QUESTIONS

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

Mr. FULFORD:: 1.	Did the Dominion of Canada recently purchase a large residence on Massachusetts avenue in the city of Washington, D.C., to be converted into barracks for members of the Canadian Women's Army Corps who are stationed in Washington?
2.	If such a purchase was made, was it made in conjunction with other governments?
3.	What was the purchase price?
4.	What use will be made of this building
after the war?


Mr. RALSTON:: 1.	No.
2.	No. The property was leased for a definite period from June 1943 to November 30th, 1945 with an option on the part of the crown to renew for further annual periods. Some

personnel of the auxiliary territorial service of the United Kingdom government will be accommodated therein on a per diem basis.
3.	See answer to question No. 1.
4.	See answer to question No. 1.


PRODUCTION OF GOLD-DOLLAR AND POUND STERLING
Mr. LACOMBE:: 1.	What quantity of gold was produced by
Canadian	mines in	the years	1911	to	1931
inclusive?
2.	What quantity of gold was produced by
Canadian	mines in	the years	1931	to	1942
inclusive?
3.	What is the par value of the Canadian dollar, and what is. its present value?
4.	What is the par value of the pound sterling, and what is its present value?


Mr. GIBSON:: This question is identical with an order which was moved by the hon. member on April 1. The return to the order is still outstanding, and I am informed by the Department of Finance that considerable work is involved in the preparation of the return. Under the circumstances I think the question should be dropped.
Question dropped.


SELECTIVE SERVICE-QUEBEC OFFICE-STATIONERY
[Stage Direction]
Mr. LaCROIX (Quebec-Montmorency):
1.	Is the Quebec office of the selective service constantly supplied with required bilingual or French stationery?
2.	If not, for what reason?
Mr. MITCHELL:: 1.	Yes.
2.	Answered by No. 1.


PREMIUM TO MILK PRODUCERS SHIPPING TO CITIES
Mr. LACOMBE:: 1.	Does the government pay a premium to milk producers who ship their product to the cities ?
2.	If so, what is the amount of same?
3.	Is it paid during the whole year?
4.	If not, why is it not paid during certain periods of the year?


Mr. ILSLEY:: 1.	The government pays a subsidy to milk producers who ship fluid milk to certain cities in Canada.
2.	Twenty-five cents per 100 pounds.
3.	Yes.
4.	See answer to question No. 3.

Questions


INCOME TAX IN VARIOUS BRACKETS
Mr. KNOWLES:: 1.	What is the total amount of income tax, and in each case what is the percentage of the total income tax collected for the year, secured from each of the following income levels for the fiscal years ending March 31, 1939, March 31, 1940, March 31, 1941, March 31, 1942: $750-$l,000, $l,000-$2,000, $2,000-$3,000, $3,00044,000, $4,000-$5,000, $5,000410,000, $10,000415,000, $15,000-$25,000, $25,000450,000, over $50,000?
2.	How many taxpayers were in each income level for the above-noted fiscal years, and what was the percentage of the total in each case?
3.	What was the average net income for persons in each of these income levels during each of the above fiscal years?


Colin William George Gibson: Detailed income tax statistics are not maintained on a basis of collections but on a basis of assessment. This will be
understood when it is pointed out that collections are now being made as much as a year before the individual files his return. Statistics are extracted from the returns after they have been assessed which may be from four months to a year after it was filed. With this understood I submit answers to the above questions on the assessment basis. For purposes of convenience the answers to the three questions are contained in the four tabl.es covering the 1938-39, 1939-40, 1940-41 and 1941-42 fiscal years.
In view of the fact that in the higher income groups a considerable number of assessments have not been finally determined for the fiscal year 1941-42, the figures for that year must be considered as incomplete.
Individual Taxpayers Assessed 1938-39 fiscal year
Number Percentage	Percentage
,	of	of Total of total Total Averageassessed total tax tax income income Income groups	taxpayers	taxpayers	assessed	assessed	assessed	assessed(000)	(000)$ 750 - $ 1,000	
Not applicable to this fiscal year1000 -	2,000	
104,476	45-4%	$ 1,078	3-2%	$139,845	$ 1,3392 000	-	3,000	
54,315	23-6	1,067	3-1	134,099	2,4693'000	-	4,000	
30,117	13-1	1,194	3-5	103,602	3,4404000	-	5,000	
14,381	6-2	1,107	3-3	64,098	4,4575 000	-	10.000	
19.862	8-6	4,751	14-0	134,444	6,76910.000	-	15.000	
3.866	1-7	3,244	9-5	47,296	12,23415 000	-	25,000	
2,096	0-9	4,596	13-5	40,202	19,18025.000	-	50,000	
917	0-4	5,992	17-6	32,014	34,908Over $50,000	
341	0-1	10,997	32-3	34,043	99,833Total	
230,371	100-0%	$34,026 100-0%	$729,640 $ 3,167Less adjustments	
1,807Net total	
$32,219
1939-40 fiscal year
$ 750 - $ 1,000	 Not applicable to this fiscal year
1.000	-	2,000	
124,132	42-4%	$ 1,285	2-5%	$167,354 $ 1,3482.000	-	3,000	
68,420	23-3	1,366	2-6	169,110	2,4723.000	-	4.000	
39,700	13-5	1,584	3-1	136,478	3,4384.000	-	5,000	
19,409	6-6	R510	2-9	86,525	4,4585.000	-	10,000	
29,619	10-1	7,084	13-8	200,002	6,75210.000	-	15,000	
6.409	2-2	5,385	10-5	78,307	12,21815.000	-	25,000	
3,492	1-2	7,517	14-6	66,243	18.96925.000	-	50,000	
1,433	0-5	9,135	17-7	49,027	34,212Over $50,000	
483	0-2	16,607	32-3	47,244	97,814Total	
293,097	100-0%	$51,473 100-0% $1,000,290 $ 3,413Less adjustments	
919Net total	
$50,554

Questions

	Individual Taxpayers Assessed					
	1940-41	fiscal year				
Number	Percentage	Percentage	of	of	Total	of total	Total	Averageassessed	total	tax	tax	income	incomeIncome groups	taxpayers	taxpayers	assessed	assessed	assessed	assessed(000)	(000)	$ 750 - $ 1.000	Not applicable to this fiscal year	1.000 - 2.000	
127.954	42-6%	$ 1,535	2-9%	$174,150	$ 1,3612,000 - 3,000	
72.502	24-1	1,608	3-2	180,673	2.4923,000 - 4.000	
43.021	14-3	1,869	3-6	144.307	3.3544.000 - 5.000	
19.581	6-5	1.695	3-2	87.426	4,4655.000 - 10.000	
26,370	8-8	6.927	13-2	177.918	6.74710.000 - 15.000	
5,737	1-9	5,311	10-1	70,086	12,21715.000 - 25,000	
3.245	1-1	7,711	14-7	61,915	19.08025.000 - 50.000	
1,501	0-5	10.382	19-8	50,608	33,716Over S50.000 	
473	0-2	15.341	29-3	43.167	91,261Total 	
300.384	100-0%	$52,379	100-0%	$990,250	$ 3.297Less adjustments 	834	Net total 	$51,545	1941-42 fiscal year	$ 750 - $ 1,000	
62.265	16-1%	$ 431	0-8%	$ 53,324	$ 8561.000 - 2,000	
167,524	43-2	4,551	8-1	243.307	1,4522,000 - 3.000	
83,592	21-5	4.187	7-4	201.354	2.4093,000 - 4.000	
32.542	8-4	3,367	6-0	112.046	3,4434.000 - 5.000	
14,403	3-7	2,721	4-8	64.137	4,4535.000 - 10.000	
20,489	5-3	9.390	16-7	137,019	6,68710.000 - 15,000	
3,768	1-0	5,720	10-2	46,086	12.23115.000 - 25.000	
2.070	0-5	7,065	12-5	39.567	19.11425.000 - 50.000	
791	0-2	6,752	12-0	26,879	33.981Over $50,000 	
281	0-1	12,076	21-5	29,237	104,047Total 	100-0%	$56,260	100-0%	$952,956	$ 2,458Less adjustments 	504	Net total 	$55,756


AUTOMOBILE TIRES FOR TOURISTS
Mr. LACOMBE:: 1.	Have steps been taken to see that there will be a supply of new automobile tires for tourists?
2.	If so, what is the quantity of such tires warehoused in garages, dealers' premises, and manufacturers ?
Mr. HOWE.
1.	Early in 1942 provision was made for tires for tourists, in a limited way, and again in Order C.S. 4J, May 15, 1942. After checking with tourist bureaus and with the United States authorities, the following provision was made: Order C.S. 4J. Page 5, Section 7, Class C-"Vehicles Eligible for Used Tires or Used Tubes-(b) A passenger vehicle not licensed for operation by any of the provinces of Canada and which has been in Canada for more

than one week as evidenced by date of entry permit, and then only if a tire or tube is essential to its continued operation." The above provision was made so that a bona fide tourist could be supplied with used tires or used tubes, so that he would not be stranded away from home.
2.	No definite number has been assigned.


REPRINTING OF SPEECHES
[Stage Direction]
Mr. PURDY.:
1.	Has the king's printer recently placed orders for printing reports of committees of the house with outside concerns?
2.	If so, what reports, and why was this necessary ?
3.	Has the printing bureau recently printed a pamphlet entitled "Planning for Victory and Security", speeches by Cooperative Commonwealth Federation members from Saskatchewan?

Questions
4.	If so, how many copies were printed, and what was the cost to, (a) the purchaser; (b) the printing bureau, including proportion of overhead, etc.?
5.	Are the speeches in the exact form as the usual reprint of speeches supplied to members?
"6. If not, in what form or particular does each differ?
7.	Does the pamphlet contain other matter than the speeches of the Cooperative Commonwealth Federation members?
8.	If so, what are the particulars of same?
9.	Did the printing of this pamphlet make it necessary to hold type longer than the seven days provided for in the regulations published in Hansard?
Mr. McLARTY:: 1.	No.
2.	Answered by No. 1.
3.	Yes.
4.	10,000 copies; (a) $255.59; (b) $251.98.
5.	No, except as to type and text.
6.	Pamphlet in question contains halftones, subheads and carries a cover.
7 and 8. Answered by No. 6.
9. Regulations published in Hansard do not refer to holding the type, which is kept until after the session for the printing of the revised edition. The order for the printing of this pamphlet was placed with the debates office seven days after the date on which the last speech reprinted in pamphlet was delivered in the house.


IMPORTS FROM AND EXPORTS TO CHILE
Mr. ROY:: 1.	What was the total amount of imports from Chile during the years, 1940, 1941, and 1942?
2.	What was the total amount of exports to Chile during the years, 1940, 1941, and 1942?


Mr. RALSTON:: In the absence of the Minister of Trade and Commerce I am advised that, owing to censorship regulations, this information is not available for publication.


CANADIAN PACIFIC RAILWAY SHARES HELD IN ENGLAND
[Stage Direction]
Mr. LaCROIX (Quebec-Montmorency):
Is the government purchasing a block of shares of the Canadian Pacific Railway, held in England, in order to supply London with Canadian dollars?
Mr. ILSLEY:: No.


MOTOR VEHICLE GASOLINE
Mr. DIEFENBAKER:: 1.	What ivas the (a) total production; (b) importation; (c) consumption, of motor vehicle gasoline in Canada in each of the years, 1940, 1941, and 1942 inclusive?
2.	What amount of gasoline comes into Canada by way of pipe line extending from Maine to Montreal?
3.	Is said pipe line being used to capacity? If not, why?
Mr. HOWE;
1.	(a) Refinery production (Barrels) 1940,
23.888,627; 1941, 26.905.923; 1942, 23.843,657. (b) Importations:	1940,	1,452,162;	1941,
1,098,711; 1942, 1,224,503. (c) Total Consumption; 1940, 25,208,022; 1941, 27,860,917; 1942, 26,780,573. The foregoing figures cover all types of gasoline, including aviation gasoline. It is not in the public interest that motor gasoline figures be released Separately for the reason that the consumption of aviation gasoline, a highly secret commodity, can be readily computed by deducting the motor gasoline consumption from the total.
2.	None as gasoline. Crude oil and petroleum products came into Canada by way of the pipe line from Maine, United States, as follows:
1941 (2 months) (Barrels) 1,098,520; 1942 (12 months) 7,157,501;	1943	(3 months)
3,159.515.
3.	It is being used to capacity in so far as we are able to get tankers to supply.


MELBOURNE MERCHANDISING COMPANY LIMITED
Mr. SENN:: .
1.	Does Melbourne Merchandising Company Ltd., import or ship wool into Canada?
2.	If so, in what amounts during each year since its formation?
3.	Who allocates such shipments to each consumer in Canada?
4.	Is an over cost charge on imported *wool made by this company to Canadian users of wool ?
5.	If so, how much?
6.	If so, what disposal is made of such profits? Mr. HOWE:
1.	Yes.
2.	It is not in the public interest that this information be given.
3.	Supplies are allocated by Melbourne Merchandising Company Ltd., to the Canadian mills in accordance with their requirements for contracts from the Department of Munitions and Supply. No wool is supplied for civilian requirements.
4.	Selling prices are generally set higher than final landed cost.
5.	From 5 per cent to 10 per cent.
6.	Profit is applied to inventory reserves.


Mr. SENN:: 1.	Is Melbourne Merchandising Company Ltd., a dominion government agency?
2.	Who are its directors?
3.	Are they full-time employees?
4.	Are the directors paid by the government?
5.	If so, in what amounts?
Questions


Mr. HOWE:: 1.	Yes. Melbourne Merchandising Company Limited is a government owned and operated company.
2.	Directors: Henry Barrett, Henry Brown, David C. Dick, Clement Tremblay, W. P. Walker.
3.	No.
4.	No.
5.	Answered by 4.


Mr. SENN:: 1.	Does Melbourne Merchandising Company Ltd., handle Canadian wool?
2.	If so, in what amounts?
3.	Who allocates such shipments to each consumer in Canada?
4.	Is an over cost charge on Canadian wool made by this company to Canadian users of wool?
5.	If so, how much?
6.	If so, what disposal is made of such profits?


Mr. HOWE:: 1.	Yes, only from the Canadian wool board.
2.	Such quantities as are required to meet the demand for Canadian wool by contractors to the Department of Munitions and Supply.
3.	Supplies are allocated by Melbourne Merchandising Company Limited to the Canadian mills in accordance with their requirements to meet these contracts.
4.	Generally, yes.
5.	Approximately 3 per cent.
6.	Profit is applied to inventory reserves.


DEFENCE INDUSTRIES LIMITED-TRANSCONA CORDITE PLANT
Mr. HOWE:: I should like to give the complete answer in reply to a question asked by the hon. member for Winnipeg North Centre (Mr. Knowles) on March 29, regarding the Transcona cordite plant:
On March 29, 1943, in reply to a question by the hon. member for Winnipeg North Centre, considerable information was given regarding the Transcona Cordite plant-the number of employees, the total cost, ownership, use of the plant on expiration of the war, etc. The figures for the number of employees in the plant were secured by long distance telephone in order that the question oould be answered as quickly as possible an'd were given as follows: May, 1942, 4,485; March, 1943, 3,089.
Confirmation by letter of the information given by telephone later showed that the figure given for May, 1942, should have read 4,398 instead of 4,485, and the figure for March, 1943, should have read 2,961 instead 
of 3,089. Inasmuch as this question was answered on March 29, before the complete figures for the month of March had been compiled, the latest available figures were given, i.e. as of February 28, 1943. As stated above, this figure 3,089 should have been 2,961. The discrepancies as above were caused by the fact that in relaying thte figures by telephone from Defence Industries Limited to Allied War Supplies Corporation approximately 130 foremen were included in both wage and salary lists and therefore duplicated.
On April 12, 1943, in reply to a further question regarding "a proposed lay-off", a definite answer was given to the specific question, and inasmuch as monthly figures on the exact number of employees had come to hand these figures were given to the house in addition to what had been asked.
Information of this kind has to be relayed from the Transcona Cordite plant to Allied War Supplies Corporation, and thence to the department at Ottawa, and therefore some discrepancy in figures, unless all questions cover the same specific period of time, is quite understandable.
For the additional information of the house and in further reply to the question of the hon. member for Winnipeg North Centre of April 13, page 2197 of Hansard, the reduction from peak employment (on operations) be-< tween May, 1942, and March, 1943, as of payroll March 31, 1943, is therefore 4,398 (May, 1942) minus 2,588 (March 31, 1943) which equals 1,810.



QUESTIONS PASSED AS ORDERS FOR RETURNS


Mr. HAZEN:: 1.	How many buildings have been acquired for use by the Department of National Defence for Naval Services during the present fiscal year, (a) where is each building located; (b) from whom was each purchased; (c) what price was paid for each; (d) what is each used for; (e) how was the price arrived at; (f) has this department a board of valuators?
2.	How many buildings have been constructed by the Department of National Defence for Naval Services during the present fiscal year.
(a)	where is each located; (b) how much did each cost; (c) who was the contractor and what was the contract price in each case; (d) what is each used for; (e) were tenders called for the erection of these buildings in each ease; if not, in which instances were tenders called?
3.	How many buildings, or space in buildings, were rented by the Department of National Defence for Naval Services during the present fiscal year, (a) where is each building located;
(b)	who is the owner; (c) what is the rent paid and the term of the lease in each case;

Questions as Orders for Returns
(d) what use is each put to; (e) is it the intention to surrender any of these leases or will they be renewed the coming fiscal year?
4.	How many lots of land were purchased for the use of the Department of National Defence for Naval Services during the present fiscal year, (a) what is the size of each lot; (b) who was the vendor in each case; (c) what was the purchase price in each case; (d) what use has each lot been put to?
5.	How many lots of land were leased for the use of the Department of National Defence for Naval Services during the present fiscal year, (a) where is each lot located; (b) what is the size of each lot; (c) who is the owner of each lot; (d) what rent is paid for each lot; (e) what use is the land put to?


USE OF FREIGHT CARS FOR STORAGE
Mr. CASTLEDEN:: 1.	Were any freight cars kept out of transportation operations during the month of February, 1943, on account of being used as storage for equipment or supplies?
2.	If so, how many?
3.	What was the cost to the government for demurrage on such cars on each of the railways during 1942?


COST-OF-LIVING BONUS
Mr. LACOMBE:: 1.	What is the amount of the cost-of-living bonus paid to each class of workers in Canada?
2.	Is such bonus the same for each class of worker ?
3.	If not, for what reason?


INTERNMENTS-CAMILLIEN HOUDE
Mr. LACOMBE:: 1.	Did the Minister of Justice issue an order prohibiting a meeting at Longueuil in connection with the liberation of Mr. Camillien Houde from internment?
2.	If so, did the department receive the texts of speeches to be delivered at such meeting?
3.	Had the Minister of Justice, or the officers of his department, official knowledge of speeches to be delivered at such meeting?
Mr. ST. LAURENT: Return tabled.


Mr. LACOMBE:: 1.	Is the commission, appointed to hear the objections raised by the interned, vested with any judicial power, or is it only a fact-finding commission, the minister being the judge in the last resort?
2.	Has the minister followed the recommendations of the said commission in the interned cases that were submitted to him?
3.	At the time of his arrest, was Mr. Camillien Houde informed under what measure he had been arrested?
4.	Were the officers arresting him in possession of a warrant, or any other written order?
5.	If so, who signed same?
6.	Has Mr. Houde personally, or through his wife, asked to be held in the province of Quebec?
7.	Why is Mr. Houde not interned in the province of Quebec?
8.	Does the advisory commission grant the interned petitioners the right to call witnesses and adduce legal evidence through their solicitors?


ST. LAWRENCE RIVER NAVIGATION
Mr. LACOMBE:: 1.	Has the government taken the necessary steps to prevent the closing of navigation in the greater part of the St. Lawrence?
2.	If not, why should the St. Lawrence be almost closed to navigation?
3.	During the last shipping season, what was the percentage of transport losses, per thousand tons, in the St. Lawrence?
4.	What were the losses, per thousand tons, in the shipping from other ports in Canada?
5.	Has the government taken the necessary steps to make the fullest use of the St. Lawrence and its ports during the forthcoming season?


FINANCIAL ASSISTANCE TO FARMERS
Mr. CORMAN:: 1.	What detailed financial assistance has the government given the Canadian farmer in the years 1941 and 1942?
2.	What detailed financial assistance has been approved so far for 1943?
3.	What is the estimated total amount of assistance which will be paid to the Canadian farmers for 1943, in detail?



PURCHASE OF FLOOR COVERINGS SINCE JANUARY 1941

Mr. DIEFENBAKER:: What is the value of (a) rugs; (b) carpets; (e) linoleum; (d) other floor coverings of all kinds that have been ordered, and/or purchased, whether delivery thereof has been made as yet or not, to each department of government, including army, navy, and air force establishments, (a) in the city of Ottawa; (b) elsewhere in Canada, since the first of January, 1941?



DOLLAR-A-YEAR MEN

Mr. KNOWLES:: 1.	How many one-dollar-a-year men are, or have been, since the outbreak of the present war, in the employ of the government, or any department thereof?
2.	What are their names, addresses, and qualifications, and on what date was each appointed?
3.	With what firm or company was each of the above employed, before entering the service of the government?
4.	Which of the above are still employed by the said firms or companies?
5.	Which of the above are still on the payrolls, or are directors, of the said firms or companies?
6.	Have any of the above firms or companies received contracts from the government since the outbreak of the present war?
7.	If so, on what date or dates, and for what amount or amounts, in each case?
Motions for Papers



MOTIONS FOR PAPERS


Mr. POULIOT:: For a copy of the order in council to permit the Department of Munitions and Supply to continue throughout the life of the present session.


Clarence Decatur Howe: Return tabled.


Mr. HANSON (York-Sunbury):: For a copy of all contracts and prospectuses issued, and other documents showing what contracts have been entered into by the government of Canada through the Department of Munitions and Supply, on its own account, or for the account of any allied government, showing firm orders and financial assistance granted to the Aluminum Company of Canada Limited, since the outbreak of the present war.


Clarence Decatur Howe: Mr. Speaker, I cannot table orders from the British government to the Aluminum company. We have undertaken not to do so. The orders given by the Canadian government for its own account can be tabled; the others cannot.


Mr. COLDWELL:: Is it possible for the government to obtain permission to table these? The same reply which is given here about British orders is given by members of the British House of Commons regarding their Canadian orders, because this government is involved, and it is said they cannot divulge contracts. Is there any way of getting a view of these contracts?


Clarence Decatur Howe: I do not think so. Many, in fact most of the important transactions between the Aluminum Company of Canada Limited and the British government, were made without the intervention of the Cana-dain government. It was only about a year or perhaps eighteen months ago that I was asked to become the agent of the British government in dealing with the Aluminum company. I have no record, nor has the government any record of earlier contracts which involved loans by way of capital assistance and purchases of the metal, and I do not believe it is desirable, for military reasons, to give the enemy information as to the amount of aluminum going forward each month to the United Kingdom. I ask that hon. members do not press the point because I think that the advantage to them hardly compensates for the great disadvantage to those responsible for these movements.


Mr. SPEAKER:: Does the minister wish to have this order dropped?


Clarence Decatur Howe: It should be dropped. I think it should be reworded.


Mr. CASSELMAN:: Could not the question be passed subject to the reservation made by the minister?


Clarence Decatur Howe: It could be passed subject to that reservation.


Major James William Coldwell: I believe that all the information requested, other than that included in the reservation which has been suggested, is in a return in my name; that is, other than the contracts made by the British government.


Clarence Decatur Howe: I have not those in my possession.


Major James William Coldwell: Yes; I say that that is the only thing we do not have.


Clarence Decatur Howe: Then I will refer my hon. friend to that return, which gives the information that can be given. Perhaps the hon. member will consult it, and if he needs more information and we can give it to 'him, we will do so. But 1 believe that all that can be provided has already been tabled. I ask that the motion be dropped.
Motion dropped.


Mr. LALONDE:: For a copy of all accounts submitted to and paid by the wartime prices and trade board, in connection with travelling, hotel and other expenses, incurred by Mr. Alphonse Forget during his employment with the said board.


John George Diefenbaker: For a copy of all contracts now in force and effect as between any department of government and each oil company for the supply of aviation gasoline, together with the records showing the total amount of gasoline purchased by and/or delivered to the government under said contracts by each of the said companies and the price.


Clarence Decatur Howe: We can table the contracts, but we cannot table the quantities of aviation gasoline delivered. This is very secret military information, and I am sure that my colleague the Minister of National Defence for Air would object to having it tabled. .

Labour Conditions



LABOUR CONDITIONS


[Stage Direction]
On the orders of the day:
Mr. GORDON GRAYDON (Leader of the Opposition):: I should like to direct a question to the Minister of Labour arising out of a news item which appeared in the press of Saturday last. This is headed as follows:
U.S. seeking farm labour from Canada.
Passes bill appropriating $26,100,000 to import men.
The date line of the article is Washington, April 17, and it reads:
A measure appropriating $26,100,000 to finance farm labour recruiting in the United States, including the importation of workers from other countries including Canada, was on President Roosevelt's desk to-day.
Senator Walter George (Democrat, Georgia) said the government hopes to bring "4,000 or 5,000" Canadians into New England and New York state for farm work this year.
Would the minister care to indicate the position of the government with respect to the information contained in that news dispatch?


Hon. HUMPHREY MITCHELL (Minister of Labour) :: I have no knowledge of the
news story except that my hon. friend showed it to me before he came into the house. Nothing of the kind has come before my department.


Gordon Graydon: I shall send this information over to the minister and perhaps on another occasion, before the Easter recess, he will give us an answer. It has an important bearing on our whole man-power situation.


Humphrey Mitchell: I shall be glad to do that to-morrow or the next day.



ANNOUNCEMENT OF SETTLEMENT OP DISPUTE AT ARVIDA PLANT OF ALUMINUM COMPANY

[Stage Direction]
On the orders of the day:
Humphrey Mitchell: I ami glad to announce for the information of hon. members that the dispute which existed at the Aluminum Company of Canada, Arvida, has been settled by our conciliation staff. The Aluminum Company of Canada, Arvida, has an agreement with its employees made through the National Catholic Syndicate which was renewed at the beginning of 1943 by reason of the fact that no notice of cancellation was given in 1942 and under its terms the agreement was subject to renewal automatically at the end of
1942. At the time the agreement was renewed representations were made by the union affiliated with the American Federation of Labour that the National Catholic Syndicate did not represent the majority of the employees.
This jurisdictional dispute had been causing some difficulty for several weeks, and our conciliation officer was able, after protracted negotiations, to bring about an understanding which was satisfactory to (a) the company, (b) the National Catholic Syndicate and (c) the union affiliated with the American Federation of Labour. The requirements of the understanding are:
1.	The union affiliated with the American Federation of Labour will be given representation on the joint employees committee.
2.	The union affiliated with the American Federation of Labour has given a declaration to the Aluminum Company of Canada that its members will abide by the present agreement between the company and the syndicate.
It is further agreed that just prior to the time the agreement next comes up for renewal at the end of 4943, arrangements will be carried out which will give definite evidence as to which union has as its members the majority of the employees of the company.



REPORTED NEGOTIATIONS FOR IMPORTATION OP FEED WHEAT INTO UNITED STATES FROM CANADA

[Stage Direction]
On the orders of the day:
Major James William Coldwell: Neither the Minister of Trade and Commerce (Mr. MacKinnon) nor the Minister of Agriculture (Mr. Gardiner) is in his seat, but before the house adjourns I should like to get some information from one. of them with respect to a news report in the Globe and Mail and the Montreal Gazette stating that the United States agriculture department is attempting to negotiate for the importation of feed wheat from Canada to meet a serious prospective shortage of high protein feeds. Could either minister give some information to-morrow regarding this matter? It will be of material interest to the western farmer.


James Layton Ralston: I shall have a note made and see if it is possible.

Munitions and Supply Act



MUNITIONS AND SUPPLY ACT


[Stage Direction]
The house resumed from Friday, April 16, consideration in committee of Bill No. 7, to amend the Department of Munitions and Supply Act-Mr. Howe-Mr. Bradette in the chair.
On section 7-Munitions contract.
Clarence Decatur Howe: I will ask my colleague to move the following amendment:
That section 13 of the said act be amended by adding thereto a new subsection, to be known as subsection 4, which shall read as follows:
If the minister is satisfied, upon an examination of accounts and records of a person who has entered into a munitions contract, that the contract price paid and payable to such person contains an unreasonable profit, he may direct such person to re-negotiate the contract price and may direct that there be withheld from such person any amount of the contract price which in the opinion of the minister represents an unreasonable profit, and may direct such person to pay to the receiver general of Canada forthwith any amount which such person has received which in the opinion of the minister represents an unreasonable profit.
That subsections 4, 5, 6, 7, 8 and 9 of the said section be re-numbered 5, 6, 7, 8, 9 and 10.


Colin William George Gibson: I so move.


Gordon Graydon: Would the minister give us some indication as to what circumstances caused him to bring in this amendment? It seems to me it has some far-reaching implication.


Mr. STIRLING:: Before the minister
answers may I ask him in what way he has hitherto been able to handle this very difficult question. Considering the vast amount of contracts that the minister has had to handle, this point must have arisen many times, particularly so, I should imagine, in connection with contracts which have been let on target prices, where the value of the work to be done was not easily ascertainable. In these cases there was little precedent and the minister doubtless has had to proceed on a trial and error basis in arriving at a price. He must, I think, have had to deal with the difficulty in connection with which this amendment is moved.


Clarence Decatur Howe: This is a clause giving the department power to re-negotiate any contract. The tendency is for many types of war contracts to give an increasing profit as time goes on. In repetition work the plant becomes more efficient, the workmen become more skilled, and the result is that the cost drops. It has been the practice of the department to re-
IMr. Ralston.]
negotiate these contracts very frequently. I think we hardly have a continuing contract that has not been re-negotiated two or three times and new prices fixed.
Reference has been made to target price contracts. That is a very good example. In that case the target is fixed, perhaps at too high a level, and it is necessary to revise the target frequently or to change from a target price contract to a firm price contract. We have had no great difficulty in the past in working out [DOT] these re-negotiations. Industry lias been fair and cooperative, and by mutual consent we have been able to arrange a new price level. We have the power in any event to cancel contracts, and we have the power to make new contracts, but recently we have been re-negotiating some very large contracts, and my officers believe we should have the power of re-negotiation expressly covered by the act. Therefore we are asking for it at this time.


Mr. BOUCHER:: Is it not a fact that in nearly all target contracts the minister has made provision for re-negotiation and has given himself power to raise or lower the price?


Clarence Decatur Howe: Y'es, that is true.


George Russell Boucher: That is stipulated in the contract itself?


Clarence Decatur Howe: Yes.


George Russell Boucher: Consequently if it is to be put into the act, it is intended henceforth to have it in the act rather than in the individual contract?


Clarence Decatur Howe: Yes. It may be both in the act and in certain individual contracts, as my hon. friend says. Target price contracts usually do provide that the minister fix the price from time to time, but this covers a great volume of contracts, such as the shipbuilding contracts, which are in process of being renegotiated, which were firm price contracts and did not contain the re-negotiation clause.


Jean-François Pouliot: In all friendliness and with the best spirit of cooperation, one must look at the chart issued by the department in dealing with this question of contracts. Of course these contracts must be drafted by the legal branch of the department. On the chart supplied to us, above the legal branch there is the assistant general counsel, and above the assistant general counsel there is the general counsel. The legal branch, together with these two gentlemen who belong to the legal fraternity, has been placed on the chart between the United Kingdom office and the wartime administrator, Canadian Atlantic ports. I do

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not think that is the right place for it. I submit that the legal branch, with the general counsel and the assistant general counsel, should be grouped with the purchase investigation branch and the munitions contracts branch. I presume the counsel of the Department of Munitions and Supply-and I apply that flattering description to all the lawyers who work there, whether big or small-prepare the contracts, and of course those contracts are supposed to be standard; I assume there are printed forms. Therefore there must be a close relation between the legal branch and the munitions contracts branch.
There should be also a close relationship between those two branches and the purchase investigation branch. After a contract is drafted by the counsel of the department I assume it is handed to the munitions contracts branch, and they must have some printed form for these contracts. Then before they agree to any contract I suppose there must be an investigation of the purchase, and the investigators are in another branch. These three branches are closely related, but on this chart they are separated, so that I do not understand how they could work very well. Of course there are many people in the department, but all those whose work has some relation to the work of another branch should be kept as close to that other branch as possible.
That is the first point I wish to make now. I suggest that the minister consider it, in order to save duplication of service. Usually the purchase investigation has to do with a deed or deeds; and while the minister is not a member of the legal fraternity, he has had enough business experience, I am sure, to appreciate that such deeds are dealt with by attorneys or solicitors. I do not see the use of the purchase investigation branch, when there is also the legal branch, and in my humble view the munitions contracts branch also should disappear, for the reason that the work supposed to be done by that branch could be covered by the legal branch. Therefore if the legal branch were put in its proper place we could dispense with the services of all the staff of the munitions contracts branch aid the purchase investigation branch. I offer that suggestion because I want to help, and to show my good spirit of cooperation.
Now I should like to say a word with regard to the new subsection 4. The minister will be given the right to say to A or B, "You have made too much money. You must pay back some of it to the receiver general." In principle I agree with that; it should be the right of the minister or any-
72537-146}
one to tell a man who has taken advantage of a contract to overcharge, that he must pay back what he obtained over what might be reasonably and justly due him. That is fair. On the other hand would it not be advisable to bring in a subamendment providing that anyone dealt with in this way should have the privilege of bringing evidence before the minister, so that his decision would not be onesided. He should have before him both sides of the picture before giving judgment in a matter which may involve a very considerable sum of money. I bring these remarks not only to the attention of the minister, but to the attention of all hon. members in the committee, so that at a later time no injustice may arise by virtue, of the amendment.


George Russell Boucher: The amendment does seem to add to the possibility of standardizing types of contracts. Members of the war expenditures committee when looking over many contracts in the past year discovered the difficulty of having contracts drawn which would merely approximate cost prices and provide for a reasonable decrease of profits. This was found particularly so in the undertaking of contracts for the manufacture of munitions, ships, and aeroplanes of novel design, in connection with which engineering practices and equipment are not well known. Computation as to costs of production in these instances is difficult.
In many such contracts there was a clause under which, notwithstanding anything otherwise stated in the contract, discretionary power was left to the minister to revise prices and profits. This applied chiefly to the target price, but to some extent it also applied to fixed prices. Hon. members may look with some misgiving upon the placing of arbitrary powers in the hands of the minister to decide what would be a fair and equitable contract. The point that worries me is that while the setting of prices and of profits may be left to the discretion of the minister, officials of his department must work with him, and it seems to me only in keeping with established practice in respect of the letting of contracts that too much authority ought not to be given to the minister and his department to overrule contractual obligations and to measure profits as he-and I do not make this observation in a personal way-according to his whims, fancies or judgment may decide.
I feel we should have some better indication of what judgment would be exercised in these cases, because one can see that it involves the difficulties with which the minister must be faced in ascertaining the efficiency of various contracting parties. An effort to
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increase the knowledge of the minister as to what is fair and reasonable in a given instance would mean to increase the already overburdening task of cost accountants in the Department of Munitions and Supply. I believe, too, that the scarcity of qualified cost accountants has increased difficulties in the department in connection with checking up costs of production and amounts of advances made during production.
When we embarked upon the manufacture of articles involving processes not familiar to the government or to the manufacturers a great deal of leeway of necessity had to be given. Now, however, with greater stabilization of types of production, machines, engineering efficiency and systems of checks and balances, we should operate with a much greater degree of certainty. In these circumstances I do not think the same discretion need now be placed in the hands of the minister as was placed there in the beginning. We should guard with the utmost caution and care the yardstick used by the minister and his department in reckoning costs and profits.


Clarence Decatur Howe: The matter of profits falls into a pattern. The reasonable rate of profit depends on the rapidity of turnover, the volume used, the amount of financing done by the contractor himself, and the amount of assistance he may require from the government. All these factors are constantly being studied by the department. From time to time we get fairly clear indications that a particular profit situation is getting out of line. In such cases we ask for re-negotiations. For instance, we are making our second adjustment in respect of ships. Not only do we find that the main contractors are becoming so efficient that profits have become excessive, but we find that the subcontractors are in the same position. We have been through every main contract and subcontract in our shipbuilding programme, refixing prices. I think all hon. members agree that fixed prices which give an incentive to the builder are desirable, and we use them more and more. But even fixed prices must be subject to readjustment, or in time they will produce excessive profits.
One is amazed when he sees how costs can be brought down by organization, efficiency and repetition. To give an example, I think the first Bren gun was contracted for on a basis of $600 per gun; to-day the cost is less than $200 per gun. The first contract for rifles produced in a government-operated plant was at $80 per rifle, and that was considered reasonable. To-day I believe it is down somewhere in the neighbourhood of $25 per rifle. These are examples of the price reductions brought about by efficiency and volume. This

is a splendid development, of course. But to take advantage of the development, the government must frequently re-negotiate continuing contracts, and in fact we have been doing just that.
As has been stated, many contracts contain a clause giving us permission to re-negotiate. But we think the situation would be benefited at this time by having a general clause giving us that power in connection with all contracts.


George Russell Boucher: Is it not also a fact that shortages of material's, bottlenecks, slow-downs and lay-offs have affected cost of production so much that costs of individual items have been varied from time to time, in accordance with availability of materials, of help and of engineering practices? We also have situations in which manufacturing organizations have been let contracts for certain kinds of production and who, while waiting for further supplementary contracts, and approaching a time for further financing of their original contract, have definitely slowed down their operations. Thus unit costs have increased. From this point of view I feel that any discretion left with the minister should be scrutinized carefully by the committee, as a means of safeguarding efficiency in production.


Clarence Decatur Howe: I can say with much confidence that increased costs due to non-delivery of materials or delays in receiving new orders have been exceedingly small. So far as I can remember I have never had a claim for increased compensation based on those factors.


Jean-François Pouliot: I understand that a new subsection 4 is now added. The subsection now to be No. 5 contains the words:
-the contract may be adjusted or reduced to an amount which represents the cost of the work or service to be carried out or rendered under the contract.
The minister will have to be very careful because I have learned that in some cases where the warehouse or depot is not large enough there are foremen who give instructions to some of their men to sabotage some of the tools in order that all the shifts might be employed and some men get overtime. For that very selfish and uncalled-for reason they cause some of the tools to be sabotaged, and then some of the shifts would come back to work and put in time without doing any work at all. That is a serious matter. I have also been told that some business men do not count the cost but make extravagant expenditures of public money. They will make risky, experiments, and they are not afraid to do that because they rely upon the

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Canadian exchequer to pay for all their errors or mistakes. That is another very serious problem.
I have also been told of tanks being tested when they were incomplete and being destroyed when tested in that condition. Very often the bolts and other parts would fall out. At some plants there are proving grounds for trying out tanks.
I mention these matters to the minister so that he can have a survey made of some pf these deplorable conditions, and apply appropriate remedies in order that the best results may be obtained from the least public expenditure.


Mr. NOSEWORTHY:: To what extent is the cost-plus type of contract still being let, and in what particular lines of work? What measures are taken by the government to see that it gets value for the money expended in that particular type of contract?


Clarence Decatur Howe: I think there is a misunderstanding about cost-plus contracts. The ordinary person usually thinks of a cost-plus contract as a contract involving cost plus a certain percentage, so that the greater the volume of work the greater the profit. I think there is no contract of that type in the department. We have contracts involving payment of cost plus a fixed fee. For instance, in Newfoundland it has been impossible to arrive at costs. There is a certain amount of inflation there and costs are variable and beyond the control of any department in Canada. There we have cost plus a fixed fee. A contractor is given, say, a $50,000 fee to do $2,000,000 of work. The work may cost. $1,500,000 or $2,500,000. The cost is the cost as audited by government accountants. But the fee is fixed. That type of contract is used under certain conditions where it is not possible to determine costs accurately. For the same class of work in Canada we would use the unit price contract; that is, so much a yard for moving clay, so much a yard for rock, so much for a yard of concrete in place. That is the unit price contract. The cost plus a fixed fee type we use where costs cannot be determined accurately in advance by the department or by the contractor. Where the costs can be determined in advance with reasonable accuracy, other types of contracts are used. So far as I am aware we have practically no contracts-I do not know of any, but there may be a few-of the cost plus a percentage type.


Mr. CASTLEDEN:: A couple of years ago there were some contracts of that type, were there not?


Clarence Decatur Howe: In the early days there may have been.


George Hugh Castleden: When you place a contract on a cost plus a fixed fee basis, what steps are taken by the department to see that costs are kept at the proper mark, that labour is used effectively on the job, and so forth? Has the department anyone inspecting and checking the work as it goes along?


Clarence Decatur Howe: On every contract carried on a cost basis, engineers check the efficiency of the work, and a treasury officer keeps cost records.


Jean-François Pouliot: Is there a standard fair
and reasonable profit on which the minister can rely in making future decisions?


Clarence Decatur Howe: Did my hon. friend say a
printed form?


Jean-François Pouliot: A standard reasonable
profit.


Clarence Decatur Howe: I dot not know that there is
a printed form but we have a certain pattern for profits, depending on a number of factors, I can say confidently that contracts of the same type are drawn to give the same rate of profit. A contract for guns would have a different rate of profit from a contract for lenses, or a contract requiring some other different technique.


Jean-François Pouliot: I want to bring the minister's attention to another point. Take the case of a firm that is handling some machinery shop with a yearly depreciation of fifty per cent. By reason of that depreciation the whole1 plant is eventually transferred by the government to that firm, and naturally there should be a decrease in the valuation made by the minister because of the capital that has been thus transferred to the firm. To make it) clearer, let us suppose that there is machinery' worth $1,000,000. It is being operated by a firm with depreciation of fifty per cent.


Clarence Decatur Howe: My hon. friend's premise is
wrong. We do'.not usually allow accelerated depreciation on machinery. The government may own machinery and place it in a private plant; in that case it continues to own it and will reclaim it when its usefulness in the plant has ceased.


George Russell Boucher: Is depreciation allowed
on machinery if the machinery is supplied by the contractor himself?


Clarence Decatur Howe: At the present time it is nob our practice to give the certificate of necessity which is required to bring a contractor
Munitions and Supply Act

before the wartime depreciation board for a purchase of machinery. The alternative is that the contractor can buy the machinery! and pay for it himself, or alternatively, the government will buy machinery, install it in the plant and continue to own it.


George Russell Boucher: But when the contractor
buys it and pays for it himself, there is depreciation allowed on the machinery?


Clarence Decatur Howe: Just the normal depreciation.


George Russell Boucher: There is no possibility1
of going to the depreciation board and asking for accelerated depreciation on machinery of that kind?


Clarence Decatur Howe: No.


George Russell Boucher: I was referring a minute
or two to leaving the discretion to the min-1 ister to renovate or renew contracts, varying them in the terms. You have the wartime! depreciation board setting accelerated deJ preciation; could we not have some sort of committee of the kind to revise contracts so far as profits are concerned, rather than leav-i ing the entire authority to the minister so to do? It is not that I am particularly fond1 of the depreciation board, because I think in some cases they have been very generous with1 their accelerated depreciation. But to adopt the suggestion I have made would be better than to leave the discretion entirely to tho minister.


Clarence Decatur Howe: If my hon. friend suggests we should have a committee to revise contracts, it would logically follow that we should have a committee to make contracts, and from that it would follow that we would have a committee to run the Department of Munitions and Supply. I must say I am not enamoured of committees. It could be done that way, but I think the present way is better.


George Russell Boucher: I was not speaking so much of a committee as of a board, the same as the wartime depreciation board.


Clarence Decatur Howe: Committees and boards are much the same.


Mr. KNOWLES:: May I ask again about contracts let on a cost per unit basis? Is any consideration given to the volume of the contract as related to increased efficiency in the plant? When the volume goes up and efficiency increases, who gets the advantage, the firm or the government?


Clarence Decatur Howe: The unit prices are set through experience. The government is carrying on a great variety and volume of work. For
r\ir. Howe.]
example, take airports; I suppose the government has built 150 airports, and its officials are familiar with actual costs of airport work; they keep cost accountants on the airport to maintain the costs; not only do they know the cost and the profits on an airport which has been completed, but they have a good deal of data supplementary to that information. From that data they fix the unit price of new work, so that if the contractor is efficient he can make a reasonable profit; if he is not efficient he makes no profit or may show a loss. This has been worked out by the experience of men expert in that field who are constantly collecting new data to keep themselves informed.


Stanley Howard Knowles: Speaking of small items such as rifles, to which reference was made a moment ago; when they are let on a cost per unit basis is the specified cost per unit the same with a small contract as with a large contract?


Clarence Decatur Howe: Ordinarily we do not place that type of work in small contracts. For example, only one firm makes a rifle. We place a contract for large quantities; we watch the costing very carefully, and we revise it from time to time. Ordinarily the costs margins are the same for all plants. If a plant cannot maintain its comparative costs with those of another plant it should not be in that particular business, and we give it some other work to do.


Gordon Graydon: It occurs to me, in connection with the re-negotiation clause in this amendment, that the department must keep fairly close supervision so far as the time element is concerned on rising profits with respect to a certain contract. Could the minister advise the committee what precautions the department takes to check from time to time upon rising profits per unit so that re-negotiation of a contract can be made in the interests of economy generally?


Clarence Decatur Howe: We have our officers in the plant who study costs and efficiency and report constantly. We are well advised as to what the margin is, and when it is getting out of line; we can check the situation by company earnings statements and by other methods. I may say that we re-negotiate retroactively as well for the future. For instance, our ship negotiations cover ships which have been built as well as ships to be built, so that, if we do not get results this month we shall probably do so six months later.


Gordon Graydon: So that if there is
excessive profit on a certain contract, the retroactive provision will wring a good deal of that profit out-

Munitions and Supply Act


Clarence Decatur Howe: Oh, yes.


Gordon Graydon: -in a subsequent contract which is entered into?


Clarence Decatur Howe: Yes, or in revision of the current contract.


Gordon Graydon: What possibilities are there of the department checking carefully on subcontractors? I suppose the same will apply to them as applies to a main contractor except that, in a case of that kind, presumably the department would have to put into the subcontractor's plant their cost accountants where there was some possibility or suspicion of an excess profit.


Clarence Decatur Howe: Old paragraph 4, which is being renumbered 5, deals with the subcontractor. He is more difficult to follow, in that ordinarily he has no direct contact with the department. We have been investigating subcontractors more and more and requiring revisions of price. The new paragraph 5 deals with subcontractors and gives us the same power over them as we have ovkr contractors.


Gordon Graydon: The minister means the paragraph 5 which is not yet before the committee?


Clarence Decatur Howe: Yes.


George Russell Boucher: Is it not a fact that cost accountants are so few and hard to get that it is impossible for them to keep up to date with their cost accounting and keep in line with production so as to give the department sufficient up-to-date knowledge?


Clarence Decatur Howe: Our own cost accounting
department is very much behind in this work. We have arranged with reputable firms of chartered accountants who ordinarily do the work of the firms to report to the department on the work which would ordinarily be covered by the department's own cost accountants. In this way we have been able to bring the work more up to date than it was some months ago. By one means and another we are able to get the necessary information. If we are late in re-negotiating a contract it is not serious; we go back and reclaim the profits of the past as well as provide the basis of costing for the future.


Gordon Graydon: To return to the problem of the subcontractor, have any cases been brought to the attention of the department, or are there cases of which the minister has knowledge, where a main contractor has subcontracted with companies which are actually under the control of those who control the main company? The reason I suggest this
is-I have no knowledge of these cases myself -that if there is some difficulty in finding where the excess profit is in a subcontract, there might be a tendency for a company which is a primary contractor to sublet a contract to subcontractors which were in some way interlocked as to directorate or control. Profits made under the subcontract might thus be in a sense hidden, and would not show in the general profits of the main contractor, with which this amendment would deal so far as negotiations are concerned. Have any instances of the kind arisen, or is that something which could not arise?


Clarence Decatur Howe: I cannot think of any cases, but I would point out that it is difficult to hide anything from the tax collector. If a firm is interlocked financially with the main contractor, the profits are consolidated for taxing purposes, in any event. If not, we soon find out that an excessive profit is being made, because we have a large pattern to work from. If prices for a similar article are lower than is being paid for the article in question, we begin to inquire. We have a department that does nothing else but inquire into situations of the kind, and in the long run we do discover excessive profits.


Mr. NOSE  WORTHY@: I notice in the explanatory notes that the old section contained a provision under which a firm could be convicted and fined for not providing suitable books to enable the minister to judge whether costs were excessive. That section also gave power to the minister to enable him to recover excessive costs. Are there any instances in which the minister recovered such costs under the old legislation?


Clarence Decatur Howe: No. There was no legislation which enabled us to recover, but as a matter of fact we do recover voluntarily. It is quite usual for a contractor to tell us that his profits are too large under a contract, and to make a voluntary refund. A short time ago a business man who operates in a comparatively small way by taking subcontracts came in and show-ed me his financial statement. He told me that he did not want to make excessive profits, and handed me a large cheque made out to the Receiver General of Canada covering his excess profits in full. That happens quite frequently. I suppose every week voluntary adjustments are made, or adjustments that are made perhaps under pressure. These amount to many hundreds of thousands of dollars. Although we have not had the direct power, we are taking power now to require that these be made.
Munitions and Supply Act


Joseph William Noseworthy: Are there instances in which that was happening and no voluntary adjustment was made?


Clarence Decatur Howe: The tax collector makes an adjustment in any case for anything over the standard profit. Our office watches very closely the tax returns of companies holding contracts with the government. It is difficult in war time to conceal earnings or profits from the tax collector. I venture to say that no contractor has made undue profits which have not been adjusted or will not be adjusted before the war is finished.


George Russell Boucher: I have a feeling that much more subcontracting could be resorted to as a means of decentralization of industry. Some little time ago I asked a question about the shortage of cost accountants. Has that had anything to do with the policy of the government in connection with subcontracts?


Clarence Decatur Howe: As a department we encourage subcontracting to the fullest possible extent. The shortage of accountants, to which my hon. friend refers, would not restrict subcontracting. I think we subcontract in Canada to as large an extent as any other country in the war effort.


Mr. GLADSTONE:: What would be the discretionary power of the minister in a case the reverse of that which we have been discussing? Competition has been keen; at times contractors may have figured too low on fixed price contracts, and changes have occurred because of rising labour costs and for other reasons. Would the minister consider making an adjustment in the price in order that a contractor might not suffer loss?


Clarence Decatur Howe: We have no authority to increase the contract price, nor are we asking for such authority. The volume of war-time business usually takes care of the situation.


Joseph William Noseworthy: It seems unusual
that the minister should be asking in this fourth year of the war for power to recover exaggerated costs. Can he give us anything more definite as to why we are being asked to give this power at this time?


Clarence Decatur Howe: We have had this power under order in council almost from the beginning of the war, or at least for eighteen months.


George Hugh Castleden: Are any contracts let by the department to persons who are not actually in the business, and who then sell the contract to others?


Clarence Decatur Howe: No.


[Stage Direction]
Amendment agreed to.
'Mr. Howe.)
Clarence Decatur Howe: There is another amendment, which makes only slight changes in the wording of the section. It reads:
That subsection 6 of section 13, be amended by adding after the word "order" in the first line thereof, the words "or direction"; and by striking out in the second line thereof, the words "subsection 3 or subsection 4 of", and by adding after the word "order" in the fourth and fifth lines thereof the words "or direction".
That subsection 7 thereof be amended by adding after the word "order" in the fourteenth line thereof the words "or direction".
That subsection 9 thereof be amended by striking out in the twenty-first line thereof the words "subsection 3 or subsection 4 of".
That subsection 10 thereof be amended by striking out in the thirty-fifth line thereof the words "seven and eight", .and substituting therefor the words "eight and nine".


Colin William George Gibson: I so move.


Jean-François Pouliot: What is the difference between "order" and "direction"? An order may be a direction.


Clarence Decatur Howe: My hon. friend should tell me. This is a lawyer's correction. It has no substance in changing the present order of things. Our solicitors asked that the change be made, and I am moving accordingly.


[Stage Direction]
Amendment agreed to.
The CHAIRMAN:: Shall the section as amended carry?


Jean-François Pouliot: No, sir. This section refers to contracts. A contract may come under any branch or any control of the department. If there is an industrialist who is willing to do something for the war effort he will be very much embarrassed in reading that chart, in which there are twenty-five crown companies mentioned; and I assume there are others. And some of them are for the same purpose. If we take, for instance, the Allied War Supplies Corporation, we have also War Supplies Limited, and it must naturally come under supplies control. With regard to shipbuilding we have the shipbuilding branch, Trafalgar Shipbuilding Company Limited, naval armaments and equipment branch, Wartime Merchant Shipping Limited, Park Steamship Company Limited and Toronto Shipbuilding Company Limited; a large number of crown companies regarding steamships and naval armament and equipment. What is the use of having all those companies?
If we take aircraft we have a gentleman who is the director, the controller of aircraft, Mr. R. P. Bell, who at the same time is director general of aircraft production branch. He must control himself. Then there is the automotive and tank production branch. The director general is Mr. J. H. Berry, and he

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controls himself. He is controller of motor vehicles control. Self-control! It is very funny but it is not logical. We have the director who is director-general of the branch and he controls himself. All branches have been dumped on that chart, which is shapeless. I hope some hon. members have it and will read it carefully. I will prove that it is shapeless.
In the first column to the left there is the aircraft production branch. Then at the bottom, between columns 2 and 3, there is Victory Aircraft Limited. Above in the third column there is Federal Aircraft Limited. Then in the seventh column we have Aero Timber Products Limited, which must be related to aviation. All that is mixed up. I do not see the use of so many crown companies.
Then we have the liaison officer, one who is famous, Mr. H. Carl Goldenberg of the Department of Labour. He is no doubt a good man. He is at the top of the fourth column. Going back to the third one, in the middle, we have the economics and statistics branch, director-general the same Mr. Goldenberg. But in the fifth column there is another group of liaison officers under the secretary's branch, for land and expropriation and workmen's compensation. I remind you, sir, that the expropriation and liaison officer is three columns left of the purchase investigation branch. And there is another liaison officer with the Department of Trade and Commerce; he is at the bottom of the fifth column. Another liaison officer with the treasury is the second near the top of the sixth column. I should have said also that the organization personnel branch and the industrial securities branch should be closely connected to the liaison officer w'ith the Department of Labour, but it is not. In the fourth column we have under Mr. Goldenberg, Washington office, United Kingdom office, and we have to make a jump to the column to the right before the controls to find United States purchases branch. The Montreal office and the Toronto office are at the bottom of the fifth and sixth columns.
Here I wonder whether the minister is asking for that power because the seventeen controls are not working well enough. In the first place there is the coordinator of production. There are some gentlemen above, ranking below the minister. There is the coordinator of production and chairman of the production board, Mr. Carmichael; there is the financial adviser, Mr. Brown, and the coordinator of controls, and chairman, wartime industries control board, Mr. H. Borden, K.C. The coordinator of production and 72537-147
chairman of production board, Mr. H. J. Carmichael, is the vice-president and general manager and director of General Motors of Canada, president, McKinnon Industries, Limited, vice-president and director, Conroy Manufacturing Company, Limited, director, Bank of Toronto; Premier Trust Company; Buffalo Ankerite Gold Mines, Limited; Inspiration Mining and Development Company; St. Catharines Hotels Limited, St. Catharines Transport Limited, and Dominion Soda Water Company, Limited.
Now we come to the coordinator of controls, Mr. Henry Borden, who has with him as associate coordinators of controls Mr. J. G. Fogo, K.C., about whom I have no information, and Mr. J. G. Godsoe, assistant manager of the Confederation Life Association of Toronto, who presided at the luncheon of the Canadian club of Toronto to-day, which was also attended by the Prime Minister (Mr. Mackenzie King). Mr. Godsoe delivered a speech on this occasion and called Mr. King "Mr. Premier" instead of "Mr. Prime Minister", but I need not say more about that. Here we have the coordinator of controls, who at the same time, mark you, is controller of supplies; that is, Mr. Henry Borden, who is also chairman of the wartime industries control board. At first he was general counsel of the Department of Munitions and Supply. He is a director of the Norwich Union Life Insurance Society; Barclay's Bank (Canada); Real Estate Loan Company of Canada Limited, and Traders Finance Corporation Limited. He has as deputy controllers of supplies Mr. G. P. Kaye and Mr. J. H. Lamprey, who is secretary-treasurer and director of Holland and Lamprey Limited.
We come now to the vice-president of the wartime industries control board, Mr. A. H. Williamson, who is vice-president of Wood, Gundy and Company Limited, Toronto; director, B. C. Packers Limited; director, Federal Grain Limited. In addition to his important job as vice-chairman of the wartime industries control board, Mr. Williamson is also timber controller, without a deputy, and rubber controller, with one deputy; and I am surprised that the deputy fuel wood controllers have not been placed under his jurisdiction also. The deputy controller of rubber is Mr. J. A. Martin, vice-president of Dominion Rubber Company Limited; vicepresident and director, Equitable Life Insurance Company; director, Chartered Trust and Executor Company; business address, Dominion Tire Company, Kitchener.

Munitions and Supply Act

Now we come to coal, and the coal administrator or the former administrator, who is now the controller, is Mr. J. McG. Stewart, K.C., who is chairman of Maritime National Fish Company; vice-ipresident and director of Mersey Paper Company Limited; Nova Scotia Light and Power Company Limited; Western Nova Scotia Electric Company Limited; Annapolis Valley Power Company; Chester Light and Power Company Limited; Milton Hydro-Electric Company Limited; Edison Light and Power Company; Barrington Electric Company Limited and The Avon River Power Company Limited. That is eight power companies of which this gentleman is a director, in addition to fourteen other companies, as follows: Rovat Steamship Company; Royal Bank of Canada; Mersey Shipping Company Limited; Rover Shipping Company Limited; Liverpool Brooklyn Realty Company Limited; Sissaboo Clyde Pulp and Paper Company Limited; United Service Corporation Limited; Super Service Stations Limited; Provincial Oils, Limited; Maritime Steel and Foundries Limited; Maritime Paper Products Limited; Brandram-Henderson Limited1; Montreal Trust Company; Best Yeast Limited. As coal controller he has a deputy, Mr. F. G. Neata, and as deputy wood and fuel controllers, Mr. D. R. Cameron and Mr. G. C. Piche. I am surprised that they were not placed under the timber controller.
I come to the aircraft controller, Mr. R. P. Bell, who is also director general of the aircraft construction division. He has no deputy. He is president of Pickford and Black Limited; Cedar Lake Lumber Limited, and Queen Buildings, Limited.
Then I come to Mr. T. Arnold, who is machine tools controller, and who was one of the first controllers appointed. He is president of the Citadel Merchandising Company Limited-; chairman of Commercial Alcohols Limited, and Manitoba Steel Foundries; vice-president, Canadian Arena Limited and director of the Algoma Steel Corporation. He has no deputy. He is also president Of two crown companies, Machinery Service Limited, and, as I have said, the Citadel Merchandising Company, Limited, though we are not told what this company does.
Now I come to the power controller for Canada, Mr. H. J. Symington, K.C., who has no deputy. He is chairman of Price Brothers and Company Limited; president, Porto Rico Railway, Light and Power Company; vicepresident and director, Monterey Railway, Light and Power Company, and Royal Se-

curities Corporation, Limited; director, N. Bawlf Grain Company Limited; Calgary Power Company Limited; Federal Grain Limited; International Power Company Limited; Ottawa Valley Power Company; Porto Rico Power Company Limited; Canadian National Railways; Canadian Marconi Company; Trans-Canada Air Lines; chairman, bondholders' protective committee, Abitibi Power and Paper Company. He was with the Montreal Light, Heat and Power Company for some time, but he does not put that name in the book any more.


Clarence Decatur Howe: Let us be accurate, at least. Mr. Symington was never connected with the Montreal Light, Heat and Power Company.


Jean-François Pouliot: He never had anything to do with that company?


Clarence Decatur Howe: No.


Jean-François Pouliot: So much the better. All the others were correct, however, and Mr. Symington is a gentleman whom I know very well. I do not say this to blame these gentlemen at all; I mention facts, which I want to place on record, just as the Prime Minister did- once.
We come to the metals controller, Mr. George C. Bateman, who is secretary-treasurer of the Ontario Mining Association. He has as deputy Mr. F. M. Connell. Mr. Bateman is president of five companies- Central Patricia Gold Mines Limited; McVittie-Graha.m Mines Limited; Severn Mines Company Limited; Mount Zaballos Gold Mines Limited and Willow Creek Mines Limited. He is director of .six others: Noranda Mines Limited; Canadian Copper Refiners Limited; Berens River Mines Limited; International Mining Corporation; Hawthorne Mines Limited; Kerr-Addison Gold Mines Limited.
Then there is the oil controller, Mr. George C. Cottrelle. He is president of Maple Leaf Gardens Limited, and Sawyer-Massey Limited ; acting president, Western Canada Flour Mills Limited; director, the Canadian Bank of Commerce; Asbestos Corporation Limited; Hamilton Bridge Company Limited; St. Lawrence Corporation Limited and Brompton Pulp and Paper Company Limited; and trustee, National Sanatorium Association. He has as deputy Mr. G. H. G. Caulton.
I come to the chemicals controller, Mr. E. T. Sterne, who is managing director of G. F. Sterne and Sons Limited; president, Ruddy-Freeborn Limited; vice-president and director, National Silicates Limited, and Stemson Structural Specialties Limited; and director,

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Canadian Bitumuls Limited, and Granite and Waterproofing Limited. He has as deputy controller Mr. W. H. DeBlois.
Then Mr. J. Schofield is construction controller, and the deputy construction controller is Mr. G. K. Fisken. The controller of ship repairs and salvage is Mr. D. B. Carswell, and the deputy controller is Mr. W. Percival. The steel controller is Mr. F. B. Kilbourn, who is vice-president, assistant general manager and director of the Canada Cement Company Limited, director, Canadian Refractories Limited and Dryden Paper Company Limited. The associate controller is Mr. M. A. Hoey, and the deputy controllers are Mr. A. C. Anderson and Mr. J. S. Lonson.
Then there is a transit controller, and also a transport controller. Mr. G. S. Gray is transit controller. The deputy administrator is Mr. J. A. Archambault. Then Mr. T. C. Lockwood is transport controller, and the traffic representative is Mr. B. S. Liberty. I am wondering why transit and transport ought not to be joined under one controller.
We see here a great deal of duplication. I cannot understand how a man could be the controller of a branch of which he is director general. There may be a difference between an associate controller and a deputy controller. Perhaps a deputy cannot attend meetings of the wartime industries control board. I also find here that Mr. J. A. Berry is motor vehicles controller, and director-general of automotive and tank production branch. The deputy controller is E. R. Birchard.
I may have missed some, because there are so many. But I have pointed out to the Minister of Munitions and Supply how his chart should have been made, so as to be understood by common mortals. If there are controllers, they must control certain production. Therefore under each controller he, the minister, or they-meaning the people under him-should have put together those who are doing the work controlled by each particular controller. The controllers are all put together, to the right of the chart, probably to give them the best possible position. The others are put to the left.
But how can any member of the House of Commons understand what is being done by the Department of Munitions and Supply when we see the various names given to these so-called crown companies? Of course we guess, but we do not know. The names given do not describe at all the work being done. These are some of them:
Cutting Tools and Gauges Limited, Allied War Supplies Corporation, National Railway Munitions Limited, Wartime Shipping Limited,
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Research Enterprises Limited, Small Arms Limited, Machinery Service Limited, Victory Aircraft Limited, Trafalgar Shipbuilding Company Limited, Toronto Shipbuilding Company Limited, Federal Aircraft Limited, Polymer Corporation, Limited, Wartime Housing Limited. Defence Communications Limited, Aero Timber Products Limited, Citadel Merchandising Company Limited, Melbourne Merchandising Limited, Veneer Log Supply Limited, North West Purchasing Limited, War Supplies Limited, Park Steamship Company Limited," Wartime Metals Corporation, Plateau Company Limited, Fairmont Company Limited, Atlas Plant Extension Limited.
A few days ago the minister said he was tabling an order in council concerning a new company which has been formed. What knowledge has any hon. member of these corporations? Two years ago I complained about growing fascism. This is it-these corporations. In some places this is called corporation or fascism. It is the same thing, and we have it here. Those men are entrenched in crown companies. If they do not control themselves, they are friends of the controller. Therefore nothing is ever wrong. They, like the king, can do no wrong.
Do hon. members think this is reasonable? How can the minister check the doings of organizations like that? I defy any intelligent man to understand anything, except to find that it is shapeless. It is a joke. This is the department which handles the largest amount of money. I expect hon. members will take time to check up what I am saying, because I know very well the positions of these gentlemen. I am not blaming them for looking after their business, because a reasonable profit is legitimate. One cannot blame a man who works hard if he makes a legitimate profit in his own line of business. But I cannot conceive how any man working for the government in his own private line of business can forget completely his personal interests, forget completely the work of his whole lifetime, just to serve in a public-spirited fashion, and for the common good-and especially if he controls himself. The controller should be someone else.
The number of controllers should be 245. Each member of the House of Commons should be a controller; that is my understanding of the matter. How can we expect these controllers to control themselves when they hide all information from us? For a time we did have some information typed on sheets of paper. But the mayor of Ottawa told the minister that that information was useless- and I knew it was useless, because certain elements were lacking, especially that of quantum.
Munitions and Supply Act

When the present judge of the exchequer court was a member of the house and chairman of the committee supposed to investigate war expenditures, I asked him if he had been told by the Minister of Munitions and Supply not to put an eye on that department. He replied that he had not, and I told him not to interrupt me. No committee of the house has ever investigated the huge expenditures of the Department of Munitions and Supply. I am wondering why the public accounts committee does not drop its investigation of telephone conversations, except those made by one official to his family, and take up the whole organization of the Department of Munitions and Supply. Let the committee look into that department and give some sound advice to the minister.
Of course in these times, when incense by the ton is burned under the noses of the ministers, I am not welcomed when I speak as I do. But the Minister of Munitions and Supply is all wrong if he thinks I am prejudiced against him. On the contrary I am trying to help him, as I did on an earlier occasion when I complained about the chaotic state of his department.
When a member of the House of Commons or someone outside the house does not understand something he concludes he does not understand because the subject is profound and deep. That is why officials in the Department of Munitions and Supply are so highly praised by those who do not take the trouble to inquire into the framework of the department, and the way things are done. I am not casting any blame upon the individuals whose names I have mentioned. In their own lines they may be big business men, but outside their lines of business they have not had the experience of members of parliament. I do not know of one of these business men who would' be ready to run in an election and make the sacrifices that every one of us is making. Who is choosing these men? Were they appointed in acccrdance with an item in the estimates? No; they were the choice of an unseen hand, and that choice was approved by the Minister of Munitions and Supply. I admit that it was a great task for him to organize a department like that when he had not the human material available. But instead of dumping all branches on that chart he should have asked the coordinator of production to produce something more logical. If there is seldom logic in politics, logic on the other hand is badly needed in government.
I will go further and say that there should be a hierarchy in the Department of Munitions and Supply. The minister at the top IMr. Pouliot.]
should have in his hands the strings of all the branches, but each branch should be able to function normally without the help of the minister in all its undertakings. What I mean by that is that when the driver sitting in the cab of a locomotive turns the throttle he is not supposed to examine and inspect at every station the working of every wheel and every other bit of the machinery. That is inspected before he leaves and his engine is supposed to run smoothly. The only time he stops apart from his regular stops is when he finds or believes the machine is not working properly. But if it works well, it is not necessary for him to get out of his cab during the whole run. I am sure that I shall be blamed by some papers which receive a considerable amount of money for advertising, because I complain of the disorder that reigns in the Department of Munitions and Supply. I made the same complaint two years ago, and since then there has been no progress; it has been regress. The men there are good-natured, they do their best, but the minister cannot conceive of a plan that will work harmoniously in the production of munitions and supplies in this country. I regret it very deeply. I hope the minister wild take what I have said in the spirit in which I have said it. I have waited for two years to repeat to-day what I have said, and in saying it now I hope, sir, that if I have not opened the minister's eyes I have at least opened the eyes of some of my colleagues in this chamber.
Production is not the only question. There is also the question of distribution. What is being done with regard to distribution, we1 may ask, when we see the pile-ups of the kind I described the other day? A common' mistake in politics is to speak, only of produc-1 tion and not of distribution. A little while ago I spoke of sabotage in production. I will not say that there is sabotage in distribution beJ cause I have not proof of that, but I will sayi that the distribution of munitions and supplies in this dominion amounts to sabotage. Is it not possible to do something in regard1 to this problem of distribution? Is it not possible to cut the duplication of crown companies and branches? Is it not possible to have real control, that of parliament? I will tell you; sir, that unless that is done, disorder will not cease to grow in this country. I want order- peace, order and good government-war, order and good government-order everywhere. It is our main duty to see to it that order is established and maintained in the Department of Munitions and Supply as well as in any other department of government.

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Major James William Coldwell: I have listened with a good deal of attention to the hon. member for Temiscouata, and I find myself in agreement with a very great deal of what he says. While there had to be improvisation at thd beginning of the war, I believe that the organization of the department is something of a menace to the welfare of democracy in1 this country. It is too far away from the parliament of Canada.
There may have been some justification for bringing in outside help in the early days of' the war when those in the service were inexperienced and unable to cope with the mat-1 ters coming before them. But my observation recently has been this, that many of the controllers are simply fronts, if I may so, for some hard-working civil servants or group of civil servants who are actually doing the work. Very often the controller is merely the name1 behind which these civil servants work, although of course the controller has the final1 say and can exercise it.


George Russell Boucher: A sort of buffer?


Major James William Coldwell: I would not say buffer. I think the time has certainly come when the government, and particularly the minister, should give some consideration to the set-up in this department to see if we cannot dispense with those who, as the hon. member for Temiscouata says, have the .final say and may be unable in vital decisions to divorce altogether their personal interests from the interests of the public which they ought in the final analysis to serve. I am not making any charge of that description, but I remember one incident that impressed itself on my mind because it came under my personal observation. One of these controllers, and he was the controller of one of the important branches, was asked in committee a number of questions intimately connected with his work and he had to defer answering until the appropriate civil servant could furnish the answers to the committee. I remember how on that occasion one member said, "If I had been in charge of that particular work for the number of months he has, I would be ashamed to admit that I did not know more about it." Therefore I think there is a great deal of justification for the criticisms which have been made this afternoon by the hon. member for Temiscouata. I have felt for the last two or three years that there was a real danger in removing these matters from parliament and placing them in the hands of controllers who have so many contacts with big business, in that by and by a group of men, not responsible either directly or indirectly to the people, may usurp the
real powers of government. No matter how careful the minister may be in this regard, he is only human, and he cannot possibly keep in touch with everything which goes on around him or control the controllers within his department. While I do not wish to say a great deal about the matter this afternoon, I believe we should pay some heed to the speech which has just been made by the hon. member for Temiscouata. After three years of the war it is altogether to be expected that younger men, who have been trained to handle the affairs of the department and subdepartments and who are not corporation officials, could take over and do the job efficiently, without there being kept in positions of influence and power men who have wide associations with corporations and businesses which may have some interests in the future of the departments and the activities of the government in many lines of endeavour.
In discussing this bill, which has such Very wide implications, and which places in the hands of the minister powers which may be called dictatorial, powers which are necessary in this time of war, powers which must be delegated to the minister at this time, we ought to see to it that he is surrounded by people who are not enmeshed in all kinds of big business and whose interests may not always coincide with the best interests of the country or further the welfare of the people.
When the house reassembles and the war appropriation measure is introduced, we should go into some of these matters very carefully indeed.
I would also support the hon. member for Temiscouata in his suggestion that the war expenditures committee devote its attention during the coming session to the Department of Munitions and Supply.


Clarence Decatur Howe: They did that last session.


Major James William Coldwell: We have discussed the service departments, but we have not gone into that department and its contracts as thoroughly as we should. Possibly there is nothing wrong in the department; I believe that the minister himself has been anxious to do everything possible to prevent anything which may savour of wrongdoing. None the less, one individual, it seems to me, is unable to cope with the many matters which come before the controllers in the department of which he is the head. This year the main function of the war expenditures committee should be to deal with the contracts which have been made by the Department of Munitions and Supply.
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Bit by bit we hear of enterprises of which the House of Commons knew nothing. I wonder how many hon. members, for example, knew anything last year about the tremendous power development at Shipshaw or the enlargement of the Aluminum company's holdings in the dominion.


Clarence Decatur Howe: Why should they? The government did not contribute to that project in any way.


Major James William Coldwell: The government did not contribute to that; but what the government or a government has actually done is to alienate as far as we are able to alienate in perpetuity one of the greatest power resources on the north American continent, and probably the greatest in Canada.


Clarence Decatur Howe: That was done many years ago.	*


Major James William Coldwell: In war time, of course, we allowed the further development of that project and the entering into contracts which have implications for years to come. I will not discuss that this afternoon, but I still say I doubt very much whether more than a dozen members knew anything about the project. I might have known nothing about it had I not been a member of the war expenditures committee, and, incidentally, in discussing salvage, heard about the tremendous haste and what appeared to us a considerable amount of waste in connection with the project. The other afternoon we were discussing
oil.	And so on. The House of Commons does not know what is going on. We are entirely in the dark as to the great projects which have been allowed or undertaken or financed, sometimes by other governments, sometimes by our own government through the Department of Munitions and Supply.
When we are granting powers of the description contained in this bill, powers which are widespread and in some respects dictatorial, it is the duty of parliament to see to it that we go into these matters carefully and thoroughly.


Mr. JAQUES:: May I just point out that the hon. member for Rosetown-Biggar has given us a very good warning of what we may expect when all business and production are under the management and control of government.


Major James William Coldwell: Quite the opposite. What I am objecting to is, not the management of public industry by the government under the direction of the elected representatives of the people, to whom the managers should be responsible, but the irresponsible management of industry, irresponsible in the sense that it is

not responsible to the people of the country in any direct way. May I say to the hon. member, while I am not going, to enter into a discussion this afternoon, that if he ever reads anything other than the "Protocols of Zion," or writings of similar sort, he would know perfectly well that what we stand for is the democratic control of our economic life in such a manner that it would be operated in the interests of the people.
Section as amended agreed to.
Section 8 agreed to.
On section 9-Retroactive appeal.


Jean-François Pouliot: Has the minister the right to make adjustments when there is a loss on a contract? This would be the reverse of the procedure which was discussed under a previous section. Prices of certain materials such as steel and lumber have risen, and I should like to know if the minister could not, before the termination of a contract, increase the contract price in order to provide a fair and reasonable profit.


Clarence Decatur Howe: The Department of Munitions and Supply has no power to pay on any contract more than the face value of the contract. It is taking the power to reduce the payment, but it has nq power to pay more than the face value of the contract.


[Stage Direction]
Section agreed to.
On section 10-Offences.
Joseph William Noseworthy: This section deals with penalties, and I should like to know if any convictions or penalties were imposed under the old act.


Clarence Decatur Howe: So far as I know, there were no penalties imposed under the act, but court actions were taken and penalties were imposed under the criminal code.


[Stage Direction]
Section agreed to.
On section 11-Inquiries.
Grote Stirling: This appears to be the last section in the bill. On April 9 the minister explained that the statutory power which enabled the department to remain in existence had lapsed and that he was carrying on under order in council. I would have thought that this amending bill would refer to that fact and confirm the department in its existence. At the present time the department would seem to be moribund, and there is nothing in this amending bill that put that matter right.

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Clarence Decatur Howe: The Department of Justice advised that the government has power under the War Measures Act to extend the termination date of the act. I am told that it is not necessary to make this amendment retroactive to the termination date. In fact, certain power was given in the original act to the government by the order in council to extend the functioning of the department. The Department of Justice believes that the matter is adequately taken care of.


Grote Stirling: The act of 1940 gave the department a life of three years which ended on April 9. Why does this bill not give it a further definite life?


Clarence Decatur Howe: As I explained to the house when speaking on the second reading, the department has taken on large obligations which in my opinion will take some years to liquidate. For example, it represents the crown in the ownership of property to the value of well over 8800,000,000. It owns manufacturing establishments which will have to be operated under the management of the crown or disposed of to private industry. It owns about 8100,000,000 worth of machinery w'hich is the property of the crown and which tnust be liquidated in an orderly way. When speaking before, I suggested the thought that the department would carry on for a period, either as an active operating department or as a liquidating department, and then be absorbed into one of the permanent departments, possibly the Department of Public Works.


Gordon Graydon: This section evidently follows to some extent the principle laid down in P.C. 4797 by which the minister was empowered to appoint investigators substantially on the same terms as proposed in this section. The powers now being given to the minister are extremely wide. Investigators are to be empowered to make certain inquiries in connection with the work of the Department of Munitions and Supply and are being clothed with extraordinary powers. I can realize, and so will the committee, that in certain instances the power given to those who are making inquiries and investigation into business affairs such as this department handles should perhaps be quite wide, but I think we have a duty to point out the possibility of such general powers in the hands of investigators being used to the public disadvantage. I do not wish to be unduly critical of the phraseology of
this particular section, but I would refer hon. members to subsection 5, dealing with offences, which reads:
Every person is guilty of an offence under this
act, who
(a)	being summoned before an investigator, fails without lawful authority or excuse to attend before the investigator at the time and place set out in the summons;
(b)	being required to produce any document or thing before the investigator, fails without lawful authority or excuse to produce the same as required;
(c)	refuses to give evidence on oath or on solemn affirmation as required by an investigator; or
(d)	refuses, when giving evidence before an investigator under this section, to answer any question which the investigator deems requisite to the full investigation of the matter into which the investigator has been appointed to examine.
Then subsection 6 reads:
No investigator shall be responsible at law for anything done by him in good faith in the performance of his duties under this section and no action shall be taken against an investigator in respect of the performance or nonperformance of his duties under this section.
In case of delegation of authority such as this from the minister to an investigator where the matters to be investigated have to do with a department of such widespread ramifications as the Department of Munitions and Supply, it can readily be seen that from the point of view of the ministry of finance and the department, wide power such as this would prima facie seem to them to be a good and proper thing. But as members of parliament scrutinizing the position which the executive take, it is our duty to call attention to the possibilities that might arise where an investigator has such very wide powers. Before I continue my remarks I should like to ask the minister this. By subsection 2, "investigator" means a person or persons appointed by the minister under this section to conduct an inquiry. Who are these investigators that the department utilizes for this purpose? And is any appeal open to anyone who is investigated who may feel that he has a grievance with respect to the conduct of the investigator and the manner in which the investigation is conducted? I should like to have some information from the minister as to the type of men who are to conduct these investigations and what provision there is for the rights of the subject being properly guarded.


Clarence Decatur Howe: The investigator is usually either a chartered accountant or a lawyer, depending upon the nature of the problem. In the matter of the Montreal Engine and Trading Company the investigator was a lawyer. The investigator merely determines
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the facts and presents them to the department for action by others. If the investigation indicates that a criminal prosecution is warranted, the facts are turned over to the Department of Justice, and that department proceeds with the criminal investigation. If the investigation shows that improper methods are being used, the results of the investigation are turned over to other officers of the department who are responsible for the carrying out of the contract in question. If action is taken as a result of the investigation, it is taken in the courts, and in any event any action taken by the department is subject to appeal to the Exchequer Court of Canada and from there to the Supreme Court of Canada if necessary. No action taken by the department is final, in that an appeal is always possible.


Gordon Graydon: How many of these
investigators are there in the department at t'he present time?


Clarence Decatur Howe: I think we have no officer of our department who would fall into the category of an investigator. There are cost accountants; they are treasury officers associated with the department, but their work is not that of investigators. And we have routine auditors who determine costs in the ordinary routine. An investigator is an officer appointed usually from outside the department to look into an unusual situation which leads us to believe that there may be warrant for criminal action, or a leakage which should be stopped It is a very unusual procedure; indeed, I suppose we have not appointed investigators in more than twelve or fourteen cases in the entire experience of the department.


Gordon Graydon: I was just about to ask that. In the twelve or fourteen investigations, how many led to criminal prosecutions and how many were dropped after the investigations had been held?


Clarence Decatur Howe: My official tells me that I rather exaggerated the number. He says that there are not more than eight all told. Three have resulted in court action, and five showed that no criminal action was warranted, but that adjustments were made by mutual agreement.


Gordon Graydon: As to the three where criminal prosecutions were launched, are they all disposed of now by the courts, or are there any still pending?


Clarence Decatur Howe: One has been disposed of, and two are before the courts.


Joseph William Noseworthy: As to the extent to which increases in remuneration of directors and officers of companies are investigated and the extent to which that is permitted to enter into cost of production, I have before me a list of the remuneration paid' to some twenty officials of one company, ranging from 820,000 to $215,000. It would seem to indicate that a number of those were increased in 1942 over 1941 by as much as $4,000 or $5,000 each. Does that question enter much into these investigations?


Clarence Decatur Howe: There is a department of government that has to do with salary increases. As my hon. friend knows, there is a salary and wage-freezing order in this country. I think the salary order is enforced as well as the wage-freezing order; the Minister of Labour says "better". Certain rules of accounting are followed by our treasury officers having to do with salaries, but the main, responsibility for fixing and regulating salaries is in the Department of National Revenue.


Joseph William Noseworthy: Where these salaries or remunerations are increased, that enters as a factor into the cost of .production?
AJr. HOWE: Where it is increased by authority of the proper officer of the national revenue department, it does; otherwise, not.


Gordon Graydon: Section 11 covers more than I anticipated from an offhand reading af the bill. I notice it takes in not only original section 22, but also section 23. Section 23 contains paragraph (b), and if the minister and those in the committee read that carefully, they may find some difficulty in understanding the actual provisions of that section. Would the minister indicate in a few words the object of the section and what circumstances caused the department to ask for this legislation?


Clarence Decatur Howe: The purpose of this section
is to ensure that property purchased and1 paid for by the crown, and owned by the crown, will not have the title of the crown impaired by mortgages or other encumbrances that may be put on by private transactions. I can give a case in point. On the property of Algoma Steel Corporation the government has at its own expense installed a Bessemer converter. The government owns the Bessemer converter. Through necessity, the converter' equipment is rather mixed up with other equipment of the plant. A steel plant operates as a unit; equipment that serves a blast furnace may also serve a converter; conveyer equipment which serves an old part of the1
IMr. Howe.]

Munitions and Supply Act
plant may also serve a new part. In that type of operation it is not possible wholly to segregate the property owned by the government from the property owned privately. It it well understood, of course, by the private company and by the government, what property is owned by the one and what property by the other. When we built this government unit on property of the Algoma Steel company, that property was subject to a mortgage, and without protection as now proposed, our Bessemer converter might be made subject to the same mortgage. The purpose of this section is to make sure that if the investment of the crown is made in certain specific property, no mortgage or other encumbrance will lie against the crown's property.


Gordon Graydon: Was this section the subject of a previous order in council, or is this a new section just being brought into the act?


Clarence Decatur Howe: It is a new section. I think
this is the only section of the act which had not been previously covered by order in council. The officers of my department feel that it is necessary, and after studying the situation the officers of the Department of Justice have taken the same view.


Mr. MacINNIS:: How was the protection
provided in this section given previously?


Clarence Decatur Howe: It is questionable whether the title of the crown to property it had paid for could be attacked. Possibly the crown would not have suffered without any such provision, but this makes it quite clear that the property of the crown cannot be attached by a lien put on by a private company.


[Stage Direction]
Section agreed to.
Title agreed to.
Bill reported.
Thomas Vien: When shall said bill be
read a third time?


Gordon Graydon: Since there have been
amendments to the bill, perhaps we might have third reading at the next sitting of the house.	.


Clarence Decatur Howe: It would be a convenience
if the senate could have the bill.


Angus MacInnis: Unless the bill is to be
reprinted as amended, there is not much use in waiting for third reading. I should like to see the bill reprinted, but if that is not to be done, I do not see the benefit in waiting.


Thomas Vien: Third reading at the
next sitting of the house.


Gordon Graydon: If the minister indicates that the other place is waiting for this legislation, perhaps my remarks on third reading can be made now rather than later on. I just wanted to make it clear that I had something to say in connection with the third reading of the bill.


Clarence Decatur Howe: I move that the bill be read the third time.


Gordon Graydon: My remarks will be very brief, and I would have made them in committee if there had been an appropriate section in the bill itself. The Department of Munitions and Supply is, of course, the great operating business department of the war-time administration. One only needs to look at the chart, which gives a picture of the departmental activities, to realize the extent to which the government has entered through this department, into the general business connected with our war-time economy. I am not in a position at the moment, nor have I the desire, to offer any suggestions or criticisms with respect to the picture conveyed by the chart to those who desire to find out the actual set-up of the department, but in these days, when so many sections of our nation are involved in a master plan, if you like-though many of us feel that a number of factors in that master plan are still lacking-it is my opinion that in the great Department of Munitions and Supply, if one is to form an opinion from the chart which was tabled by the minister, far too little attention is paid to the position of labour in Canada. Most of us, I think, believe that in a war-time period such as this we must regard industry, agriculture, labour and all the other important sections of our national economy as part and parcel of our war-time endeavour; as a partnership, if you like. Having in mind the necessity of bringing in labour as a major partner in the war effort, it seems to me that the Department of Munitions and Supply ought to have something more in its general structure than just one official who appears as liaison officer with the Department of Labour. Labour and industry must go hand-in-hand, as two great partners in this war effort, and there must be closer relationship between industry, as represented in many instances by the Department of Munitions and Supply, and labour.
In the days which lie ahead and in the development of the Department of Munitions and Supply steps should be taken to bring into that great structure an ever closer relationship between it and Canadian labour. Speaking on third reading, I have no desire to go into details with respect to the working out
Munitions and Supply Act

of that plan. But before the final passage of the bill I did wish to raise my voice in an effort to secure a greater part and a proper partnership for labour in the operations of the Department of Munitions and Supply, and all it stands for in governmental administration.
Whatever criticisms may be made of labour from time to time, it is my view that very often a true picture is not presented. There is no reason why we should single out any part of our civilian community for either Credit or criticism. On the contrary, I should like to see every section, whether industry, agriculture or labour, taking its place as a partner in a great movement for total war in Canada. The minister should see that labour is properly represented and not lost sight of in his department. This is not the first time I have raised my voice in the house in favour of greater representation for labour and agriculture upon the various governmental administrative boards. The Prime Minister (Mr. Mackenzie King) and others have been prone to consider my recommendation as a new theory of government. I say to them there is nothing new in that theory; it is simply a common-sense approach to a problem.
I believe that some of the greatest problems arising from our war effort can be traced to the fact that labour, agriculture and other sections of the community are not properly represented on our boards andi controlling organizations. Some of our real troubles have developed because, through lack of representation, these groups have not the confidence they should have in the boards which have been set up. In the Department of Munitions and Supply, as in other branches of government, as a nation we must not lose more time in obeying not only the letter but the spirit of the only workable arrangement through which the country can wage total war, namely, that of giving all sections proper representation in the structure of governmental administration.
As I said at the outset, I do not wish to speak at length on third reading; -but it seemed to me that at this time, with all the earnestness and seriousness I * can command I should ask the minister, before it is too late, to include in the organization of his department the partnership of labour, agriculture and those other branches of endeavour which have not been recognized to a point where their confidence is assured.


Angus MacInnis: I shall not prolong the debate on third reading, except to say that I concur in the statements made by the leader of the opposition (Mr. Graydon). I remember in the session of either 1940 or 1941-very likely in

both-drawing attention to the fact that when the war supply board was first set up it was composed of sixty-six members, only one of whom represented labour. All must recognize the fact that in the production of munitions and supply labour is the most important factor. Undoubtedly the fact that labour has not received what it considers to be its proper representation on these boards has been a major factor in the difficulties between industry and labour.
For a short time last Friday I sat in at the inquiry now being conducted by the national war labour board. I believe the most telling statement made that morning was made by a staid, sober representative of a well-established trade union in this country. He pointed out that, despite the government's order in council P.C. 2685, organized labour had as much difficulty in government-owned and controlled industries in securing recognition as it had with private employers.
May I add my voice to what has been said by the leader of the opposition. He has repeated statements I have made since the beginning of the war to the effect that we cannot have a really democratic, all-out war effort until we bring all classes together in the organization of that effort.


[Stage Direction]
Motion agreed to, and -bill read the third time and passed.

[Stage Direction]
Hon. J. L. RALSTON (for the Minister of Finance) moved) for leave to introduce Bill No. 69, to amend) the Excess Profits Tax Act, 1940.
Gordon Graydon: Since we are travelling from hand to mouth, as it were, first of all I congratulate the government upon having this bill printed before the first reading.
Motion agreed to and bill read the first time.	,
At six o'clock the house took recess.
After Recess
The house resumed at eight o'clock.
Hon. J. L. ILSLEY (Minister of Finance) moved the second reading of Bill No. 69, to amend the Excess Profits Tax Act, 1940.


[Stage Direction]
Motion agreed to, bill read the second time, and the house went into committee thereon, Mr. Bradette in the chair.
Sections 1 and 2 agreed to.

Excess Profits Tax
On section 3-Revenue losses.
Gordon Graydon: We have not had this bill in our hands very long. There are some far-reaching provisions in it, and I think the Chairman might read the provisions.
The explanation with regard to this section is:
This amendment gives taxpayers parity of treatment under this act and the Income War Tax Act.
Does that refer to the previous provisions of the Income War Tax Act, or to the provisions of the act which is not at present before the house?


James Lorimer Ilsley: Partly to each. I will explain what this section does. Last year we provided that with respect to businesses, a loss for the year 1942 could be carried forward and set against profits of a subsequent year, and that is one of the provisions in the Income War Tax Act to which reference is made. But this year we are providing also that farmers' losses can be carried forward for two years. Business losses can be carried forward for one year. There is to be an amendment to the Income War Tax Act to give that additional concession to farmers. These provisions, one enacted last year and one to be enacted this year, will be set out in full in the Income War Tax Act, and this is simply to incorporate that into the Excess Profits Tax Act by reference. Paragraph (d) refers to the businesses, and paragraph (r) refers to the farmers. This simply makes the same rule which is applicable to the calculation of income tax applicable to the calculation of excess profits tax.


Gordon Graydon: Does this section apply the excess profits tax principle to agriculture?


James Lorimer Ilsley: It does not apply it at all. It always has applied if agriculture could have excess profits. That matter was up on the resolutions, and perhaps the hon. gentleman will remember that I said it might be that some large farmers-ranchers, for example- would pay some excess profits tax; but the great majority of farmers have earnings of less than $5,000 a year, and if they have earnings of less than $5,000 a year they are not subject to the Excess Profits Tax Act. Moreover, they are deemed to have standard profits of $5,000; the profits have to be higher than that before there would be any excess profits tax payable. Generally speaking, the Excess Profits Tax Act is of very little moment to agriculture. But it always has applied if agriculture had the excess profits. This does not make it apply.


Gordon Graydon: The only reason why I raised the point was that agriculture and excess profits hardly seem to be synonymous terms.


James Lorimer Ilsley: No; that is true.


Angus MacInnis: I had a communication from a commercial organization in Vancouver drawing attention to the fact that some twenty-five professions were exempted under the Excess Profits Tax Act. They stated that they had written to the Minister of Finance drawing this matter to his attention. Is there any change in the act this year?


James Lorimer Ilsley: No; there is no change in
the act. There has been considerable pressure for changes in the act ever since it was first passed. But the provision of the act which draws a line between business on the one hand and salaried and professional persons on the other hand was drawn very carefully, after lengthy examination of the English act and their experience under it and their rules. We have always adhered to that line, although it has been a matter of grievance to certain businesses. Perhaps the most notable instance of a grievance is that of fire insurance agents, who are regarded as being businesses, while life insurance agents are regarded as not, as working on commission. That is where the line runs. Perhaps not all fire insurance agents would be on one side nor all life insurance agents on the other, but most life insurance agents are not subject to the act and most fire insurance agents are. I just instance that as a grievance. With most people there would not be very much difficulty. It is not an excess income tax; it is an excess profits tax, and a tax based1 upon the excess of incomes has many things against it. We never adopted that principle. On the other hand, excess business profits are taxed. The question is how to draw the line between business on the one hand, and non-business occupations on the other.


Angus MacInnis: I.think I understand what the minister is saying. If there is a dental company, it would be subject to excess profits tax if it made the necessary profits in the period, but if a dentist were doing business on his own he would be taxed just for income tax.


James Lorimer Ilsley: I should not like to give a ruling. Two or three years ago the income tax division issued a brochure on the Excess Profits Tax Act which contained two lists of occupations, one showing those subject to and the other showing those not subject to the
Excess Profits Tax

act. I think the suggestion of the hon. gentleman is correct. I have the list here, but it would take too long to read it. This publication was issued by the income, tax division in 1941. Under the professions within the exemption, which would be non-taxable, I find dentists, and in the column opposite, of taxable businesses, I find' druggists and drug companies. I do not find anything about dental companies, but perhaps there is no such thing. It may be that they would be principally manufacturers.


[Stage Direction]
Section agreed to.
On section 4-instalment payment of tax.
James Lorimer Ilsley: I am sorry to have to start this business of offering amendments again, but I should like to move:
That clause 4 of the Excess Profits Tax bill be amended by deleting lines 46 and 47 thereof and substituting therefor:
"such balance on or before the last day of March and one-half of such balance on or before the last day of June."


[Stage Direction]
Amendment agreed to.
Section as amended agreed to.
Section 5 agreed to.
On section 6-Reference to treasury board.
Gordon Graydon: This is an extremely important section, and when the similar resolution in the income tax legislation was before the committee it occupied some time. I think it might be advisable if the Chairman read this section in full.


Joseph-Arthur Bradette: Section 6 reads:
G. Section fifteen of the said act is repealed and the following substituted therefor:
"15. (1) Notwithstanding any of the provisions of this act, where the treasury board is of the opinion that the main purpose for which any transaction or transactions was or were effected (whether before or after the passing of this act) was the avoidance or reduction of liability to tax under this act, it may, if it thinks fit, direct that such adjustment shall be made as respects liability to tax under this act as it considers appropriate, so as to counteract the avoidance or reduction of liability to tax under this act, which would otherwise be effected by such transaction or transactions, and tax shall be assessed and levied accordingly and shall be payable as in this act provided.
(2)	Notwithstanding anything in this act contained, if upon examination of any transaction or transactions made directly or through the medium of third parties or by the creation of new or intermediary companies, it appears to the treasury board that any payment or benefit in cash or otherwise, received by any person subsequent to the year nineteen hundred and thirty-nine as a result of such transaction or transactions has been received directly or indirectly from a company having undistributed income on hand, then the treasury board may
[Mr. Ilsley.l
find that the main purpose of such transaction or transactions was to reduce or avoid taxation, and it shall thereupon be deemed for the purposes of this act that such person, whether he received any such payment or benefit in the form of capital or otherwise, has received income subject to tax in such year or years since 1939 and in such amount or amounts as treasury board may determine, and tax shall be assessed and levied upon such person and shall be payable as in this act provided.
Any such finding by treasury board may be made notwithstanding that such transaction or transactions may have been entered into either within or without Canada or prior or subsequent to the coming into force of this section.
(3)	Notwithstanding anything in this act contained, if substantially all of the shares of a company having undistributed income on hand have been purchased since the coming into force of this act, by any other company or companies, treasury board may find that the main purpose of the sale by the vendor was to reduce or avoid the tax which would have been paid by the shareholders of such company having undistributed income on hand on the distribution to them of the said undistributed income, and in such case, notwithstanding section four (n) of the Income AVar Tax Act, the dividends paid by the company having undistributed income on hand and received or deemed to be received by any such other company or companies shall upon being so received or deemed to be received be taxed against such company or companies and the tax shall be assessed, levied and paid as in this act provided.
(4)	In any appeal from an assessment made pursuant to any finding, direction or determination of the treasury board under this section, the Exchequer Court of Canada shall have jurisdiction to determine whether the main purpose of the transaction or transactions or sale was the avoidance or reduction of liability to tax or whether any finding, direction, determination or adjustment ought to have been made or given, or was appropriate.


Gordon Graydon: Is this section on all fours with the section which is to be incorporated in the Income War Tax Act?


James Lorimer Ilsley: Yes.


Gordon Graydon: I should like to repeat one observation I made when the Income War Tax Act resolution was before the committee of the whole. I suggested that in order to regularize the section, to make it perhaps more workable and to avoid what might be a dangerous situation, and in view of the varied opinions which have been heard from various parts of the committee, the Minister of Justice and the Department of Justice should be consulted by the minister and his department with respect to this particular section. I am not sure that I got much encouragement from the Minister of Justice, but in fairness I should say I did not receive much discouragement. But I was hoping that over the week-end the two ministers would have got together and that the Minister of Justice would have had an

Excess Profits Tax
opportunity of going over these two sections.
I should like to know whether the minister has consulted the Minister of Justice and his department with respect to the section as it is now before us.


James Lorimer Ilsley: I have discussed the matter at some length with the Minister of Justice.
I do not know that I can say anything in particular about his attitude, but I think I am safe in saying it is favourable to the enactment of this section as it is now.


Gordon Graydon: The minister seemed a little hesitant about that.


James Lorimer Ilsley: I am just wondering what my hon. friend is looking for, whether a legal opinion or an opinion on policy. He seemed to be inquiring the other night whether the Department of Justice thought it was a good thing to pass this section.


Mr. MARTIN:: With regard to the delegation of the taxing power.


James Lorimer Ilsley: I point out that subsection 1 is not in the terms of the subsection 1 that I placed on Hansard when this was under discussion in the resolutions. I have gone to the British Finance Act of 1941 to get the language for this subsection. Let me read what section 35 of the Finance Act, 1941, says:
Where the commissioners are of opinion that the'main purpose for which any transaction or transactions was or were effected (whether before or after the passing of this act) was the avoidance or reduction of liability to excess profits tax, they may, if they think fit, direct that such adjustments shall be made as respects liability to excess profits tax as they consider appropriate so as to counteract the avoidance or reduction of liability to excess profits tax which would otherwise be effected by the transaction or transactions.
The differences between that section and this are mainly these: We felt that we could not set up an outside body for dealing with these cases, that the discretionary powers are very great and that it would necessarily be a body which would to a large extent create its own jurisprudence, make its own law, and I am sure that the Canadian people would feel that we should not delegate powers under a section like that to that type of body. But the commissioners are, as decribed in the British act, a tax court, I presume, or something like that, set up under the British legislation.


Mr. JACKMAN:: I think they are ordinary citizens.


James Lorimer Ilsley: Here we have always provided that the Minister of National Revenue makes the necessary decisions in respect of taxation, and there would be an appeal from
him to the exchequer court. For one of the ministers to assume this responsibility is perhaps undesirable, because he is vitally interested in the collection of taxes. Therefore we thought it would provide an element of safety if we left the decision to the treasury board, which is a committee of the cabinet, and provided for an appeal just the same.


Paul Joseph James Martin: Are the parties allowed to be represented by counsel before the treasury board?


James Lorimer Ilsley: Yes. There is no provision for that in the legislation, but in the one case that was heard under the section which is the predecessor of this one notice was given to the parties and they were given opportunity to appear and did appear. Their counsel did not appear but he had the right to appear and was expected to appear. For some reason, however, he thought it was better to let the parties come themselves. He did come to see me. When I was Minister of National Revenue; my colleague the Minister of National Defence was then Minister of Finance, and he was scrupulous in his provision for notice because he realized that it was only fair that notice should be given. I could not imagine the treasury board acting under any of these sections without adequate notice.
With regard to subsections 2 and 3, they are substantially the same as the ones I read before the committee. The appeal section is expanded with the view of making it clear that the Exchequer Court of Canada can correct the treasury board. This is based also on the British act. The British act reads:
3. Any person aggrieved by a direction of the commissioners under this section may appeal to the special commissioners whether on the ground that the main purpose of the transaction or transactions was not the avoidance or reduction of liability to tax or on the ground that no direction ought to have been given or that the adjustments directed to be made are inappropriate.
Our language is an adaptation of that. An appeal is already provided from assessment, and all these determinations of the treasury board lead to assessments, so that our provision reads:
(4) In any appeal from an assessment made pursuant to any finding, direction or determination of the treasury hoard under this section, the Exchequer Court of Canada shall have jurisdiction to determine whether the main purpose of the transaction or transactions or sale was the avoidance or reduction of liability to tax or whether any finding, direction, determination or adjustment ought to have been made or given, or was appropriate.
We seem to have gone as far as we can go.
Excess Profits Tax


Gordon Graydon: When these matters
come before the exchequer court on appeal, does this section give the exchequer court power to review every part of the case which was determined by the treasury board? In other words, does the exchequer court operate to grant a blanket appeal to those who may feel aggrieved from the treasury board's ruling or assessment or levy? I want a clear and plain statement from the minister whether or not, if parties feel aggrieved with respect to a decision of the treasury board on. any of the. grounds which the treasury board dealt with, the exchequer court actually has the power under this section to revise., review and change in any way the whole decision of the. treasury board?


James Lorimer Ilsley: The powers of the. exchequer court on appeals are found in sections 58 to 69 inclusive of the Income War Tax Act. Section 66 reads:
Subject to the provisions of this act, the exchequer court shall have exclusive jurisdiction to hear and determine all questions that may arise in connection with any assessment made under this act and in delivering judgment may make any order as to payment of any tax, interest or penalty or as to costs as to the said court may seem right and proper.
The proceedings in, the exchequer court on appeal may be held in camera upon request being made to the court by any party to the proceedings, and pleadings, or at least documents equivalent to pleadings, are provided for in section 63. I must say that I never participated in any appeals from assessments before the exchequer court, but they must have full power to take evidence and go into the matter. They hear a great many appeals from time to time, and I am quite sure they must have full power to go fully into all matters. They have the jurisdiction and their procedure is well settled in practice.


Grote Stirling: When discussing the resolutions of the Income War Tax Act the other evening, the minister described in some detail the difficulty in which he found himself with regard to this matter. I do not understand why the government did not adopt the procedure of having the treasury board examine the matter and, if it came to the conclusion that there had been tax avoidance or evasion, the matter could be placed before the exchequer court for a decision. Why should, the treasury board be clothed with these very wide powers when the courts of the land are available for the purpose? If the exchequer court should find that avoidance or evasion has taken place,
TMr. Ilsley.]
it would seem that the rates of taxation which had been avoided by the action of the corporation could then be applied.


James Lorimer Ilsley: This just transfers the matter to the exchequer court if there is an appeal.


Grote Stirling: Only on appeal?


James Lorimer Ilsley: Yes, by a method that is all laid down. The procedure on appeal is laid down in the Income War Tax Act; the basis of it is the assessment, and the treasury board is given the power here to direct an assessment. Then the parties may proceed to the exchequer court, if they think that assessment is unjust under all the circumstances. I do not know that there would be any advantage in a reference to the exchequer court. As a matter of fact there would be very few cases under this section. The fact that the section is there and that there may be cases is the main thing, so that the taxpayers may take note of the section. I suppose the other method might have been followed, though it would confer on the exchequer court a new jurisdiction which it does not now have. The exchequer court has always been regarded as the appeal court in regard to an assessment, and the procedure taken here was that the treasury board should come to the conclusion that the main purpose of the transaction had been the reduction or avoidance of liability to taxation; that it should try to ascertain how much tax had been avoided or how much money had been obtained in forms other than income which really should be regarded as income. The treasury board would make these findings, and then if a party were aggrieved he could take the matter to the exchequer court.
I wish to direct the attention of hon. members to the fact that when the British went as far as they did, it indicates that they have a problem there. In my judgment, subsection 1 goes further than subsections 2 and 3. It is a more drastic subsection, and is taken almost word for word from the British act. Many people consider that in the British statutes they describe specifically what they want to legislate against, and then let a person avoid that legislation if he can. To those people it must come as a surprise to find that they gave such sweeping powers to anyone as are found in this provision, because all their commissioners have to find is that the main purpose for which the transaction or transactions was or were effected was the avoidance or reduction of liability to tax. When they find that, they may direct such adjustment

Excess Profits Tax
as they consider appropriate in order to counteract the reduction or avoidance of liability to tax which would otherwise be effected by such transaction or transactions.


Harry Rutherford Jackman: Do the British have a similar section in regard to ordinary income tax or just in regard to the excess profits tax, which is quite a bit different?


James Lorimer Ilsley: I do not know whether or not they have it in regard to ordinary income tax, but I do not see any difference in principle. They have all kinds of provisions. They enact these sections; they find that they do not operate, and they try something new. I do not know just what acts they are in, but this one is taken from the excess profits tax act.


Grote Stirling: It seems to me the suggestion I made would have this advantage, that it would be the courts of the land, instead of the treasury board, that would find guilt. I may not be correct in saying it would be the exchequer court, but it seems to me there would be great advantages in having a court as the instrument by means of which guilt is brought home to a person.


James Lorimer Ilsley: There may be nothing illegal in the transaction that is impugned, so that it is hardly correct to say that the treasury board will find any guilt. All they find is that persons may have legally entered into transactions whose main purpose was the avoidance of tax. Then they say, "That is all right; it is not an illegal transaction. The property has passed; new rights have been created, and so on, but your main purpose was the avoidance of tax, and you cannot do that to us. You have to pay us some tax there." It is not exactly a determination of guilt; it is a highly discretionary determination of the amount of tax that was avoided or the amount of income that was received in some other form, thereby avoiding taxation. Of course, if we left it to the exchequer court, what I am about to say would not apply; but if we left it to a board, I am sure all this, criticism in regard to bureaucrats and bureaucracy, the delegation of power to irresponsible bodies, and the setting up of cumbersome and expensive machinery, would break right out. If we leave it to the exchequer court in the first instance, that court has not any body of law to guide it. Of course it will have to form a body of law if there are appeals; I admit that. But I would hope that probably there would not be any appeals. I should hope that probably there would not be any cases under this.


George Russell Boucher: If there is not a liability avoided, how in the world could the exchequer court decide that there was a responsibility
to pay. The minister said that in cases where the treasury board would find that taxation had been avoided by legal means, and by circumventing the taxing intentions of the act-not against any known law-treasury board must make substantive law to find a basis upon which the tax could1 be collected. That is, I take it, if we were to refer a matter to the exchequer court, that court would have to go by existing law. They could not make law, ab initio, as treasury board really has done. That is the crux of the whole situation, because in effect the minister is saying that although no law says you shall pay it, just because you have intended to form some sort of system whereby you can circumvent the law, and yet be within it, you must pay. Is that not the situation?


Mr. GRAHAM:: In my opinion subsection I is an improvement over the section in the resolutions of the Income War Tax Act. But I think the point made by the hon. member for Carleton is an important one. It is one which struck me, as I read this particular section. No matter what treasury board may find, when a case comes to the exchequer court that court will have to find within the terms of the provisions of the Excess Profits Tax Act the reasons why it should come to the conclusion that the taxpayer had avoided liability under the provisions of the act.


George Russell Boucher: By legal means?


Roy Theodore Graham: Yes. So that it seems to me this subsection is unnecessary. I was going to say that the more I think about it, and the more I consider the principle embodied in the subsection, it appears to me that it is an unwise thing for a committee of government to inject itself into the actual hurley-burley of the settlement of disputes, with the possibility of holding public hearings. It is quite true that past history has shown that there have not been many cases under the present section of the Income War Tax Act. But who can tell, with the immense broadening of taxation, that there might not be many cases arising either under the provisions of this measure, or under the Income War Tax Act.. Then we would have the example of a committee of government taking evidence, listening to complaints, weighing this and that, and then giving a decision which, if taken to the exchequer court, will be decided on the provisions of the act, other than that particular section. I suggest to the minister that if he still believes the subsection is necessary, it- might be wise to make the commissioner of income tax the person who, in the first instance, makes the finding
Excess Profits Tax

that there is an avoidance, and that it would become operative as against the taxpayer only upon being approved by treasury board. It seems to me that would impose the duty on an official of the crown who, frankly, has to do the research work in connection with investigating and considering the details of evidence. He has to do that anyway, it seems to me, and it would keep treasury board and the government as an institution out of the arena of disputes between citizens.
I do not like in any act a provision, such as that in the Income War Tax Act, whereby there is an appeal from the income tax commissioner to the minister, who is charged with the duty of reviewing the findings of the income tax commissioner. We all know that the minister cannot possibly discharge that duty. I do not believe any act passed by parliament should hold out to any citizen the assumption that the minister in his capacity as minister can go to the trouble or take the time to consider the merits of a certain taxpayer's case when, in fact, we know in actual practice that is not done.
I hesitate to see that principle extended because, if there are many cases, I do not believe treasury board could honestly and fairly discharge the duties imposed upon it by the section. Like the hon. member for Carleton, I suggest to the minister that the section will add nothing to the efficacy of the Excess Profits Tax Act; and that if, in his opinion, it does, and he considers it necessary, it would be wise to put the duty on the income tax commissioner, and have his decision operative with respect to this type of case, only with the approval of treasury board.


George Russell Boucher: It seems to me that this provision in the act in effect sets up a judicial forum without actually setting up a law to be administered by that forum. In other words, it says, "You are setting up a body either to enlarge the existing law, or to modify it, and not to interpret it." But you are not giving them the basic principle of law on which they can adjudicate upon it. For that reason I go a long way with the hon. member for Swift Current; but the suggestion that the income tax commissioner should be the first person to adjudicate upon it and also originate the law still infringes that one point, even though appealable to the minister or to the exchequer court. In other words, it is a basic principle that the courts should interpret the law, not make it. They should make the law only in so far as they are interpreting existing law.


Roy Theodore Graham: Must the commissioner of income tax not do this with all income tax returns?


George Russell Boucher: No. I would say that the income tax commissioner only interprets the existing state of affairs in accordance with existing law. But the Minister of Finance has said, and I think quite truly, that he who must resort to treasury board for a decision whether he must pay tax, has not broken any law. He has not committed any offence. In the minister's own words he has not broken the law; he has not committed any offence, and yet he has to come before the commissioner or treasury board for a decision whether he must pay a tax. It should only be for treasury board to decide under what law, statute or enactment he must pay it. And he is ab initio breaking the law in avoiding it, if he should be called upon to pay.


James Lorimer Ilsley: There is no doubt the hon. member for Carleton is correct in theory. I am the first to admit that these are very wide powers being given to treasury board. We would not be arguing about this section at all if we could define in advance the types of avoidance resorted to. But if we were to follow the principles expressed by some hon. members, we would be legislating just a little too late in every case. All through the years we would be legislating too late.


George Russell Boucher: Is that not the general situation in connection with the law, after all?


James Lorimer Ilsley: A new type of avoidance
would be worked out. We would see it happening, and we would say, "We must not lay down a broad power to catch people like that in the future, because that is not specific enough; and we must not legislate retroactively because that is not usual." Accordingly we would just legislate to prevent it, and they would never do it again. But they would do something else. I would not be so insistent about this legislation if -it were not for the fact that we are at war. It is perfectly reasonable to ask people not to do things for the main purpose of avoiding taxation, and it is also perfectly reasonable to say, " If what you did was for the purpose of avoiding taxation, and on that point of fact you get all the appeals in the world, you should go to the Exchequer Court of Canada; it has jurisdiction to decide that fact. This is something that is going to happen to you taxwise." It must be left to somebody with wide discretion, and rather than leave it to what are called bureaucrats, irresponsible persons, it seems to me that the appropriate body is treasury board, which is a committee of the government responsible to this parliament.
Let us consider what the hon. member for Swift Current says. He suggests that we say

Excess Profits Tax
that in the first instance the commissioner of income tax shall exercise this power or make this determination, but that it shall not be effective unless approved by treasury board. That, in practice, is exactly what will be done.


Roy Theodore Graham: I would rather have it
stated in that way.


James Lorimer Ilsley: The commissioner of income tax will be the one who will bring to his minister a case and say: See what is happening here. If the minister considers it is a proper case he will refer it to treasury board, and treasury board will consider whether they should go further with it or not. If they decide to go further they will notify the parties and make some just and proper disposition of the case. They will do what is appropriate. Those are the words that are used here. This is not the ordinary language of statutes or of lawyers-not at all. This is something new. It is strange language to members of the legal profession.


Gordon Graydon: You are giving them a lesson.


James Lorimer Ilsley: No; I am not giving anybody a lesson. But they found they had to do it in Great Britain, and it is obvious that we have to do something like that. If we misuse or abuse our powers we will pay the penalty. If we are too harsh or too easy we shall pay the penalty. If we find that treasury board cannot handle it we may have to set up some body to handle it. It may be possible at some time to lay down some rules to cover it. For a great many years now we have been talking about this matter, and the commissioner of income tax has said that the devices and ingenuity which are used are so great that it is impossible to write sections which will specifically describe the state of affairs so as to result in the raising of the tax.


George Russell Boucher: -What the minister says is true, but after all is there not another principle to be considered? We are in fact trying to deal with some case that may arise in the future. We are guessing at what may happen. We are not making a law to cover an offence that has already been committed but are grasping into the future, and guessing at an offence that may be committed. Before there was a law against stealing, stealing existed, and against going beyond that' principle I protest vehemently. I think we should go on the common-sense principle of passing a law to deal with an offence when it is found to exist. We must not be too progressive. We cannot entirely wipe out all our past traditions. We cannot
eradicate the past and say that we are standing up here in this nineteenth parliament and with the wisdom of Socrates and the statesmanship of Pericles passing a law to cover something that may happen in the future. We may lose something by not taxing; but when the actual situation arises, that is the time to pass a law to stop the thing, not before it is done.


Mr. ROSS (St. Paul's):: I would not call this law progressive; I would call it radical. How much has the treasury of Canada lost by not having a law like this? How much money is involved?


James Lorimer Ilsley: I could not give any estimate, but we are in big figures in these transactions. There is nothing small about this.


Douglas Gooderham Ross: How much would it be?


James Lorimer Ilsley: I could not give any estimate.


Harry Rutherford Jackman: Under subsection 1 of the new section 15, is it the intention, if you smell a rat, shall I say, to insist on the whole transaction or series of transactions being undone? I find that the second subsection gives the treasury board power to trace the proceeds into the hands of any person who may receive them, notwithstanding the fact that they may be different from the original shareholders of the No. 1 company. Would the minister explain what is envisaged by the section which I have had a chance to read only since coming into the chamber this evening? Does he intend to undo these transactions and put everything into the status quo before the transactions were entered into.


James Lorimer Ilsley: There is no power here to undo transactions. There is just the power to tax the persons.


Harry Rutherford Jackman: Suppose the proceeds
got into the hands of very small shareholders; you would not get your tax anyway.


James Lorimer Ilsley: Possibly not. It might be that the transaction would result in persons receiving payments, benefits in cash or otherwise, who were perfectly innocent of any intention of avoiding the tax. It might very well be that it would be an injustice to touch them at all.


Harry Rutherford Jackman: But you are going to
touch them.


James Lorimer Ilsley: There is nothing here that
says so.


Grote Stirling: If it is not the intention to undo what has taken place, what is the good of doing anything?
Excess Profits Tax


James Lorimer Ilsley: It is simply to get taxation, to assess and levy upon the persons who received the benefits.


Harry Rutherford Jackman: Tax at what rate? It
makes all the difference in the world. I read from line 40 of section 15 subsection 2:
. . . and it shall thereupon be deemed for the purposes of this act that such person-
That is the one who received the payment. -whether he received any such payment or benefit in the form of capital or otherwise, hag received income subject to tax in such year or years since 1939 and in such amount or amounts as treasury board may determine, and tax shall be assessed and levied upon such person and shall be payable as in this act provided.


James Lorimer Ilsley: The tax would depend upon the income. It says it shall be deemed that such person has received income. Once it is deemed to be part of his income, the tax goes on at the statutory rate. There is nothing arbitrary about the tax. The same principle applies in subsection 3. In the British section, which as I say is more drastic, that safeguard is not present. In subsection 1 what is directed is an adjustment as respects liability to tax which shall counteract the avoidance or reduction of liability to tax which has taken place. That is as far as the treasury board would have the right to go. You do not know the rate there until you have gone through certain computations in order to determine the liability to tax appropriate to counteract the avoidance of liability to tax. That is the language of the British section. As I say, I think we were, if anything, more circumspect in drawing sections 2 and 3 than that, but the former section 32A went, I believe, further than the British section,


Harry Rutherford Jackman: The ministry do not seem to realize that there might be any significance in the statement that it is one thing to legislate along these lines for a surplus which arises through excess profits, and another thing to legislate for a surplus which arises over the course of years through ordinary business profits which have not been distributed, but which on the other hand have been ploughed back into a business in order to build it up. Morally, however, if there are any morals about this resolution, the two are on entirely different footings. I should be interested in finding out through the minister and his assistants whether there is in Great Britain at the present time any such legislation as is now before the committee. I believe all hon. members are quite willing to have any kind of legislation, whether it is against the fundamental rights of the subject versus the crown, if it is only to retrieve excess profits which this house voted unanimously against when

the Excess^ Profits Tax Act was first brought in. That is one type of profit, made out of war, sometimes referred to as "blood money", which everyone believes the government is entitled to and no one should be allowed to keep. But the legislation which will come down under the income tax act has reference to profits which were earned long before the war, and of which, I think, one is entitled to take quite a different view. I believe that is why the minister will not find any legislation in Britain having to do with anything but excess profits, when one is given such full power against the subject as is envisaged under this legislation. Therefore I should myself prefer to reserve any remarks I have to make for this legislation when it comes under the income tax act, even although it is identical in wording.
I should, however, like to ask the minister one or two questions at the present time. One is in regard to treasury board. Hon. members of this committee and the public at large have been very much concerned about the duties which are thrust upon the cabinet. We have some 10,000 or more orders in council. Let us concede that three-fourths of them are on mere matters of routine and do not require to be brought to the knowledge of hon. members. But a great many are drastic, tantamount to pieces of major legislation, embodying as they do questions of policy; and it is utterly impossible for most of us who are not members of the privy council to see how this can be done. Then a committee of the council is constituted the treasury board. That board is to be set up as a judicial body to consider intricate cases of taxation and corporate history and accounting, any one of which may easily take three or four days or a week, possibly much longer; the minister will have more experience in that matter than I have. How is it physically possible for treasury board to handle any number of cases which * may come before it? It seems to me we are designating an utterly impossible task to a body which might be fitted to perform it, but which will by no means have the necessary time in which to do so. Eor that reason I think treasury board should not be considered for this very important judicial function:	it
simply cannot perform it.
If the provision that treasury board shall determine these matters is left in the bill, what will be the result? As the acts read now, an appeal is sometimes taken from the commissioner to the Minister of Finance. To the ordinary man-and I think there is more truth than otherwise in the statement-this is simply an appeal from one man to himself; there is no real distinction.

Excess Profits Tax
Therefore it would be much better if the administration could conceive of some board or committee apart from treasury board which might more truly represent the citizens of the country and would not be interested in gathering in money for the necessary financing of the war. Such a body would be more impartial. After all, the government must get in the money; and if it sees a fruitful source, such as a case which may come before it and about which there may be some doubt, naturally it cannot help feeling that the country needs money and it must have it, whether or not justice is done to the subject. Accordingly I would again ask the ministry to consider some other board than treasury board.
In the final clause there is provision for the right of appeal. This, I believe, is quite a change from the wording of the resolution, which referred to a review of any ruling of treasury board made under the provisions of this section. The matter has already been discussed1 this evening. I wish to be absolutely sure that the exchequer court will have complete power to review on appeal the facts and any questions of law which may be involved. It is not simply a reference of certain points from the ministry to the exchequer court?


James Lorimer Ilsley: No.


Harry Rutherford Jackman: It cannot be limited in any way?


James Lorimer Ilsley: No.


Harry Rutherford Jackman: That is splendid.
The other great distinction between the existing and the proposed legislation has to do with the change from "no reasonable purpose is achieved by the transaction or series of transactions." That is the wording of the existing law. It has been changed to "the main purpose was to avoid taxation." None of these words are legal words, particularly; they are plain, ordinary, dictionary words, and I suppose the ordinary layman should be able to. gather their import as well as a lawyer. But it would seem that the change is made to tighten up the situation, and even though a reasonable business purpose if served, the crown, in its great dtesire and necessity to gather in revenue, will be able to set aside any reasonable business purpose. Even though the proprietor of some old firm . in one of our small towns-where there are so many-has been seeking, to gather some capital to meet his succession duties and has entered into certain transactions for that purpose, the crown will now say, "Your main purpose was to avoid taxation." The proprietor will say, "Yes, of course it was to
avoid taxation, but if I paid out all this earned surplus which was gathered by this company thirty or forty years ago, when we were building it up and creating employment for the people of the town, there would' have been little or nothing left, because the government is taking seventy or eighty per cent of my income. How can I ever get my money free to pay my succession duties?" This would seem to be a fairly rightful purpose, when the crown gets it, or a crown gets it. He is only trying to get ready for the day when he must pass off this earth; but he is never able to do so, because this fortune was left in the company when his sole purpose was not to avoid the small percentage of personal income tax which obtained throughout most of that period, but simply to use it as a business tool to build up the place and benefit the community. Now, when he realizes that old age is upon him, and he wants to get some money free to meet his obligations to the various governments under which he operates, he goes through a series of transactions, or .perhaps a simple transaction, and the crown in right of the dominion government comes in and says, "Yes, but your main purpose, even though it might have been a reasonable business purpose, was to avoid taxation.; and the whole transaction falls .by the wayside as far as any tax saving is concerned, and you must .pay the full amount of tax". So that his object is defeated. I presume there are cases like that which are covered by the change in wording from "no reasonable business purpose" to "main purpose".
Leaving that for the moment, I still believe that this committee would be fairly unanimous in approving legislation which covered cases of tax avoidance-not tax evasion, because they are clearly illegal from the beginning. It is true the minister has said that the government are not smart enough to catch up with the various dodges of artful lawyers, that they are always a step behind the parade. They cannot be very far behind, particularly when we consider that the house is sitting for five or six months or even longer each year. If one or two cases should slip by, it would not be a great loss to the crown. In the meantime the rights of the subject are protected and business men know where they stand according to the law of the land. If a particularly bad case should show up, I do not think the house would object to the passing of retroactive legislation in order to prevent a particularly big fish from getting through the net.
I suggest once again to the minister that in place of having legislation passed which so defeats the right of the subject, he should
Excess Profits Tax

have specific legislation passed to meet the cases that arise from time to time. If necessary, retroactive legislation will be conceded by most of the members of this house. That should be done, instead of having such a blanket resolution put through as he is having done at the present time. I still believe that members of this committee are entitled to know something more about the particular cases which the minister has encountered and which he has been unable to catch. He has gone back in this proposed legislation to 1939.


James Lorimer Ilsley: 1940.


Harry Rutherford Jackman: It covers anything that has happened since 1939. The minister would do well to tell the committee the particulars of some of the cases. It is an important piece of legislation that we have before us. To some extent we are legislating in the dark, and from the constitutional point of view it would appear to be an extremely bad bit of law making. I ask him to consider the points I have brought up and also to be good enough to say something more about these particular cases which apparently cannot be met by specific legislation, but only by blanket legislation.


James Lorimer Ilsley: I have not the particulars of any cases, but what I have heard about them in the Department of National Revenue would indicate that it would take a long time to describe the various steps and stages through which some of these transactions have gone.


Gordon Graydon: Will treasury board have time to go into that?


James Lorimer Ilsley: They can find time for almost anything if they have to. They have found time for a lot of things.
I should like to deal with one point raised by the hon. member for Rosedale. He mentions a case of the man who had conducted business over a period of years and, as old age approached, had a large earned surplus in the business, a large amount of undistributed income which had been piled back into the business. I am prepared to admit that the present combination of income taxes and succession duties, provincial and dominion, would make an almost impossible situation for that man. I am prepared to admit that there are some very hard cases.
The conclusion I came to was that there was necessity either for legislation or executive action of some kind, not only in one direction but in two. One direction was in the protection of the crown. We have tried to take the necessary steps by drafting the legislation before the committee. Just as soon as we get around to it we must give earnest
consideration to working out rules which will give some relief to the person who is confronted with the combination of heavy income taxes and succession duties and who has a large earned surplus or a large amount of undistributed income in his business.
We have power under the Consolidated Revenue and Audit Act to do that. There are cases that cry aloud for relief. I am not usually very sentimental about the griefs of the taxpayer, but these cases do offend one's sense of justice. Between now and next year we are going to try to do something, to lay down some rule of procedure under the Consolidated Revenue and Audit Act or work out some legislation that will provide some form of relief in some of these cases. The hon. member for Rosedale put the matter moderately enough. A man starts with $20,000 capital which he puts into a business. He carries on that business for thirty or forty years, and at the end he has $200,000 in the business, of which $180,000 is undistributed income, earned surplus.
If he dies at that stage, succession duties are payable to the province and to the dominion on an estate having a value of $200,000. In order that the executors may get money with which to pay the succession duties they will either have to wind up the company of which he was the sole or main shareholder, or declare dividends, or do something of that kind. If money comes out of the company in one year in a very large amount, it will mean that the income of his beneficiaries, let us say his widow, would be very high in that year. The tax rates are considerable, and the amount that would be left for the payment of succession duties might be quite small. It might very well be that the combination of succession duties and income tax would practically ruin the estate.
The taxation authorities recognize that; I recognize that. We have the power to relieve against that under the Consolidated Revenue and Audit Act, but it would be a most dangerous and extraordinary power to exercise. I am simply saying that we recognize the problem. Having recognized the problem, we have to depart from the rules that apply in times when taxes are low, namely, that ordinarily no remissions shall be made. I think we shall have to make some arrangement to meet such cases. When you get your taxes very high, difficult and unprecedented problems arise, and that is why considerable discretion must be given to the taxing authorities or to the executive. To pitch this problem 'over to some outside body is pretty dangerous.

Excess Profits Tax
The hon. member for Rosedale wanted to know whether there is any provision of this kind in the income tax legislation in Great Britain as distinguished from the excess profits tax legislation. I do not know about that; I will get the information if I can when the similar section of the income tax bill comes before the house. But as was pointed out the other day, there is not the same need for it in Great Britain because they do not have anything but the individual income tax; they do not have the corporation tax in any real sense, and therefore the same problems do not arise.
I listened attentively to the hon, member's suggestion that we legislate, perhaps retroactively, for specific cases as they arise, but it is undesirable to do that to any great extent.


Douglas Gooderham Ross: I am not a lawyer. Is it constitutional for us to delegate to treasury board an enlargement of our laws? In the second place, if that is done, suppose an appeal were taken to the -exchequer court and the Supreme Court of Canada; how could the supreme court uphold the treasury board without some law on which to base its decision?


James Lorimer Ilsley: This legislation gives the
exchequer court power to determine whether the main purpose is avoidance of liability to tax. There is no difficulty about that; that is a question of fact. It also gives them power to determine whether any finding, direction, etcetera, ought to have been made or given or was appropriate. That is a very odd power to give to a court or to anybody. But the reasons why we are asking for it I tried to express the other night and to-night.


Harry Rutherford Jackman: This section, since it does not legislate to cover specific cases, makes one wonder what is in the mind of the revenue department. The minister has spent some time in developing the hypothetical case which I mentioned of an old resident in a small town who has been responsible for building up the industry of that place. Let me ask about a type of transaction which has not been entirely absent during recent years, and find out whether that is one of those aimed at. Is there anything iniquitous about it, because the moral line seems to be rather fine in some of these cases; some people apparently have not the right kind of moral reflex to tell whether or not something which the minister or those who will have the discretion under this section would consider something which ought to be upset? Suppose this man or company which the minister mentioned, having $20,000 original capital and over the years $180,000 of earned
surplus, ploughed back into the company, bringing about this expansion, desires to reclassify his capital stock without changing his charter or interfering with his earned surplus, and puts out a certain amount of preferred stock which he may sell to the public, perhaps distribute some common stock with it as bonus and keep the remainder himself, in that way putting himself in cash in order to meet his succession duty obligations which might come about in the near future-


James Lorimer Ilsley: By redemption of the preferred shares?


Harry Rutherford Jackman: No; supposing his company is all common stock now; he reclassifies his capital structure, has some investment dealer make an issue of preferred shares and thus gets sufficient cash to look after his obligations to the province and the dominion; is that the type of case aimed at under this section? There is no disturbance to the earned surplus, which still rests with the original corporation.


James Lorimer Ilsley: I do not know what finding the treasury board would make in a case of that kind.


Harry Rutherford Jackman: Is there anything wrong with it? The trouble with legislation of this sort is that nobody knows where they stand. How is business to go ahead and make employment for people as well as carry on for the simple 'purpose of making a profit? It is quite impossible for any kind of business to be carried on unless business men know where they stand. If we are to have this type of legislation, we can be certain that business will stagnate.


Major James William Coldwell: We have been giving a good deal of thought to this problem. I must confess that although I do not like the wording of this section, it does something which should be done, and except for the fact that it might have been brought under an independent board or commission as suggested by the hon. member for Swift Current the other day, there seems to be no other way out than that presented to us tonight by the minister. I would, I think, go farther than this proposal goes. I should like to see a penalty clause where there is wilful evasion. I know it is difficult to prove that. The hon. member for Rosedale objects to it on a number of grounds, but if there is wilful evasion-


Harry Rutherford Jackman: Avoidance. There is no evasion. That is different.


Grote Stirling: That is the distinction
the minister makes.
Excess Profits Tax


Major James William Coldwell: If there is avoidance which is deliberately carried out in order to escape the payment of certain dues to the government, then in my opinion that becomes evasion. It is all very well to say that if business does not know* where it stands, then legislation of this sort will affect business. I do not see why that should be so, if the business man is conducting his affairs according to the rules and legislation we have before us. If he is carrying on his business with a proper intent, then it is up to the treasury board now to prove that his main purpose was the avoidance of tax before he becomes subject to this legislation. So that personally, while I wish the phraseology could be changed, I cannot see how it can be changed and still do what the minister wants it to do.


Frederick Clayton Casselman: I realize that the minister has given an interpretation of subsection 4. But I am not satisfied with that interpretation. He mentioned section 66 of the Income War Tax Act. In that there is given exclusive jurisdiction to the exchequer court; there is no limitation whatever on it. It reads:
Subject to the provisions of this act, the exchequer court shall have exclusive jurisdiction to hear and determine all questions that may * arise in connection with any assessment made under this act and in delivering judgment may make any order as to payment of any tax, interest or penalty or as to costs as to the said court may seem right and proper. .
This section, in referring this matter from the treasury board to the exchequer court- and of course I must admit this is by way of appeal where in the other case it is the first time the matter has been before the court- appears to me to put a very great limitation on the jurisdiction of the court. Subsection 4 of this section reads:
In any appeal from an assessment made pursuant to any finding, direction or determination of the treasury board under this section, the Exchequer Court of Canada shall have jurisdiction to determine whether the main purpose of the transaction or transactions or sale was the avoidance or reduction of liability to tax or whether any finding, direction, determination or adjustment ought to have been made or given, or was appropriate.
All that does is to refer the matter to the exchequer court. Why would not the meaning be clearer if the last five lines were taken from the section altogether, and it read:
Any appeal from an assessment made pursuant to any finding, direction or determination of the treasury board under this section shall be to the Exchequer Court of Canada.
If the last five lines were left out, there would be no possibility of any misinterpretation in regard to the jurisdiction of the court.


James Lorimer Ilsley: I do not follow the hon. gentleman at all. I follow his suggestion, but I do not understand the reasoning that leads to his conclusions. To begin with, there is nothing in subsection 4 to limit the jurisdiction conferred by section 66, which gives the Exchequer Court of Canada jurisdiction to hear and determine all questions that may arise in connection with any assessment made under this act. In delivering judgment, that court may make any order as to the payment of any tax, interest or penalty, or as to costs, as to the court may seem right and proper. The point has been raised as to whether the exchequer court would have power to go back of the assessment to this direction or determination or finding of the treasury board upon which the assessment was based; would the exchequer court have power to say this? "We disagree with the treasury board. We think what they did was inappropriate. We think they did not use their discretion properly. We think the direction they gave should not have been given, the finding they made should not have been made, the determination or adjustment they made was oqe they should not have made." To clear that up, to make it plain, to put it beyond question, we have said that the Exchequer Court of Canada can do that. They can put themselves right in the position of the treasury board and say that board gave a direction it ought not to have given. Then, if that is the case, on that appeal the court can alter the assessment accordingly. If we were to do what the hon. gentleman suggests, we would leave that question still cloudy. We would not have added anything; we would have simply said that an appeal from an assessment made pursuant to a finding or direction of the treasury board lies to the Exchequer Court of Canada. Well, it lies there now. We do not get anywhere under this section until we get an assessment. The treasury board simply directs or orders an assessment, and it is no good to do what the hon. gentleman suggests, namely, to provide an appeal from the assessment, because section 66 does that now. The effect of this section is to say that on that appeal, which lies now under section 66, the Exchequer Court of Canada shall have jurisdiction to determine whether the main purpose of the transaction or transactions or sale was the avoidance or reduction of liability to tax, or whether any finding, direction, determination or adjustment ought to have been made.


Frederick Clayton Casselman: It has only been a
question in my mind as to whether or not this was a limitation. The minister is definite to the effect that there is no limitation whatever in the exchequer court?


James Lorimer Ilsley: Yes.

Excess Profits Tax


Frederick Clayton Casselman: Then I am prepared
to accept the minister's statement.


[Stage Direction]
Section agreed to.
Section 7 agreed to.
On section 8-Application of section 1, of section 2, of section 3.
Harry Rutherford Jackman: I did not realize that
you were carrying all of the new section 15 of the act when you did, Mr. Chairman, and if I may be allowed to do so I wish to direct the minister's attention to that part of subsection 3 of section 15 which reads:
. . . treasury board may find that the main purpose of the sale by the vendor was to reduce or avoid the tax which would have been paid by the shareholders of such company having undistributed income on hand. . . .


James Lorimer Ilsley: Which section is that?


Harry Rutherford Jackman: Lines 7 and 8 on page
4 of the bill; that section has been passed. It goes on to say, "notwithstanding section 4 (n) of the Income War Tax Act," which has . been a saving provision and, I think, a salutary one, too, under which earnings in one company which had paid the full tax to the government, and which were subsequently disbursed to and received by another Canadian corporation were free of tax in that company. Eventually, of course, the money would have to be distributed to some individuals to be used at all, and then it would come under the ordinary income tax provisions and be taxed accordingly. May I ask the minister just what the purpose is in changing this well-known provision of Canadian corporate and tax law so that it is no longer applicable. Certainly, if the surplus of the company which is disgorged, if I may use the term, goes to another company, that surplus is still intact and in corporate form and cannot be used by any person until it is finally declared in the form of dividends to individuals who have power to spend the money and who are therefore taxed when they receive it. I suppose I need not ask what the purpose is; 1 presume it is to overcome one of the subterfuges; but surely it is a radical departure from existing corporate law in this country, and I think it calls for an explanation. It seems to me that if the administration is allowed to regard any dividend which may come into another corporation under section 4(n) as taxable instead of non-taxable, as it is at the present time, we shall have considerable confusion. Of course I know the ordinary dividend from one company to another still will be non-taxable; but there may be many border-line cases, especially where any deal is involved concerning any major amount of
shares or any large distribution, particularly by companies that have not a wide public distribution, so that once more it will lead to uncertainty and business men will not know their exact position.
May I point out that where this uncertainty * exists, it is not necessarily the crown that will be the beneficiary of the policing provisions it is laying down. It means that the small business proprietor, if he has to sell, will be able to sell at a certain price to other people-^perhaps a younger generation coming along, who have money, who will not have to distribute that surplus for another thirty or forty years. The result is that the crown is no better off. The small proprietor gets a mo.dicum of the money, instead of the major portion of it. No one has any advantage except the rather sharp- if I may use that expression-promoter who buys up the old concern. And the old proprietor is then' somewhat better off than he would have been if he had distributed his surplus, and paid a tax of seventy per cent or eighty per cent on it.
Getting back to my original question, may I ask the minister why he feels it necessary to put in section 4 (n). Will it not lead to considerable confusion in J;he minds of people who have operated under that section in the past?


James Lorimer Ilsley: This section applies only to a few transactions. It applies only to cases where substantially all the shares are sold to another company. It applies only to cases where there is undistributed income on hand, and particularly it applies only to cases where the main purpose was to reduce or to avoid the taxes on the shareholders. It is expected that companies and shareholders who want to use a certain device, which is quite feasible and has been used, will take notice of that section, and not use it any more. If their purpose is a legitimate one, there is no reason in the world why, if they are thinking of moving their shares out, bodily, into another company, they cannot consult the income tax authorities, in which event they would be told whether there would be objection to it.


Harry Rutherford Jackman: I gave the minister one instance a moment ago, and he could not tell me.


James Lorimer Ilsley: I am not the income tax authority.


Harry Rutherford Jackman: But the minister is the man who lays down the principles.


James Lorimer Ilsley: I am not the minister in charge, either-
Excess Profits Tax


Harry Rutherford Jackman: He is sitting with the minister.


James Lorimer Ilsley: -and if I were, I would be a little hesitant about reciting offhand' answers with respect to specific matters mentioned in the committee. But I do not think there is anything wrong with .that subsection.


Harry Rutherford Jackman: Once again business does not know where it stands, and it must know, if it is to go ahead and! make plans. Let me give an 'illustration. Let us suppose a company has had a number of subsidiaries and put in consolidated returns but, for certain reasons, possibly taxing reasons, it decides to unconsolidate, and1 put in separate returns. There is no harm done. They paid the penalty of two per cent, because there was an advantage in taxation to them to put in a consolidated return ini the past. If they do that, it might easily be that one of the subsidiary companies, which was formerly consolidated, pays out. of its own earned surplus a substantial sum. of money to the parent company.. Surely that is quite legitimate. There is nothing surprising in that. It has been recognized right along. Yet, under a section like this, the parent company may be taxed on the income, as if the income had never really belonged to it, through the wholly-owned subsidiary which was part of the consolidation.
There are so many things involved in modern corporate practice that unless men know exactly where they stand it would seem to me we shall have chaos and confusion. So that nobody will feel that he can enter into a transaction.


Colin William George Gibson: Take a chance.


Harry Rutherford Jackman: The minister may smile, but if he would enter into some of these transactions he would know the uncertainty with which these people are faced. Frankly, I do not understand how the minister will help business in this country, and help industrial organization unless he gives business men a body of law from which they may know their positions, and act accordingly.


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

[Stage Direction]
Hon. ALPHONSE FOURNIER (Minister of Public Works) moved that the house go into committee to consider the following resolution:
That it is expedient to introduce a measure to authorize the Minister of Public Works on

behalf of His Majesty to enter into an agreement to pay to the corporation of the city of Ottawa the sum of $100,000 for the year ending July 1, 1943.
George Russell Boucher: Mr. Speaker, it is not my intention to speak at length on this measure, except again to urge that the minister set up a committee, as was suggested last year, to go into the relationship between the corporation of the city of Ottawa and the dominion government. A great deal of statistics and detail was placed on Hansard last year with respect to the condition of Ottawa as the capital city. While wartime has brought more exacting legislation to the floor of the house, yet it has brought a much more serious situation to Ottawa. Last year we dealt fully with the changed attitude in Ottawa by virtue of wartime buildings and services. We discussed the loss in taxation to Ottawa by virtue of lands being taken over by the dominion government.
There are, however, one or two greater points we might briefly emphasize to-night. Although constitutionally the government, when taking over land, is not enabled to pay taxation on it, and while under constitutional practice and law it would be improper to pay taxation on government-owned property, yet the situation as between the dominion and the city of Ottawa could, and I think should be discussed in two other respects. First of all, we must consider the greatly increased services the corporation must render to the dominion government and, in effect, to the people of Canada by virtue of the new buildings, the increased civil service and the many new services which must be rendered.
During the past winter it has been amply demonstrated that extras have been required. There have been requirements for extra street cleaning, extra fire protection, extra services, extra housing accommodation, and the many other services the city must render to the government, in return for having the capital situated here. Truly, the people of Ottawa are most appreciative of the capital city, and the presence here of the large proportion of its population directly concerned with government enterprises. But it is handicapped as well, as I pointed out last year, because, located as it is, with its great power resources, wrater communications, road communications, rail communications and manufacturing inducements, were it not for the presence here of the head of government and government buildings, it could be, and probably would be a great industrial centre. Industry has its advantages for every community.
I should like to say a few words to-night to bring before the minister in charge and the

City of Ottawa Agreement
government facts which would amply prove to them, as they did to me at least in the discussion last year, the desirability of having a committee set up to go into the whole matter, as was suggested by the member for Yale (Mr. Stirling) who was then leading the opposition, so that a businesslike and efficient system may be worked out which will adjust fairly and adequately the relations between the dominion and the corporation of Ottawa. I would not want to press this too hard at the present time; in fact I do not press it to-night, but I would urge that the matter be taken in hand at the earliest possible date.


Mr. G. A. CRUICKSHANK (Fraser Valley):: While I have nothing to say against the city of Ottawa and know there is no use in my trying to prevent this grant from going through, I think it is only fair to the rest of Canada to point out that over 13,000,000 a month of new money is being spent in this city by incoming war-time civil servants. By that $3,000,000 of extra money every month, the city of Ottawa was able this year to reduce its tax rate by three mills. No other city in the whole Dominion of Canada has been able to reduce its mill rate. I' cannot see where the members for Ottawa can show any extra charges that have come -upon the city. Frankly, if I had my way, the city of Ottawa would not get this $100,000 a year. It would not get one dollar, because here is the city council, with $3,000,000 extra money coming into the city every month, trying to ruin the farmers by reintroducing oleomargarine into this country. I cannot see why the people of Canada should be called upon to pay $100,000 a year to any city in war time to enable it to reduce its tax rate by three mills, and then try to reintroduce oelomargarine into the capital city of Canada.


Mr. G. J. McILRAITH (Ottawa West):: Mr. Speaker, first of all I wish to offer a word of congratulation to the member for Carleton (Mr. Boucher). Apparently he has read and absorbed some of the remarks I made last year on the second reading of the Ottawa bill, and I am happy to say that he appears to have been converted by them. For that I am duly grateful.
There are just one or two facts I wish to point out in reply to the member for Fraser Valley (Mr. Cruickshank). He will find the reasons and all the relevant data in support of this grant set out in the bound edition of the debates of this house of last year, at page 2685. May I tell him, so that he can pass it on to some of those taxpayers concerning whom he is so solicitous, that the total amount of assessment on taxable real property
in the corporation of Ottawa in the year 1942 is $146,458,368. The total amount of dominion government property, exclusive of federal district commission property, exempt from taxation by reason of the fact that it is owned by the crown, is some $61,537,700. Hon. members will see in the relationship of these two figures one to the other the reason why there is a demand for a committee to look into this question. The amount of taxes that would be paid on that tax-exempt property, were it taxable, would exceed $2,000,000 a year. I do not for a moment suggest that the proper basis is that it should be taxable, but the mere fact that it would produce a tax revenue of something over $2,000,000 will indicate the extent of the problem.
There is another aspect of the matter not generally understood. The great problem does not only arise out of the new government buildings. It arises out of the loss of revenue from buildings that were regularly paying taxes over a period of years and which have been expropriated by the crown and ceased to be taxable from that date on. In 1942 the assessed value of the taxable real estate in Ottawa expropriated by the crown was $895,475. The revenue on that item will be lost in 1943, although taxes had been paid on this property regularly in previous years.
One other item in the remarks of the hon. member for Fraser Valley that demands attention was his reference to the tax rate in Ottawa. The tax rate on real estate, when taken by itself, is not an answer. The tax rate must be taken into consideration along with the assessment, and to go into the question of assessment is practically impossible in discussing an ordinary bill before the house. It is a matter that will have to be gone into carefully in a committee. If you raise your assessment enough each year you can, of course, reduce the tax rate and still produce the the same amount of taxes.


George Alexander Cruickshank: Did I understand the hon. member to say that you can reduce the assessment and reduce the tax rate?


George James McIlraith: No.


George Alexander Cruickshank: I wish the hon. member would repeat what he said.


George James McIlraith: What I said was that the tax mill rate taken by itself is not an indication of the financial condition of the city.


George Alexander Cruickshank: How do you arrive at your revenue?


George James McIlraith: You must take into consideration the assessed value of your taxable property and the mill rate. The assessed

City of Ottawa Agreement

value varies each year, and to go into questions of assessment in the house on an ordinary bill is virtually impossible. The total assessment may be increased either by an increase in property values or by the assessment of new property, or by both. All this relevant information, I submit, can be gone into only by a committee set up for the purpose and having time to examine details and with authority to summons the necessary witnesses.
I stated in 1941 when a similar bill was before the house, and repeated in 1942, that the city was fully appreciative of the tremendous demands on the government for money for war purposes, and that therefore we were not unduly pressing our demands. But the situation is getting worse each year, and I had hoped that at least a committee would be set up to examine into the whole question to see if some fair and workable basis could be arrived at. I should like to urge again this year that some examining body with power to summons witnesses examine into the whole relationship between the city and the government, because many other factors that could be mentioned, if time permitted, must be taken into consideration. Having done that, the committee could recommend to the house an appropriate amount. I think it is quite apparent from any examination of the figures that the amount now granted is wholly inadequate.


Major James William Coldwell: Is it not true that an increase in the population of the city and increasing business ought to increase the city's own assessment on property?


George James McIlraith: An increase in business will not increase the assessment on real estate. We are dealing with taxable real estate. There is an item of business assessment in addition to the assessment on real property, but it is relatively-small. I do not want to go into the whole question of assessment; I have had too much experience in municipal law trying to puzzle out the assessment act to be dogmatic about it; it is a fairly large order. I know from actual experience there are numbers of properties being sold regularly in Ottawa at prices much below the assessed values. I have in mind actual cases when I say that. I do not want anyone to draw the conclusion that the general situation is that all property is assessed at more than its actual value, but I know of many cases where property is so assessed.


Major James William Coldwell: I think the request made by the hon. member for Ottawa West (Mr. Mcllraith) that a committee should be set up to go into the whole problem is a reasonable one, because none of us knows whether the amount we are voting is too much or too little,

and until a thorough inquiry is made and a fair basis arrived at, it is simply a hit-or-miss business. I regard the request as sound and reasonable.


Hon. ALPHONSE FOURNIER (Minister of Public Works):: Last year, on the discussion of the same bill, the hon. member for Yale (Mr. Stirling) suggested to the government that the whole relations between the government and the city of Ottawa should be examined by the banking and commerce committee. He complained that in committee of the whole we could not get enough information upon which to base our judgment as to the amount, whether it was sufficient or insufficient. The hon. member for Ottawa West (Mr. Mcllraith) suggested also that a committee be set up, though not the banking and commerce committee. He said: "It is still my position, and I think it only fair, that a committee should be set up to put the whole matter on an equitable basis so that the city may receive proper compensation and private taxpayers may not be required to carry an unfair burden." Some day probably a committee or some negotiating body will have to be set up as between the government and the city to see if the amount is fair and reasonable. I am glad to see that hon. members who have spoken do not wish to press this matter during war time. This would not be a war expenditure, and perhaps we would hear a good deal of criticism from outside the capital were we to increase at this time the grant from the government to the city.
This resolution is the basis of a bill to extend the life of an agreement which was entered into between the corporation and the government in 1920. At that time the amount granted to the city was $75,000. This went on for five years. In 1925 the amount was increased to $100,000 for another five years; and from 1930 on a bill was passed every year to extend the life of this agreement. Hon. members should understand that this grant of $100,000 is made in settlement -of all demands and claims of the corporation of Ottawa for the use of water for sprinkling of streets, for the use of water on the driveways and on the parks belonging to the federal district commission, and for fire protection of government buildings in the city. These are the three services rendered by the corporation for which we are paying $100,000 a year. This does not mean that the government is not expending other moneys in the city of Ottawa. Last year we voted, I believe-the amount will be found in the estimates of the finance department-the sum of $333,000 for the federal district commission.

City of Ottawa Agreement
All that money was not spent in the city of Ottawa, but it was expended in the city and the surrounding district.


George Russell Boucher: Four other constituencies.


Alphonse Fournier: Yes. Some of it is disbursed in Carleton, Hull and surrounding districts. But by far the largest amount is spent in the capital city.


George Alexander Cruickshank: And there is
policing?


Alphonse Fournier: No. We have our own force, which is the Royal Canadian Mounted Police, quite a renowned body, and sufficient for the task in the city. Last year we negotiated with the city and agreed to increase the rate for the use of water in the government buildings. If I recall correctly, we paid eighty^one or eighty-two thousand dollars for water. We also paid the taxes on the legations of Great Britain, Australia, France and other countries having legations here.
In my opinion, as the city expands and as we occupy more space here, it will be necessary to have, perhaps not a committee, but negotiations with the city, and such negotiations could well be conducted by some officials representing the government and others representing the city.


Gordon Graydon: Is the minister opposed
to a committee?


Alphonse Fournier: Well, at present I do not think it would be the proper means. I do not believe that at this time the government would consider increasing the grant to the city; that is, they would not wish to increase it during the war. That is the stand we have taken since 1940. Hon. members seem to agree with this point of view; and if we are not disposed to increase the amount now, the use of a committee disappears.


George Russell Boucher: Do not set up a
committee because they might find you should increase the grant! Is that it?


Alphonse Fournier: I do not know. They might find that Ottaw'a has benefited sufficiently by the increase in government activities in the city. I am open-minded on the subject. I do not know; I am not an expert. They might advance good reasons why the amount should be increased. But everything which has been brought to Ottawa, including, as mentioned by the hon. member for Rosetown-Biggar (Mr. Coldwell) the increase of population and the extension of building, might have to be taken into consideration in determining the amount which should be fixed. At the present time I believe that for the services
72537-148}
received we can still negotiate with the city authorities and increase, as we did last year, the amount paid for the use of water. For water we paid $50,000 in 1941, and last year I believe we paid $81,000 on the increased basis. But I do not see that by the appointment of a committee now we would make very much headway.


Gordon Graydon: What does the minister
mean by headway?


Alphonse Fournier: That we could come to some agreement, unless the government should change its position and announce its readiness to increase the amount.


Gordon Graydon: I was trying to get the
situation clarified. I took it from what the minister said that the appointment of a committee would mean a decreased payment, but in the next breath he suggested that it might mean an increase. What is in the minister's mind?


Thomas Vien: May I point out that we are now on the resolution, and that in committee this question, may be asked of the minister and he may reply.


Alphonse Fournier: I do not know what would be the findings of this committee. It wmuld depend upon the evidence produced before the committee. This request came from hon. members. So far as I recall, we have never had a request from the city for a committee. We did have a request to increase the amount; that was either in 1940 or 1941. At that time it was understood that during the war we would not consider increasing the amount. Some day, however, I believe negotiations will have to take place between the two bodies to see if the amount should be increased. I am not convinced that it shoiild be increased, but I know that hon. members from, the district would like to see it increased.


Mr. SOPER:: I should like to renew the suggestion I have been making to the Minister of Public Works and the department for some time, that a number of government departments should be moved out of the city to some of the surrounding towns. According to the remarks of the mayor it would seem that some of the departments are not wanted very much in Ottawa. I urge on the government to take this action if they are to be saddled with these taxes.


Douglas Gooderham Ross: Does this amount include fire protection for the parliament buildings, the east and west blocks, the confederation building and other government buildings?


George James McIlraith: Yes.
City oj Ottawa Agreement


Alphonse Fournier: It covers fire protection services for all buildings. We have sprinkler systems in the different buildings as well as janitors.


George Russell Boucher: Does this amount not also cover a great deal of police protection? The minister mentioned other services, but he did not mention police protection.


Alphonse Fournier: We have our own police in every public building in Ottawa. It does in a sense compensate for policing other government buildings where no government police are situated.


Mr. COLD WELL:: Is not the driveway policed by the mounted police?


Alphonse Fournier: Yes.


James Layton Ralston: The federal district
commission.


Thomas Miller Bell: We are providing considerable police protection in Ottawa.


George James McIlraith: I should like to point out that only a part of the driveway system is in the corporation limits.


Mr. McNIVEN:: I regard the driveway in Ottawa as one of the most beautiful of its kind in Canada and, I believe, on the continent. I should like to know who first built this driveway and who had charge of building the Champlain bridge. Does the city of Ottawa maintain that bridge?


Alphonse Fournier: This work was started in 1899 by what was then called the Ottawa improvement commission. At that time the commission was granted an annual sum of $60,000. This grant was continued until 1909 when it was increased to $100,000, which grant continued until 1920. From 1920 on, the grant paid was $150,000, until 1925, then $200,000. In 1925 a bill was introduced to create the federal district commission, and 'there is now on the order paper a resolution to extend the life, of the commission for another ten years. At present $333,000 is paid each year for the maintenance of the driveways, parks, the grounds around the parliament buildings and different sections in the surrounding district. There are other driveways not as elaborate as the one in the city.


Major James William Coldwell: In one way or another the federal government pays out $433,000 for beautifying the driveways and the federal district in and around Ottawa?


Alphonse Fournier: More than that when water rates are considered. The amount of $333,000 is not all spent within Ottawa;
IMr. Mcllraith.]
some of it is spent in the surrounding district. A total of $80,000 was paid out last year for water taxes.


George Alexander Cruickshank: What does beautification mean?


An hon. MEMBER:: You should know that, coming from British Columbia.


George Alexander Cruickshank: If the parliament buildings were located in British Columbia, they would be surrounded by natural beauty and you would not have to pay for it. We buy a lot down by the old brewery and do something with it, and I.should like to know what beautification means.


Alphonse Fournier: I have not the exact dictionary definition of the word, but it is to make something that does not look too well look nicer. At all events, I know what beauty is.


Donald Alexander McNiven: Does the government pay any frontage tax or local improvement tax on pavements, roads and sidewalks in front of government properties?


Alphonse Fournier: Yes. We are subject to the local improvement taxes the same as any other ratepayer. We maintain Wellington street from Connaught place to the old Perley home, to the brewery, and the sidewalk on the north side of the street. We keep in repair the sidewalk on Elgin street as far as Laurier avenue and along the south side of Laurier avenue where it faces Cartier square.


Donald Alexander McNiven: Do you pay frontage taxes for the frontage of the Jackson building, for example?


Alphonse Fournier: No.


Douglas Gooderham Ross: I think it would be a good idea to have the bill go before the banking and commerce committee where we would not only see that Ottawa got sufficient, got a square deal, but be able to' discuss the problems facing other cities in the dominion. We would be very glad to have these parliament buildings in Toronto and all that goes with them, and I do not think we would be asking for $100,000 or anything like that. We would be only too glad to get the extra revenue which would go along with them. I think the banking and commerce committee should look into this matter, and then we could take up the other public buildings across Canada. Other cities may be entitled to the same grant, although I do not think we need it in Toronto.
Resolution reported, read the second time and concurred in. Mr. Fournier (Hull) thereupon moved for leave to introduce Bill No. 70,

Supply-Public Works
to authorize an agreement between His Majesty the King and the corporation of the city of Ottawa.


[Stage Direction]
Motion agreed to, bill read the first and second times, considered in committee, reported, read the third time and passed.
[Stage Direction]
Hon. J. L. RALSTON (Minister of National Defence) moved that the house go into committee of supply.
Motion agreed to and the house went into committee of supply, Mr. Bradette in the chair.

[Stage Direction]
338. Departmental administration, $133,950.
Item stands.

[Stage Direction]
The Speaker of the Senate.
110. Allowance in lieu of residence, $3,000.
Major James William Coldwell: I should like to know just what the senate does. Someone sent me to-night the French Hansard from the other place for April 13, seven blank pages; it seems a.waste of paper.


George Alexander Cruickshank: What about the
divorces? They work hard.
Item stands.



DEPARTMENT OF PUBLIC WORKS

[Stage Direction]
256. Departmental administration, $194,780.
Gordon Graydon: How many departments are we going into? I understand we are not in any of these three departments up to the present. I was prepared to allow two departments to be introduced, but I do not think we should allow more than two unless there is some special reason.


James Layton Ralston: I mentioned these three the last night.


Major James William Coldwell: I think two departments are enough to be introduced on one night.


James Layton Ralston: I mentioned all these
three the other night. I do not know what ministers will be available. We are in three departments now but there is very, little chance of making much progress. The Minister of Public Works is prepared to go on with this item.


Major James William Coldwell: The only objection I
have is that there are so few opportunities now for hon. members to move private members' resolutions, that if we allow a number of
departments to go into supply, they can be called on Thursdays and Fridays without motion to leave the chair, and the result will be that there are no opportunities to raise matters in which members are interested.


James Layton Ralston: I can only say I do not know how many votes there are; but as I remember there are seventeen or eighteen departments, and there will be only five departments in after this one is called. If we treat legislation as one there would be six, but legislation is an extra. There must be at least twenty different departments for items to be called, so that there will be plenty of opportunity for my hon. friends to debate on the motion to go into supply.


Gordon Graydon: Are we going on with this?


James Layton Ralston: Yes.


Gordon Graydon: and incur heavy capital expenditures upon which in the end interest must be paid. But if there are many instances in peace time where that is not justified, surely with a temporary condition such as we have during this war-time period, this government ought to review its position with regard to the whole question of purchasing property for temporary purposes. I do not know what the government is going to do with some of the property it has bought. In many of the instances that have come to the attention of hon. members from time to time I am quite sure there could not have been any real necessity for putting so much capital into real estate holdings which were to be used for temporary, war-time purposes. Under the War Measures Act and the Natural Resources Mobilization Act the government has full power to make any move it may deem desirable or expedient in the public interest. It does not have to expropriate; it does not have to purchase. It may rent; it may lease; it has wide and comprehensive powers which give it those rights and privileges. So that I think it is incumbent upon the Minister of Public Works, when we begin to consider his estimates, to make some declaration or announcement with regard to the policy which I think is running this country into a tremendous sum of money in capital expenditures which, I am afraid, in the years that lie ahead will be against the interests of the taxpayers, and which will make this government and this country look very foolish from a business point of view when hostilities* come to an end.
I do not wish to overemphasize my point;
I do not wish to exaggerate the position, but I think someone in this house must ask for a halt in what I think is almost approaching a landslide with regard to the matter of purchasing buildings for temporary accommodation. There may be some instances in which it is justified, but it seems to me such instances are rather rare in comparison with the many examples of the other kind that are too apparent, I think, for any of us to overlook. Therefore I would ask the minister now to give us a declaration as to the government policy which has dictated, this kind of spends ing and this sort of investment of the funds of the people at a time when those funds are difficult to obtain. I should be glad if the minister would give the committee the benefit of his views in that regard. .


Alphonse Fournier: Since the beginning of the war, expenditures on public works have been curtailed. This year there is a decrease of some $405,351 in our estimates. We are not making any capital expenditures.
If hon. member^ will look through the esti-
[Mr. Graydon.l
mates, it will be found that they are all for maintenance, repairs, upkeep and the payment of salaries. Hon. members should understand that during the war not all properties belonging to the government come under the Department of Public Works. We have acquired some property; we have constructed some buildings. I believe the policy followed by the government at the present time is dictated by necessity. When we create a new service; when week by week and month by month that service grows and it applies to public works for space, public works has to rent premises or put up buildings. We have put up a good many temporary buildings, but we do not intend to continue forever buying properties or putting up new buildings. We think some day we- shall reach the peak and then there will be a decrease. In this city, however, we have rented nearly all the space we can find, and we bought certain properties when we found we could save money by doing so.


Gordon Graydon: How do you save money by doing that?


Alphonse Fournier: If the rental is
so high and the purchase price is so low that we would save in the long run.


Gordon Graydon: But if I may ask the
minister a question, has he not full power to take over any space on lease, just as he may take over a piece of freehold?


Alphonse Fournier: Yes; we can
expropriate.


Gordon Graydon: How many times has the minister done that?


Alphonse Fournier: I have not done it since I have been in the department. Many things have been said against the public works department in the last six months, but I am there every dlay and1 I have: not seen those things happen. I have had many leases for new property. The first building in which I became interested, in connection with which tenders were being called, was the building on Sussex street for the wartime prices and trade board. It must not be thought that I am going round to the other departments telling them I can put up new buildings or rent additional space. I receive these requisitions, and have the officials make inquiries and look around. The space is not made available the day after the requisition comes in. 1 .may tell the committee that since the beginning of the war we have more than doubled the office space we occupy in this city. Speaking from recollection, I believe we were occupying 1,800.000 square feet of space before September, 1939, and we are

Supply-Public Works
now occupying about 3,800,000 square feet in this city, in addition to the space we occupy outside Ottawa.
As to policy, I would not commit the government by stating that we shall not puit up any new buildings or that we shall stop renting space. We do not know exactly what will be our future needs during this war. Every time parliament or the government decides on a new policy or a new organization we have to have space. Sometimes we do not find suitable space. I do not think this is the proper time for the discussion, but I could give a list of the properties rented in this city, and a list of properties acquired since 1939. That list would show that we have space in nearly every public building in Ottawa. We are just as anxious in the department to see a diminution in the leasing of properties, or in the erection of new buildings, but ours is not the main consideration. We have not built anything for the department; it has all been for war organizations. That is part of our work, and is taken out of our war appropriation. If hon. members will look at the break-down given by the Minister of Finance they will see that we have an amount of over $4,000,000 as a war , appropriation. That amount is outside our yearly estimates. I believe last year we expended over $7,000,000 on war projects. We are trying to keep expenses as low as we can, when they are not made in the interests of our war effort.


Gordon Graydon: It may be that the minister is perfectly right in respect to the item upon which a discussion of this kind should be founded. I had in mind particularly, however, the expenditures made on temporary, war-time buildings, and the advisability of having leasehold, rather than freehold, where possible. While I am subject to correction by the minister, it has been my understanding that the Department of Public Works is the medium through which purchases of temporary, war-time buildings are made. It may be that the minister's statement respecting purchases of buildings tells only a small percentage of the whole story, one which perhaps is worse than I had originally anticipated.
I believe the minister's explanation with respect to civil estimates is one about which I cannot complain very much. But in so far as war-time expenditures are concerned, if the amount of $4,000,000 includes only a part of the expenditures which have been made in respect of public buildings and properties for temporary use during a war-time period, then
of course the story is much worse than I had anticipated, and perhaps will lead me to make further inquiries and investigations.
However, I am glad to have the minister's declaration in respect of civil expenditures. I believe it was the understanding of all hon. members that when the war broke out, the Department of Public Works committed itself to a policy of non-expenditure, so far as additional capital was concerned. What the minister has said with respect to maintenance reflects normal and proper expenditures. Concerning them I have no complaint, provided that the money spent for maintenance is well and efficiently allocated.
Is it the policy of the government, and particularly the Department of Public Works, that when properties are available for renting, at reasonable rates, or when leases may be taken over under powers conferred by the National Resources Mobilization Act, sOch avenues are first explored and all such possibilities exhausted before any scheme involving capital expenditures is entered into.


Alphonse Fournier: We always look over properties we can lease before we decide on new construction. We followed the policy outlined at the beginning of the war, that we would not make capital expenditures on public works for civil purposes. However, there seems to be some confusion as to the work done by the department. If hon. members will consult Votes and Proceedings of Tuesday, March 2, 1943, they will find at page 15 certain war expenditures allocated to the Department of Public Works. The amount stated is $7,096,-
000.	I believe the Minister of Finance gave a break-down of war expenditures for the coming year. While I am speaking from memory,
I believe there is an amount of some $4,000000 which will be expended in the coming year.
Civil expenditures of the department have been going down from year to year.


Gordon Graydon: And of course they should.


Alphonse Fournier: There have been no capital expenditures made since the commencement of the war. For 1942-43 the total civil expenditures amounted to $16,533,839, in . 1941-42 they were $19,289,902; in 1940-41, $27,101,541 and in 1938-39 $21,457,824. It is clear, therefore, that civil expenditures have decreased steadily.


Mr. CHURCH:: What is the Minister of Public Works doing to relieve the congestion in Ottawa brought about by the war, through the large number of new arrivals in the past three years? The minister's predecessor had this matter before him, and it was suggested
Supply-Public Works

that some departments might be moved to other cities, so as to relieve congestion in Ottawa, The government is erecting many temporary buildings, which are economically wasteful. After the war they will be torn down. The government is buying property in Ottawa and erecting large public buildings, some of which are for the accommodation of the armed forces. The housing situation is deplorable. The trains are filled with people who cannot find any accommodation. The minister should take a long-term view of this problem. There is a great deal of money being wasted in putting up temporary shacks to house war departments here. If one goes over the list of departments, he will find that many of them have services that relate to the large cities in Ontario and Quebec, and some of those services could be moved out of this city, resulting in an economy and more efficient administration. The minister has been in office for only a short time, but his predecessor had to report upon this subject, and I think something should be done about it. As I say, the public are coming here and cannot find any housing accommodation. Business men are complaining about this situation. The accommodation on the trains, berths and staterooms are filled by government officials located in Ottawa who could be transferred to other cities, thereby effecting a big economy and relieving the housing situation. The government is expropriating property running into millions of dollars, tearing down buildings and putting up others to house duplicate services. Rentals are very high, and something should be done about that. This matter should not be postponed from year to year because otherwise, after the war, there will be an even more serious situation in this city. Have any steps been taken along these lines since the war began? What has been done and what is the policy of the government for the next twelve months?


Alphonse Fournier: The public works department has no decision to take as to the location of the different departments of government. I, as Minister of Public Works, cannot tell the Minister of Finance: You should open up offices in Hull instead of in Ottawa. They know the purposes and needs of their organization, and I am no expert to tell them; you should build or rent in Toronto instead of building or renting in Ottawa. I get a requisition that office space is needed, say, in Regina. The resident architect in Regina, after being furnished with all the details as to the space required* then tries to rent the space, and the same in other cities. We are having trouble enough to house the government service without the public works department being asked to look after the housing of the public.

We have not disturbed many people in the city by the buildings we have put up or leased. We have avoided putting people out of their homes in order to erect new buildings. I have a case in mind where I objected to putting up a building on that open space at Wellington and Lyon streets, because some buildings there belong to the government and it would have meant putting some eighty-two or eighty-four people living in houses there out of their homes. We were thinking about putting up a building there to house the wartime prices and trade board, but the idea was dropped because we would have had to turn eighty or more people out of their homes.


Gordon Graydon: Is the wartime prices and trade board building going up somewhere else?


Alphonse Fournier: We have asked for tenders.


Gordon Graydon: Will it be a permanent building?


Alphonse Fournier: No, it will be a continuation of the national revenue building on Sussex street, down below Mackenzie avenue.


Gordon Graydon: Is it a building that will be used after the war?


Alphonse Fournier: No; it is one of those temporary wooden buildings. We could not rent 75,000 square feet of space to house the wartime prices and trade board. There was no other solution.


Gordon Graydon: I was hoping that this would not keep on.


Thomas Langton Church: Apparently nothing is done except to spend1 money like water on leases and buildings that are an economic waste. The government will never be able to put these buildings to any use after the war. I think the minister should explain why the dominion government does not give a grant to other cities throughout Canada in lieu of taxes on property taken over and for services given, just the same as is done in the case of Ottawa. The Ontario government pays some cities and towns a very considerable sum of money for local improvements and in connection with other matters. The minister's department has followed for thirty years this principle of paying something to the city of Ottawa for the maintenance of services for government buildings, and the same principle should be extended to other cities of Canada

Hamilton, London, and Winnipeg, for instance which have to give police, fire and many other services to the public buildings there. That is done in Australia. It is unfair that other cities

Alaska Highway
should not receive compensation in the same way as Ottawa, because the government gets these services, not at cost, but for nothing.


Douglas Gooderham Ross: Does the Canadian Broadcasting Corporation look after the leasing or renting of their own buildings, or does the Department of Public Works provide them with premises?


Alphonse Fournier: I cannot give a definite answer at the moment, but when item 256 is reached-


Gordon Graydon: That is a broad item.


Alphonse Fournier: Yes; I understand that, but I can give an answer then. The moment a department needs space, a lease is prepared in the public works department.


Jean-François Pouliot: I was ejected from my
office to make room for the unemployment insurance commission.
Item stands.
Progress reported.


[Stage Direction]
At eleven o'clock the house adjourned, without question put, pursuant to standing order.
Tuesday, April 20, 1943