be paying $225,000,000 in interest on debt created in the way I have indicated. In ten years that yearly interest payment will amount to $2,250,000,000, which we shall have paid on debt-bearing securities of the dominion government alone.
Can we stand that sort of thing, or should we stand it any longer if there is another way of doing it? Surely I have shown that there is no more inflation, and that you have not given the working people of this country any more money to spend, because you give the bank this bond and let it have the interest for nothing, than when you issue this bill. It is nonsense to let anyone tell you otherwise. If that be so, what would be the harm in doing as I have suggested? Where is the evil in it? I should be glad to be shown. I think it is time we called a halt. I have just about concluded if my hon. friend is protesting.


Richard Burpee Hanson: No, go
ahead; this is most interesting.


Arthur Graeme Slaght: I am sorry; I thought my
hon. friend was protesting. Lest anyone here should have any doubt about my interpretation of the law-though I am sometimes wrong in that-I should like to give an authority that probably will not be questioned; I refer to Mr. Graham Towers. Before the standing committee on banking and commerce in 1939, at page 76 of volume 1 of the proceedings, the hon. member for Vancouver-Burrard was examining Mr. Graham Towers, and I might read half a dozen questions and answers in order to set any doubt at rest:
Mr. McGeer: Am I right in savins that a hank deposit can be created in this way? A banker can purchase a dominion government bond by accepting from the government, we will say, a bond for $1,000 and giving to the government a deposit in the bank of $1,000?
Mr. Towers: Yes.
Mr. McGeer: When a bank takes a bond from the government, what the government receives is a credit entry in the banker's book showing the banker as a debtor to the government to the value of $1,000?
Mr. Towers: Yes.
Mr. McGeer: And in law all that the bank has to hold in the way of cash to issue that deposit liability is 5 per cent?
Mr. Towers: Yes.
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Mr. McGeer: You are aware that our banks now hold one billion four hundred odd million dollars of municipal, provincial and dominion securities?
Mr. Towers: Yes.
Does my hon. friend still suggest that that has been altered since 1939? I have made vigilant search, and it has not. I think he was thinking of the issue of notes.


Richard Burpee Hanson: I admit that.


Arthur Graeme Slaght: I have gone on much longer than I intended, Mr. Chairman. But let me show you what we have been doing under this frenzied system since 1910. This picture is a vivid one because I am speaking only of dominion debt, and leaving out provincial and municipal debts. In 1910 our dominion debt amounted to $341,000,000; in 1920, $1,935,000,000; in 1930, $2,261,000,000; in 1940, $4,062,000,000; and in 1942, as set out in the appendix, $5,866,000,000. Where do we go from here?
Someone may suggest, "Oh, if you issue national currency you are going to give the workingman of this country pockets full of money." Does anyone suggest that when the workingman gets through paying his taxes under this budget he is going to have too much money to spend; that he is going to become reckless Li his expenditures after paying these taxes? This budget is going to be a financial strain. It is going to be the toughest budget the Canadian workingman or anybody else ever tried to bear up under, and yet they are going to take it, and take it with a cutting down of their expenditures on luxuries and all that sort of thing, which the Minister of Finance is very properly advising us all to cut down on.
I want to say this, that rather than deprive the soldier of the $50, and the married man of a decent allowance to support his wife and children, I would raise the income tax a little higher on incomes in the upper brackets -raise the taxes on the men who have as against the men who have not. I am prepared to support that proposition if needs be. The minister seems to be amused by my language, but I tell him I am sincere in making this suggestion. My hon. friend the leader of the Cooperative Commonwealth Federation group has said more than once that it is not what you tax a man that counts but what he has left after he has paid his taxes, and surely that is good gospel in war time. I would impress upon the minister in the most sincere way, if he feels that to meet the increases I have spoken of, because of the losses that will follow them, he must raise

more money by borrowing, not to do so, but to issue national currency instead. We have outstanding now in national currency $515,000,000, and that is all. That works out at $43 per head for every man, woman and child of our eleven and a half million people. That $515,000,000 is made up of $470,000,000 of paper currency and $45,000,000 of silver and copper coins, because we have no gold coins now, and that $515,000,000 is all the national currency we have outstanding. The United States with their tremendous wealth and greater population have outstanding in national currency an amount which works out at $88 per head of their 130,000,000 people. That is the situation in the United States, so there is no parallel whatsoever.
Somebody says, "What is the harm in issuing a lot more debt for Canada to pay out?" I give credit to the Minister of Finance for doing this, that he has got the debt owed by this country into the hands of Canadian people instead of into the hands of people in New York and London. That was a wonderful thing to do; the debt is nearly all now in the hands of Canadian people.
Somebody says, "If the Canadian government collects from the Canadian people $1,850,000,000 by way of bonds, with a yoke of interest to pay for twenty years, then the Canadian people own $1,850,000,000, and all is well. Everything is all right; you have done no harm to anybody." But that dog won't bark, and for this reason. I have some figures dealing with the distribution. I am sorry I do not have them here, but I got them from the authorities. The Minister of Finance recognizes the problem of where the interest-bearing debt obligation is owned and held.


An hon. MEMBER:: By the chartered
banks.


Arthur Graeme Slaght: In large part, yes. Out
of $3,922,000,000 of bonds issued, the chartered banks bought $1,254,000,000. But there is another way in which they do business. Anybody who wants to buy a bond can go to a bank and pay in $10, and the 'bank will advance the rest to buy a $100 bond for him.


Richard Burpee Hanson: They will go 100 per cent sometimes.


Arthur Graeme Slaght: That is a very laudable
thing to do. But just get the figures of Canadian bonds which the chartered banks are holding to-day. In the last victory loan the Minister of Finance, with the aid of all those men who rushed in to help him, got

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a wonderful distribution of the loan. I did not mention, in connection with the 155,000,000 of increased interest, that it will cost us at least eight or ten millions more to get it, because that is the expense of raising victory loan money. Somebody objected last year to SS,000,000 as being too much.
I do not think it is. But that is a part of the burden you have to carry if you go on the debt-issuing principle instead of on the currency-issuing principle.


Richard Burpee Hanson: Would
the hon. member put any limitation on this method? What would he do with foreign obligations if our money became depreciated?


Arthur Graeme Slaght: If it became depreciated?
If the countiy were blasted to pieces with a volcano, what would any of us do? Let my friend show me how this money will become depreciated. I am suggesting a national currency, which does not mean debt, instead of debt-bearing obligations. Suppose a foreign country is looking at Canada's financial position and Canada's bookkeeping. Do you think that Great Britain or the United States will think less of Canada if she increases her national currency by $1,200,000,000 in one year, instead of increasing her national debt by $1,200,000,000 of bonds, plus $55,000,000 of interest-bearing coupons every year? If you were a country merchant and you were looking at a customer who had an obligation of a straight. $100 to pay at some time when his creditor pushed him, would his credit be any worse than if he had an obligation of S100 at 3 per cent interest for twenty years, which would make his total debt $100, plus three times twenty, or a total of $160? There has been a lot of bogeyism about this matter and a lot of well-meant nonsense.
There have 'been many false premises; there have been many unsupportable statements; but I challenge anyone to show me where there would be inflation by the same issue of national currency, if carefully each year you take care of your maturing bond obligations that mature in that fiscal year. We started off under a foolish policy, and we cannot ruin the insurance companies and the banks by shutting them off and giving them just cash when we require to renew our obligations as we do year after year; I want to protect them. When you have done what I suggest, and if I am right in saying that we have maintained control over prices, that we have maintained rationing of goods, then every proper reason that has ever been advanced before in Canada in support of this debt-increasing burden falls to the ground.


James Lorimer Ilsley: I very much regret the
speech that has just been made, because I think it will do a great deal of damage. It is made at a time and in an atmosphere when seeds of that kind will, I am afraid, fall on fertile ground. I ask the hon. members of this house to give me a chance to answer this, because I feel a deep responsibility at this moment, and I am going to do the best I can to answer what my hon. friend has said. At a time when we are passing through great disasters we are asking the people of the Dominion of Canada to bear great burdens. We have laid down a basis for our fiscal policy. We did that before the war, and we reasoned these matters out with great care in speech after speech that I and my colleagues made. We examined carefully the proposals that my hon. friend has made-he has not made them, so far as I know, until now, but others have been making them from before the war in practically the same form- we have had committees on them, and we have looked at them from every point of view. We came to the conclusion

in this we were agreed with by the experts of the dominion government, the United Kingdom government, the government of the United States, the governments of the other dominions and, so far as I know, the governments of every democratic country-that by all means the fairest way of financing the war was by taxation and by borrowing. We have given our reasons why that is so.
If a country devotes its assets, devotes its resources, human and material, to the carrying on of a war to the greatest extent to which it is capable, the real costs of that war are not monetary; they are costs in men and property which the country has devoted to the carrying on of the war. The more of their output that they put into war, the less there will be for the people who stay at home. That may become less and less, and the standard of living of the people may go down and down. How will that go down? In what way will that burden be apportioned? There is no escape whatever from the burden. When the country produces as much as it can, if it devotes 46 per cent, then 50 per cent, then 60 per cent of that output to the war, the proportion left for the people at home goes down, and an ever-increasing burden is placed upon the backs of the men, women and children of the country. That is inescapable. We are talking about realities. This is not a question of money at all; it is a question of things and people. It is elemental. We are just confusing it if we think it is a question of money.


Mr. QUELCH:: Mr. Chairman-

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James Lorimer Ilsley: Will my hon. friend please
keep his peace? I asked' for that courtesy when I rose. I want to make a good job of this, because I feel that it would be a calamity if my'hon. friend's views gained any foothold in this country. It is all very well for the group in the corner to be talking. There are not a great many people who take them seriously; but if a powerful speaker such as my hon. friend is going to disseminate this kind of doctrine throughout Canada and it is taken seriously, then of course it upsets the very fundamentals of our whole scheme of financing this war. It destroys it.


Arthur Graeme Slaght: It does not give you the
right.


James Lorimer Ilsley: If my hon. friend believes
that, then he has no confidence in the financial policies of the administration. He should not be a supporter of the financial policies of the administration, because his attack is upon fundamentals.
Let me come back to what I was saying. The question is how to distribute this burden, because a burden there will be. There are three ways in which to do it. The first is by taxation; the second is by borrowing, and the third is by inflation. We can adopt that policy, and it will be easy for a while. My hon. friend is not the first to suggest it. This is not the first century in which clever men have risen in their places in parliaments and advocated this kind of thing. Let the hon. gentleman read the debates of the constituent assembly at the time of the French revolution. The finest economists of France were advocating this thing. They were advocating the issue of a few million more of money, then a few million more and then a few million more until their currency was entirely destroyed. It has been done time after time.
My hon. friend says to-night that we should finance this war by the issue of a billion dollars of what he calls national currency. I gathered from the latter part of his remarks that by national currency he meant Bank of Canada notes, because he told the committee of the hundreds of millions of dollars of Bank of Canada notes that are outstanding. Let me lead the committee through the three kinds of borrowing that there might be. The most simple way of putting into the currency of this country a billion dollars of Bank of Canada notes would be to borrow a billion dollars from the Bank of Canada. We would be borrowing from our own institution, and the effect would be precisely the same as if we had issued this amount. We cannot issue it because we have not the power, but it would be our bank that would be issuing it for us. 
If they issued and lent the money to us, that is an issue of a billion dollars of national currency. That is the most natural thing.
There are three kinds of borrowing. First, we can borrow from the public; second, we can borrow from the chartered banks and, third, we can borrow from the Bank of Canada. That is by far the most inflationary method of the three. If the government borrows $100,000 from my hon. friend, his bank account shrinks by $100,000 and the Minister of Finance's bank account increases by $100,000. There is no difference in the total of . the deposits after the transaction from what there was before. I think that is clear. That is the first method of borrowing.
The second method that I mentioned is to borrow from the chartered banks. I go to some bank and ask them to let the government have $100,000. If I followed what the hon. gentleman said, the government would be doing just exactly -what the hon. gentleman says they would do. They simply credit the government with $100,000, and the total of the bank deposits of the country have increased by $100,000. In other words, that transaction results in there being in existence $100,000 more new money than there was if I had borrowed from my hon. friend. To that extent it is $100,000 more inflationary in its eSect than the other method. That is the reason why we shy off from borrowing from the chartered banks, why we strictly limit our borrowings from the chartered banks, keep them down to the irreducible minimum. That is why we keep on with these campaigns throughout the country and pay millions in advertising. That is why we have 22,000 workers for the national war finance committee all over Canada trying to get the people to lend their money to the country so that the government will not have to borrow it from the chartered banks. That is the second method.
The third method is the method suggested by my hon. friend to-night, borrowing from the Bank of Canada or issuing of more currency. That is several times more inflationary than borrowing from the chartered banks.


John Horne Blackmore: What do you mean by inflation?


James Lorimer Ilsley: It is more inflationary than if we borrowed from the chartered banks, for this reason. We are borrowing real cash then; we are borrowing something which, when it goes into the chartered banks, serves as cash reserve. Everyone familiar with the working of the banking system knows that, the moment the banks get their hands on additional cash-
I mean by that Bank of Canada notes, or deposits by the Bank of Canada which are

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convertible into Bank of Canada notes-when the banks get those reserves in their hands, powerful forces are set in motion to get the banks to buy securities themselves, to make loans themselves, so that the deposits of the chartered banks will be seven, eight, nine or ten times as great as their cash reserves. That lies at the base of their whole profit-making activities; the way they make money is by lending more money than they have. What they have is their cash reserves; and unless a bank has out several times-six, seven, eight, nine or ten times-its cash reserves, it is not being profitably or, from a banking point of view, properly conducted. Therefore, if we create, as the hon. gentleman has suggested, a billion dollars of new money, government money, Bank of Canada notes or deposits, and put those into circulation, we have set loose inflationary tendencies of terrific power. That is the reason why we keep away from borrowing from the Bank of Canada. We would borrow from the chartered banks before we would borrow from the Bank of Canada even though we had to pay a little interest to the chartered banks but not to the Bank of Canada, or if we did pay interest to the Bank of Canada we would be paying interest to ourselves. That is the reason for our / borrowing from the people of Canada and, if vre have to, even from the chartered banks, but not at all from the Bank of Canada if we can avoid it. My hon. friend says that is all right under normal conditions.


Mr. McGEER:: I did not say that that was all right at any time.


James Lorimer Ilsley: He is advocating the issue of a billion dollars of Bank of Canada notes; that is what he is advocating. He says that, whatever may be the situation normally, you have now a wartime prices and trade board, which will hold prices down, and you can put your money into circulation without forcing prices up because you have the price ceiling on. Well, my hon. friend has the most sublime faith in the price ceiling. I wish I had as much faith in the price ceiling without that billion dollars as he has with that billion dollars.


Richard Burpee Hanson: It would just blow up.


James Lorimer Ilsley: I want to tell him that if we put into circulation a billion dollars of new money, it would blow the price ceiling to kingdom come before you could say "Jack Robinson''. I say this too, that if by some miracle we were able to keep that price ceiling on we would have to keep it on for many, many years, because we would never dare take it off.
44561-270J
You can do only so much by bureaucratic methods. You can do only so much by repression, by policing. Our prosecutions are starting now; I see them in the papers:	a
prosecution, I think, in Winnipeg, another somewhere else. There was a prosecution in Montreal of a restaurant which charged too much for a meal. Black markets will undoubtedly develop. People will be violating our regulations, and there will be no way in the world to prevent that from happening. The only way we can preserve that price ceiling is to take away from the people by borrowing and taxation just as much as we possibly can, so as to relieve that upward pressure on the price ceiling and on prices. I want to say that anyone who thinks an issue of a billion dollars of new money, national currency, Bank of Canada notes, can be effected without the slightest inflation is simply deluding himself.


An hon. MEMBER:: Tommyrot!


James Lorimer Ilsley: The Social Credit party, of course, do not agree with that, and I do not expect them to agree with it. But I think it would be a terrible thing if any substantial proportion of the membership of this house espoused those views or were convinced by that argument.
I do not know that I have very much more to say this evening. I do not believe there were many more points made in regard to this method of financing. Let me say that it is as old as the hills; it is as old as the ancient empires. It was done in France; it was done in Germany. But Germany at the present time is not relying on this method of financing. Germany has a tremendously heavy taxation load on its people, and is borrowing from them to relieve the upward pressure on its price ceiling, which is a much better price ceiling, I have no doubt, than ours. But to think that we in this democratic country, with the great freedom there is of expression and the great interest in individual liberty, could, by sheer brute force of pressure on people, maintain a price ceiling if we set loose another billion dollars of national currency at this time, is just not to have a conception of the gravity of the situation, of the might of the inflationary forces which would be set loose.
My hon. friend opened his speech with some remarks on the item, and I want to thank him for his tribute to myself. He says that I haye done a good job, but it seems to me that he cannot think so, because I have been wrong all along if he is right. I have been fundamentally wrong if he is right, and I do not think that I have. Why,
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Mr. Chairman, rather than do what my hon. friend has suggested I would walk out in a minute.


An hon. MEMBER:: It might be a good thing.


James Lorimer Ilsley: It might be a go'od thing, yes, but I would not try. I would not make an attempt to finance or try to conduct the finances of this country if I ran away from the hard way, which is the only way and the only fair way, the way of imposing obligations in accordance with ability to pay, and took this easy, downward, fatal course to the abyss-which it would be.
I want now to come back to the item and say a few words with regard to soldiers and officers. As I told the committee this afternoon, I am going to have some proposal to make about that before these resolutions are through the house. I know there is discrimination there; I know there are several discriminations; and I think I shall have some proposals which may have the effect of ironing out the discriminations, but not, I think, the proposals which have been made in this chamber this afternoon and to-night.
With regard to single and married men, I wish to put a finger on the fallacy in my hon. friend's argument. He seems to think that the difference between the tax which the single man pays and the married man pays is the amount which the married man's wife and children are supposed to live on. No such theory was ever before promulgated. It was the principal amount upon which this is the tax that lies at the basis. My hon. friend has worked out some differences here. For instance, he takes the taxpayer who is in receipt of $3,000. He says that the new tax plus the refundable proportion of money, savings required is, for a single person without dependents, $1,064; for a married person without children, $884; and for a married person with two children, $668. The comparison should have been, I submit, between taxes, not between amounts which include refundable taxes or compulsory savings, and there the difference is considerably greater. But even so, the difference in taxes is not sufficient to enable a man to support his wife or his wife and children, and was never intended to be.


Richard Burpee Hanson: I think
that on the whole we are indebted to the member for Parry Sound (Mr. Slaght) for having stirred up interest in a very important subject matter in this house and for having
at least given us some intellectual entertainment, when we have listened to, shall I say, the brilliant reply of the Minister of Finance (Mr. Ilsley). I may have flirted with the idea

of fiat money in the early stages of the war, but I should not like anyone to say that I am a believer in the issue of national currency as a method of financing this war. All history, as the Minister of Finance has said, cries out against it. There is no easy way of financing war, as the minister has also stated.
The speech of the member for Parry Sound to-night was reminiscent of the evidence which the member for Vancouver-Burrard (Mr. McGeer) gave to the Macmillan commission on banking as long ago as 1933, and was also reminiscent of a speech which the same hon. gentleman made before the banking and commerce committee of this House of Commons in 1934, and it is by no means a new suggestion. If we were to adopt the methods advocated by the hon. gentleman, and so ably controverted by the Minister of Finance to-night, this country, sooner or later, notwithstanding all the controls that human ingenuity could devise, would finally blow the lid off, as has happened in every other country in which resort has been had to these methods-that is, so long as you maintain the capitalist system. If you have a system of socialism and are a self-contained nation; if you do not owe foreign debts and do not have to pay for goods you import from outside, then I suppose one might consider that theory. I know this will not please my hon. friends in the comer to my left, but I suggest that their theories can operate only if you are in an air-tight compartment of a nation and do not have to deal with other people, who will not accept money against which there is not a sense of security.


An hon. MEMBER:: Give some evidence of what you are saying.


Richard Burpee Hanson: My common sense is evidence enough. I do not want to get into a discussion of social credit principles.


An hon. MEMBER:: You cannot.


Richard Burpee Hanson: I have been listening to these theories since 1923 before any of the present hon. gentlemen ever graced a seat in this house. I remember when Major Douglas first appeared on the scene, and I remember the second time he came. He would not leave until we paid him a fee, to which I was opposed, by the way.
I believe there was never a greater monetary faker in the history of this country than that same Major Douglas. I am satisfied on that point.


John Horne Blackmore: That is just your opinion.

Income War Tax Act


Richard Burpee Hanson: I had some near-hand dealing with that gentleman. He offered to come to Ottawa in 1934 for his expenses, but before we could get rid of him and get him off the expense account he had to have a fee, and against my protest the banking and commerce committee agreed to pay him. But that is by the way. If we were to pursue the course advocated by the member for Parry Sound, on the basis of the monetary theories of the member for Vancouver-Burrard, this country within a short time, at the rate we are spending money in the war, would simply blow the whole lid off. We never could carry on, and the people of the country would hide their wealth and not make it available to the government. I may be old-fashioned-


Some hon. MEMBERS:: Hear, hear.


Richard Burpee Hanson: It is prob- ' ably true I am, but my opinions are based on the established theories and practice of decades and decades of public finance, and until it can be demonstrated that Canada can finance the war on the basis of fiat money, then I am going to adhere to the old-fashioned principle which the Minister of Finance advocated here to-night.
The only criticism I have of the minister's war finance method is that in this budget, I fear, he is attempting to tax too highly, when one has regard to the fact that this war may continue for a long time. He may dry up some of the sources. Notwithstanding that, the Canadian people are willing to make the sacrifice, but they would be very distrustful of a government which has proceeded for three years on one basis of war finance if it suddenly switched to another basis. That is a factor which must be given consideration. So that much as one may be attracted by this theory of financing >the war by means of national institutions, let us think this matter clear through before we adopt any such theories.
I hope that any remarks I have made are not of such a provocative nature as to cause this debate to go on for a long time, because we are anxious to get back to the resolutions. But I think I should support the minister, believing what I do with respect to orthodox finance, and I do support him.


Mr. ESLING:: My sympathy is with the Minister of Finance. He has had an unhappy and difficult task in the preparation of this budget, and has done it well, and it is because of the confidence which the people have in our present Minister of Finance that they accept this budget with less complaint than ordinarily. The proposals in this income tax resolution come home more directly to everybody in
Canada than do some of the other resolutions. But I would not slight the taxation measures in the other resolutions, because if any tax which financial ingenuity could suggest has been overlooked in this budget we may be assured that it was not intentional on the part of the minister. I think also that he will welcome any suggestion or reminder of any other tax which he might impose. Therefore, if I may be permitted, I will offer such a suggestion.
Of course there is concern about taxation at this time. But the minister has brought the people of this country to a realization of the fact that we must find ways and means for the conduct of the war. There are some features of the budget requiring correction. One was mentioned by the leader of the opposition, namely, the omission of exemption from the refundable tax on agreements of sale.
Under the national housing plan we have some 23,000 units constructed in Canada and a guarantee on the part of the federal government of some $73,000,000. At least there is $73,000,000 that has gone into this plan. Then many industries are contributing to or assisting in the building of houses for their employees. In my district one company has lent its employees some $2,000,000 for the construction of houses. It makes a substantial community.
Also there is concern about the churches. Naturally we must all retrench and economize, and the first inclination of some people is to cut down their church contributions. It is an easy thing to do, but it is regrettable, because the churches must be maintained, particularly in such critical times as those through which we are now passing.
I should like to refer to the provision in this resolution as to the amount upon which there is total exemption from any tax, namely, $660. That amount I think applies primarily to grade 1 civil servants. For grade 1 civil servants whose homes and parents are in Ottawa the situation is perhaps not so serious, but for grade 1 clerks who come from afar the situation is very serious. My suggestion before I sit down will be that the basic rate of pay for a grade 1 clerk be $70 a month instead of $60, and I propose to show then that the government is not going too far.
What is the situation? The government has some 3,200 stenographers and typists at $60 a month, plus a cost of living bonus of $6.60. They have perhaps three or four thousand more doing clerical work. These girls are war workers just as much as the man or woman in a munitions plant. Without their assistance the Department of Munitions
Income War Tax Act

to-day not only the Canadian Performing Right Society, which is a subsidiary of the parent concern in the United States, but also Broadcast Music Incorporated. It is a very small concern at present, but it will grow, and as others see its success more companies will be formed.
So I say to the minister that I hope he will see that the Copyright Act is amended at the next session and that, the Performing Right Society be required to register and to pay for every piece of music for which it exacts tribute from the Canadian people.


Gerald Grattan McGeer: Mr. Chairman, I had not intended to enter into this discussion, because I believe, and I think the great majority of the members of this house will agree with me, that these are times when even though you disagree with the government the best thing to do, if you are in the minority, is to let the majority which the government represents go forward without interference, because of the enormous responsibility which every government of the united nations is carrying at this time.
However, the leader of the opposition was kind enough to refer to the remarks of the hon. member for Parry Sound as expressing the monetary system of the member for Van-couver-Burrard, and was also kind enough to declare that they recalled memories to him of the time when he sat as chairman of the banking and commerce committee of this parliament in 1934, upon whose recommendations the banking legislation was changed to the five per cent tax reserve basis and the Bank of Canada was established with a 25 per cent reserve gold basis, removable in its entirety by order in council.
I happen to have some pleasure in recalling the representations that I had the honour of making before that banking and commerce committee. They were not welcomed by the chairman, and I did not get much assistance from him in placing my views before the committee. But I was able to place them all before the committee despite him and his prime minister of that day. What was the difference between myself and the Bennett-dominated committee of 1934?
I advocated at the time certain things. One was that the Bank of Canada should be a wholly publicly-owned institution. That idea was scorned and sneered at; and even when we were returned in the election of 1935 pledged, as I believe, to bring about that reform, we had another battle on the floor 
of this house. That battle was won in two rounds. The first was when we got the Bank of Canada 51 per cent publicly owned, and the next was when it came to be an institution owned and controlled as the greatest public utility service in our nation by the people of Canada. That is a reform which will never be taken away. Yes, I had the privilege of advocating that in 1934, but it was repudiated by my hon. friend's committee and by his government and by the parliament that was dominated by his party.
Another suggestion that we made was that gold had outlived its usefulness as a security for the value of currency, and we advocated that the Bank of Canada should be free to issue currency in terms of public need and national necessity, unrestricted by the amount of gold which the government could buy or secure.
What has happened to gold? Does any member of this house advocate the restoration of the limitation of our money in use by going back to the gold basis? Let me give the committee one illustration of what has happened.
I have the greatest sympathy for the Minister of Finance in the position of responsibility that he holds at the moment; but it is well not to be too dogmatic in one's conclusions because it might be that in this day and generation we might be able to manage currency a little better than they did two hundred years ago in France, or a little better than when they were managing currency to win the continental revolution, or a little better than when they were managing the greenback currency of the United States which Lincoln issued to save the nation from disunion and disaster. We to-day can thank the memory of Lincoln that he did not fear to use the national currency because, if democracy is going to survive this war, it is because the most powerful republic that was ever saved by the issue of national currency, the United States, has joined with the British empire in this war to preserve a world that Lincoln thought ought to be preserved for people to live in of the kind that he established in the United States.
Easy, of course, it is to sneer at the power of a nation to issue currency. There have been terrible tragedies in the abuses of monopoly and privilege by the private owners of money scattered down throughout the pages of history, but there is something more to be said for national currency and its power as a medium of exchange of a nation than

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merely to try to dismiss it as something that was tried a few centuries ago and did not happen to get a fair chance.
Let me give another illustration of the absurdity of gold as a basis. The sound money men, these experts, told us that we could not have any money to put the unemployed to work for the decade before the disaster. I remember some of the terrible warnings that we got from other ministers of finance that if we dared to put the unemployed of this nation to work by using national currency we would wreck the credit of the nation. Do not make any mistake about that. What did we do? We decided on this continent to gather gold. We gave away our scrap iron; we gave away our scrap steel at prices disastrously low; we threw away our copper, our nickel, our lead and our zinc; all these useful metals we gave away because we were led to believe that there was some virtue in the accumulation of gold. So we tucked twenty thousand million dollars worth of gold in the hills of Kentucky while the Japanese were building nut of our scrap iron a fleet to wipe us out of the Pacific.


John Ritchie MacNicol: They will never do it.


Gerald Grattan McGeer: They have made a fairly good start, and we certainly have great difficulty in finding any virtue in the gold that we have to stop them. That is quite beside the question. The hon. member knows that I have no doubt about our ultimate capacity to defeat Japan, but what I am pointing out to this committee is that we gave away our useful metals and gathered a useless metal. We found that we could not build any battleships or planes or guns or fighting equipment out of this useless metal called gold. True, by a common arrangement, the United States is still paying us a good deal more than it costs us to take it out of the ground, but just how long they are going to keep on adding to their useless hoard at that price I do not know, and I do not think any reasonable man would care to hazard a guess. I do know, however, that our currency to-day unsecured by gold is just as valuable as it was at any time when it was supposed to have been secured by gold. There were two things proposed which in a short period of a decade have moved from the ridiculous to the sublime.


Some hon. MEMBERS:: Oh, oh.


Gerald Grattan McGeer: My hon. friends may laugh, but we said other things. We knew that in a managed currency system, unless you took control of the movement of currency and
credit and investments internationally you could not stop the flight from your dollar and you could not stop an international manipulation on the international currency markets of the value of any individual currency. We said you could stop the flight from the Canadian dollar, and we advocated a control of international currency movement. We were told that that could not be done, but we pointed out that other nations were actually doing it. Japan was doing it back in the twenties, and so was Germany and so was nearly every other country in the world including Britain. Since we appeared before the banking and commerce committee in 1934, the foreign exchange control board has come to be one of the most valuable of the economic institutions in the Dominion of Canada. Make no mistake about it; that board will never disappear. It has proven its value, and it has vindicated what we advocated in 1934. It has proven that a democratic nation can to its own advantage control the movement of its international currency and avoid the disastrous exploitation of the value of its currency by international currency exploiters.
We advocated something else, if my hon. friend will recall, and we spent a day in placing it before the committee under his chairmanship. We advocated the need for the regulation and management of international trade. We said that one of the great difficulties facing the world was the rapidity of communication, the rapidity of transportation and the capacity to produce and preserve foodstuffs; that these made it important that we recognize that international trade must be maintained on a basis of selling no more than you are able to buy from your neighbours and buying no more than you are able to sell. That could not be done without a proper system of regulating international trade by direct control. We were told that that could not be done. Other nations were doing it, and we are doing it successfully to-day. That is another institution that no Tory reaction will ever drive out of the life of the Dominion of Canada.
Of course those were heresies. I thought the chairman of the committee of that day, now the leader of the opposition, would have apoplexy on one or two occasions. As a matter of fact, we tried to modify our remarks because I thought some of his associate chartered bank managers would suffer the same fate. They were all there.


Richard Burpee Hanson: The only difficulty I ever had with the hon. member
Shipping Losses

was to stop him. Once he is started, you never can get him stopped.


Gerald Grattan McGeer: That is exactly what the hon. member was there to do. That was his job, and he made a very good attempt to do it. However, the hon. members supporting him would not support him in his refusal to hear me.
Progress reported. .


[Stage Direction]
At eleven o'clock the house adjourned, without question put, pursuant to standing order.
Thursday, July 16, 1942