FIELDING (Minister of Finance) moved that the House go into committee to consider the ways and means for raising the Supply to be granted to His Majesty. He said: In the presentation of the budget it is usual to devote some attention to each of three fiscal years. First we have to consider the completed year, the accounts of which have been laid before parliament in due course; next we have tb consider the current year, or as in the present instance the year which actually ended a few days ago, but the accounts of which have not yet been closed; and lastly we have to consider what is the outlook for the year that lies ahead of us. It is now some time since the accounts for the fiscal year 1907-8, were submitted to parliament and probably most hon. members who are interested have given them consideration; nevertheless for the convenience of reference it is always well to note in the budget speech the principal features of these accounts and therefore I desire to call attention to the chief points in them. The results of the operations of the fiscal year

1907-08 (that is, the year which was closed or. the 31st of March, 1908) did not differ very materially from the anticipations expressed in the last budget speech. My expectation was that we should receive a revenue of $96,500,000; the actual revenue was $96,054,505.81, or $445,494.19 less than my expectations. I had counted, however, on an expenditure chargeable to revenue fund of $77,500,000, but the actual expenditure proved to be $76,641,451.59, or $858,548.41 less than the estimate. The falling off in the expenditure was more than sufficient to balance the shortage of the revenue, and the net result was that whereas I had anticipated a surplus of $19,000,000 the actual result was a surplus of $19,413,054.22.

Fund-1907-8.

- Actual. Estimated Budget Speech 17th March, 1908. Greater than Estimate. Less than Estimate.$ cts. 96,054,505 81 76,641,451 59 19,413,054 22 8 cts. 96.500.000 00 77.500.000 00 19,000,000 00 $ cts. $ cts. 445,494 19 858,548 41

Surplus 413,054 22

The previous fiscal period was one of nine months and therefore it would not be convenient to make any comparison between that period and the last fiscal year. It may however not be without interest that I should call attention to what are the sources of revenue as shown in the accounts of that year:

Sources of Revenue, 1907-8.

Customs $57,543,811 25Excise

15,782,151 68Post Office

7,107,886 86Dominion Lands

1,883,619 88Railways

9,534,596 20Miscellaneous

4,202,439 94

It is to be noticed that the customs revenue was the largest in the history of the Dominion. It is also gratifying to be able to state that that very large revenue was realized with a lower rate of customs taxation than had existed in former times, as will appear from the following comparison :

Average Rates of Customs Duty.

Average Rate Average Rate on Dutiable on Dutiable Imports. and Free.

1896

29-974 19:1291897

29-967 18-6131908

26-582 16-480

Particularly gratifying was the continued increase in the revenue of the Post Office Department. The affairs of that department for 1907-8 show a surplus of $1,101,957.12. I am sure the House will agree with me that this is a most gratifying return, especially when we bear in mind that there has been a wide extension of the service, that we have cheaper rates of postage, and that this department a few years ago was a constant burden on the treasury, showing year after year a very large deficit.

I have dealt so far with the consolidated fund expenditure. There is, however, a large expenditure in addition, known as capital and special expenditure. For convenience of reference I put in a statement showing what this expenditure for the year amounted to :

Capital and Special Expenditure, .1907-8. Capital Expenditure.

National Transcontinental Ry $18,910,253 58Railways

4,761,299 54Canals

1,723,156,07Public works

2,969,049 08Dominion lands .. .. 768,243 94Militia

1,297,904 65

Special Expenditure.

Railway subsidies... $2,037,629 30

Bounties

2,787,354 21Charges of management

682,337 91

A large proportion of this capital and special expenditure was provided out of the revenue by means of our surplus of 191 millions of dollars. Deducting from the total capital and special expenditure of $35,937,228, the surplus of $19,413,054, sinking fund expenditure of $2,234,263, and a small refund of $910, in all $21,648,228, it will be found that the increase of the net debt on the 31st of March, 1908, was $14,288,999.88, notwithstanding the fact that in that year we expended $18,910,253 on the eastern division of the National Transcontinental Railway alone. But for that outlay, there would have been a reduction in the debt of $4,621,253.

Coming now to the affairs of the fiscal year 1908-9, which ended a few days ago, I have to point out that our practice with regard to the closing of the accounts of the fiscal year in Canada differs from that of the mother country. There the fiscal year closes on the 31st day of March, and the accounts are closed up immediately. That is quite possible in a country with conditions such as those of England with comparatively short distances and complete means of communication. But in a country like Canada, with a vast territory and public business going on all over the wide Dominion, it has not been possible to close up the accounts so early. The law permits three months for closing the accounts, though we always endeavour to close them in less time. Consequently, although the fiscal year has actually closed, we are not by any means in a position to determine precisely what has been the revenue and what the expenditure for the year. The best we can do is to take the figures as we have them up to date, and make reasonable allowance for probabilities, and thus reach an estimate of what is likely to be the outcome for the year. The revenue of the year, I need hardly remind the House, was affected by a world-wide stringency which started in the fall of 1907. The revenue of

1908-9, as received and accounted for up to the 10th of April, 1909, was $84,352,581.30. My estimate is that when the returns are completed and the account is closed, the revenue will be found to have amounted to 84i millions of dollars. This is 114 millions of dollars less than the revenue of the previous year, or a shrinkage of 12 per cent. In the face of such a falling of revenue, in view of the trade depression so well known, in view of the difficulties which Ministers of Finance the world over are experiencing in the preparation of their budgets, it would not be surprising if it became my duty to report a very considerable deficit on the operations of the last year. I confess that at one time I viewed the situation with anxiety, and would not have been surprised if on the closing of the accounts there had turned out to be a balance on the wrong side. I am happy to say, however, that my apprehensions' in that di

Total

Mr. FIELDING.

rection are not to be realized. I am glad to be able to say, as far as the accounts at present indicate, that we shall close the affairs of the last fiscal year with a surplus of $1,500,000. The expenditure, as shown by the returns up to the 10th of April, 1909, amounted to $72,939,642.22. Taking the expenditure for the balance of the year at about the same as it was in the previous year, we estimate the total expenditure of the year chargeable to income at about $83,000,000 ; and, as I estimte a revenue of $84,500,000, this will leave us with a safe margin of surplus to the extent of $1,500,000, and I am not without a hope that on the final closing of the accounts the surplus may be even somewhat larger. I am sure it will be felt that this statement, if it be realized, will be a most satisfactory one for Canada, for we are dealing with a period when throughout the world there have been financial conditions which have much disturbed business, and when in the natural order of things a very unfavourable balance might have been expected. That statement, of course, deals only with the consolidated fund revenue and expenditure, what for convenience I may call the ordinary expenditure of government.

There is of course to be considered capital and special expenditure. We estimate that it will take twenty-five and one-half million dollars to pay the outlay of this year last past for the Transcontinental Railway. The taking over of the Quebec bridge adds to our debt the sum of $6,424,000, and other capital and special charges amount to $17,300,000. These sums aggregate $49,224,000. From this we will hve to deduct the surplus, estimated at one and a half million dollars, and sinking fund amounting to $1,675,000. These two aggregate $3,175,000 which, deducted from $49,224,000, would leave a balance of $46,029,000, in round numbers $46,000,000, which will be added to the net debt of Canada for the year closing on the 31st of March of this year. This is a very large increase but it is to be noted at once that $32,000,000 of that amount is accounted for by the National Transcontinental Railway and the Quebec bridge, which is to be deemed hereafter a part of the National Transcontinental Railway. So it will be seen that if we have a very considerable increase in our debt, it is due to the very special expenditure that we are incurring id connection with the great work of the construction of the National Transcontinental Railway.

Mr. FOSTER.

Can my hon. friend give the items of revenue, customs and excise?

Mr. FIELDING.

No, I have not these figures at hand in detail. I gave my hon. friend a day or two ago the latest information we had on the subject, and a simple computation for the few remaining days of the year will enable him to work it out for himself.

Mr. FOSTER.

Can the minister give me the amount paid out for bounties in the Consolidated Revenue Fund Expenditure for the year just closed?

Mr. FIELDING.

I have not the figures at hand, but from memory about $2,238,000. If that is not substantially correct I shall give my hon. friend the exact figures later.

I freely say that we might have avoided this addition to the public debt. In the first place, we might have avoided it by refraining from the construction, in the whole or in part, of the eastern division of the National Transcontinental Railway. I have occasionally heard suggestions of something of that kind from the members of this House. Particularly have I heard criticisms of the construction of that section of the line which lies between Quebec and Moncton. Now, whatever may be said by people living in more remote districts, who are not familiar with the needs of that line, there was no portion of the Transcontinental Railway which was so unanimously demanded by the people particularly connected with it as the line between Quebec and Moncton, no portion, I say that without reserve. Time and again representations were made to the government of Canada as to the need for the construction of that road. Not to have built the eastern division, particularly that section, would have been a narrow, almost a provincial policy. The people of the maritime provinces, without regard to party, without regard to any differences they might have on other questions, were practically unanimous in demanding that if Canada was to engage in the enterprise of another transcontinental railway they should have connection with that road by some line which was better suited for a transcontinental service than the old Intercolonial Railway. The legislatures of the provinces, boards of trade, the various representative bodies of that portion of the country, again and again called upon the government of Canada to build that section of the road. Therefore, when hon. gentlemen criticise the construction of that road, I would have them bear in mind what I stated a moment ago, that there was no portion of the whole transcontinental line which was more universally demanded by the people immediately concerned, than that between Quebec and Moncton.

There was another way in which we might have avoided this addition to the public debt. We might have followed the example of our predecessors as to the man-

ner of aiding the construction of a transcontinental railway. I do not say this in order to criticise the action of our predecessors. We know very well that aid was granted to the Canadian Pacific Railway in three forms. There was a gift of finished road, costing an enormous amount of public money, a gift of $25,000,000 in cash and of 25,000,000 acres of land. Leaving out of consideration the cash bonus and gift of finished road to the Canadian Pacific Railway, and considering only the land grant, I venture to say that if we had been willing to give the Grand Trunk Pacific 25,000,000 acres of land in the west, we could have devised a scheme which would not halve added one dollar to the public debt cf Canada. But would it have been a wise policy? I am sure upon that question there will not be a very wide difference of opinion. Whatever may be said of the wisdom of the government of that day in granting such a large land subsidy to the Canadian Pacific Railway, and I have no desire now to criticise that policy, whatever may be said as to the merits of that policy judged in the light of the time when it was devised, it is but the simple truth to say that as the years rolled on that policy caused widespread dissatisfaction in the western country, and if it had been proposed to again adopt the policy of subsidizing a great transcontinental railway by giving a large block of land in the Northwest territory, I am satisfied that such a policy would not have commended itself to the judgment of this House or of the country. The land for the settler, not for the railway corporations, is the demand of the western people.

Oh, oh.

Mr. FIELDING.

So I say that if we had regard only for appearances, if we were afraid of adding to the public debt, we might have avoided it, we need not have responded to the wish of the maritime provinces as to the construction of the eastern division, we need not have paid the large sums that we are paying out now from time to time. We might have given land and I am sure the Grand Trunk Pacific would have received a policy of that kind with great favour. But we were of opinion that a policy of that kind was not a wise policy and that our true course was to build the eastern division of that road as a government work, to pay for it out of the public treasury, to face the responsibility it would bring on us for a short time until that responsibility becomes, as it will at an early period in its history, an interest-bearing asset. While the cost of construction will remain as a debt, there will come a time in the early history of that road when the Grand Trunk Mr. FIELDING.

Pacific Company must pay 3 per cent on its cost. Practically therefore, that portion of the debt of the country will be wiped out because it will be represented as an interest-bearing asset. So we say that while a few short-sighted people, well-intentioned no doubt, might say that we should not have incurred this debt, I am sure that the sounder judgment of the country will say-not necessarily condemning the policy of former times because conditions may have differed then-that it would have been a mistake to-day to adopt that policy of land subsidy, and that we did well to face the financial responsibility which is involved by these additions to the public debt.

Our trade statistics for the past year will necessarily be unfavourable, but they will not be more unfavourable than the statistics of other countries. The year 1907 was only a partial year, a period of nine months in our financial accounts, and therefore it is difficult for us to make comparisons. The total trade for the fiscal year 1908 reached a very high figure, being just $100,000,000 more than that of the fiscal year 1906, the last full period of 12 months.

In 1906 our exports amounted to $256,586,630. In 1908 they increased to $280,006, 606. Our imports in 1906 were $294,286,015, and in 1908, $370,786,625. Our total trade in 1906 amounted to $550,872,000, and in 1908 to $650,793,131. I do not attempt any comparison with the previous year because our fiscal period then covered nine months only. For the fiscal year 1909, we have no official returns that are complete; but from the best information we can obtain in "the uncompleted returns, our exports in 1909 amounted to $261,379,904, and our imports to $292,358,021. Our total trade thus amounted to $553,737,325. Our exports have fallen slightly, but there is a marked decline in our imports. In this respect we are able to make very satisfactory comparison with the United States. As regards imports, Canada and the United States stand on even terms, the decline being about the same in both cases. But taking the figures of the calendar year, it would appear that the exports from Canada have decreased but a small degree, whereas those of the United States have decreased very largely.

Coming now to the year 1909-10, with the adequate resources and widely recognized energies of the Canadian people, it is only fair to assume that we shall speedily be able to overtake the falling off of the past year. It is only reasonable to suppose that the conditions of the past year are quite abnormal and due to special circumstances, which I think will disappear to a sufficient extent the coming year to enable us to receive a very considerable increase of revenue over that of the year just past.

Of course I do not think we would be justified in expecting to reach the very high * revenue of 1907-8, but we do think that the revenue of 1909-10 will considerably exceed that of the year which has closed. The year just closed we are estimating to give a revenue of 84i million dollars. For the coming year we estimate that we shall realize a reasonable percentage over that, but we do not expect to approach at all the revenue of the previous year which was $96,000,000. It will take us undoubtedly another year to overtake that and possibly a little more. We think there is every reasonable probability that 'the turn of the tide has come, and that from this out our revenue will steadily increase. But for the present the revenue of 1907-8 must stand as the high water mark of our income.

With this condition of revenue and with the very many demands being made upon us, it would almost seem unavoidable that we should meet the difficulties by an increase in taxation. In some other countries that seems to be the remedy for the financial conditions that have there arisen. In our judgment, however, there is no need here of increased taxation. We think the truer and sounder method is to meet the situation by a substantial reduction in our expenditure, and that is the method we

have adopted. Unquestionably if we were to continue the same rate of expenditure as that which has prevailed in recent years, we should be obliged to add to the burdens of taxation; hut we have come to the conclusion that the part of wisdom is to ask all concerned to be patient with us for the time while we put the brakes severely on expenditure. I have prepared a statement showing the reductions in the estimates for 1909-10 as compared with 1908-9. It is but fair to say that the estimates for 1908-9 which I quote are the complete estimates for that year. That is to say, they are the estimates submitted in the previous session and the supplementary estimates of the current session. The estimates for 1908-9 on consolidated fund amounted ta $89,412,868. For the new year now beginning, the estimates for the same account have been reduced to $80,078,624. So that in that account there is a reduction of $9,324,243. If we turn to the expenditure on capital account, we find that in 1908-9 our estimates amounted to $43,658,365, and for the coming year the figures are $30,411,150. So that, taking the decrease of $9,334,243 on *consolidated fund account and $13,247,215 on capital account, we have a total decrease in estimates on the whole expenditure of $22,581,458. Here are the details:

. REDUCTIONS IN ESTIMATES FOR 1909-10.

Consolidated Fund-

1908-9.*

ots.

1909-10.

$ cts.

Increase.

$ cts.

Decrease.

$ cts.

Public Works

Agriculture

Militia *

Marine and Fisheries. Railways and Canals. Other Departments..

17,422,354 78 1,719,627 06 5,749,275 22 5,923,900 00 12,435,373 08 46,162,338 17

89,412,868 31

8,184,408 06 1,112,500 00 4,813,150 00 4,879,980 00 11,880,857 33 49,207,729 51

80,078,624 90

3.045.391 34

3.045.391 34

9,237,946 72 607,127 06 936,125 22 1,043,920 00 554,515 75

12,379,634 75

Net decrease Consolidated Fund

9,334,243 41

Capital-

Public Works

Railways and Canals

Dominion Lands_____

Militia and Defence.

3,635,542 29 37,819,566 75 903,256 06 1,300,000 00

43,658,365 10

4.512.000 00 23,828,150 00

771,000 00

1.300.000 00

30,411,150 00

876,457 71

876,457 71

13,991,416 75 132,256 06

14,123,672 81 876,457 71

Net Decrease Capital

Total Decrease Consolidated Fund and Capital

13,247,215 10 22,581,458 51

*Including all Estimates of the Year.

The reductions, therefore, that we are making in the estimates are very considerable. We have yet to bring down some supplementaries for the current year, but 144

they will not materially alter the figures. T.hey will be very moderate. The supplementaries which have to be brought down towards the close of the year are one of the

unseen things we cannot determine in advance, except to say that it is the determination of the government to keep the expenditure of the year within very moderate figures. We ask hon. members to appreciate the difficulty we have in making reductions. There are demands from hon. gentlemen of both sides and from all over the country for many public works, and undoubtedly, in many instances, these works are urgent and important, and with better conditions it would be our duty to respond to those demands. But we wish to point out to those interested that they must submit to the sacrifice, if a sacrifice it be, for a short time, and consent to a severe cut in our expenditure in order that our burdens may not be too heavy and our credit be well maintained. We know that in many parts of the country great works are projected-railways, canals, and other enterprises which may in themselves be worthy enough, some of which will have to be undertaken at a later date and will figure largely in the development of Canada; but it is much more important that we should, in the present condition of affairs, await an improved financial condition. Therefore we say to the promoters of all the enterprises, no matter how worthy they may be, that they must be content to let them stand aside for the present.

Mr. FOSTER.

What amount of capital expenditure is proposed for the eastern section of the Grand Trunk Pacific?

Mr. FIELDING.

$20,000,000. We think that our aim ought to be - and we shall endeavour to accomplish it as far as possible - to provide out of our revenue, during the year now opening, for all the ordinary expenditure and for a considerable part of our capital expenditures-if possible even for all of them. There is one work as to the wisdom of borrowing for which there can be no question, and that is the Transcontinental Railway. If we can succeed in keeping down our borrowings for new works during the coming year to the sum which we wish to expend on the Transcontinental Railway, I am sure we shall have a very good statement to present'. I do not know that we can accomplish this, but it is to be our aim, and I am sure that if for the works of the year we have to borrow any sum in excess of that required for the Transcontinental Railway, it will not be very large.

Now it has been our good fortune to be able to present an uninterrupted series of surpluses for a long period of years. For the first year of this government, 1897, a year in which we had only what I may call a partial control of public affairs, there was a deficit of $519,981.44. Since that, we have had, if I include the estimated sur-Mr. FIELDING.

plus for the year just closed, twelve surpluses amounting to $115,059,087.83. If we deduct the $519,981.44 of our first deficit- if it be chargeable to us-we find that for the twelve and three-quarter years we have had a total surplus of $114,539,106.39. This represents a net average annual surplus for these twelve and three-quarter years of $8,983,459.32.

Now, I am not unmindful of the fact that, as regards one item, the method by which these surpluses have been estimated has been occasionally questioned in the House. I refer to the item of bounties, which is charged to a special account. I have explained this point on several occasions, but, as there are many new members this session, it may possibly not be wrong if I again state the view the government entertained when the change was first made. Under the former government, the bounties, which did not amount to a very large sum, were treated as a drawback. It seemed to be assumed that there was money paid in some way into the treasury, and that it was received back by way of drawback ; at all events the common understanding of a drawback is the repayment of money which has been received.

Mr. R. L. BORDEN.

They were charged to revenue, were they not?

Mr. FIELDING.

That was the result, although it did not take that form. They appeared to be treated as a reduction of the customs duty-the customs duties were understated, in reality, because they were subject to this drawback of moneys which had never been paid in. It reduced the revenue and so was equivalent to a charge on revenue account. We thought that was not the best way of dealing with the matter, that the account should be treated differently. And, as, at that time, the whole bounty question was being re-considered, we came to the conclusion that bounties being a temporary aid to industries,-they have been somewhat longer in existence, it is true, than was expected at the time-they might properly be treated in a special account in the same way as a railway subsidy was treated. When you pay a sum of money as a railway subsidy, you receive nothing for it; you do not get any property, you have no assets to represent it, but you give these sums as temporary aids to a great enterprise, which, no doubt, will bear fruit in future years in the development of the country. And we thought that the bounties, which were to be regarded as temporary assistance to great industries, might properly be treated in the same way. Therefore, they were treated in what is called a 'special account,' the same as railway subsidies. I am aware, as I have said, that the propriety of that has been questioned, but I think that the reasons which

led us to take this view are sound reasons. But, without arguing that, I have thought it better to present the calculation of what would have been the surplus if the bounties had been charged to income.

Mr. R. L. BORDEN.

Will the hon. minister state how much these bounties have amounted up to the present time-in other words, what is the amount of this special account?

Mr. FIELDING.

Speaking from memory, something over twelve million dollars or $1,000,000 a year. If we charge the bounties in this special account all to ordinary revenue account we shall find that the result will be to show a total surplus for the twelve and three-quarter years of $99,832,075.55, and an average annual surplus for the twelve and three-quarter years of $7,869,182.39. It will be seen, therefore, that while the change in the method suggested by some hon. gentlemen would make a difference in the surpluses of that period, it is by no means a very large difference- the surpluses have been so large for the whole period that a change in the method of keeping the account would not materially affect the result.

Mr. MIDDLEBRO.

What deficit would there be this year if the bounties were charged to revenues instead of to capital?

Mr. FIELDING.

Both sides of the account would come pTetty close together; there might be a small deficit; and this is the only year in twelve and three-quarter years when this change in the method of keeping the accounts could possibly have affected the question whether there was a surplus or a deficit. The heaviest item of these bounties, the bounty on iron and steel, will expire in 1910. The bounty on lead will expire in 1913. There is a bounty on electric smelting which runs for two years longer than the other iron and steel bounties, but I do not think that much will be claimed under that item. So, whatever may be said with regard to these bounties, the heaviest items will expire shortly, and I suppose there will hardly be much room for contention as to their proper place in the accounts. I merely wished to emphasize the fact that if a different method of keeping the accounts had been employed, while the surplus would have been reduced on the whole, yet the bounties have played no very large part in that result.

There is another point I wish to deal with relating to surpluses and deficits. I have regretted to observe a disposition on the part of some of the public press to create a new standard in these discussions of surpluses and deficits. One Conservative newspaper sets forth in flaming headlines the statement that in the public accounts for the year there is a deficit of 144i

$30,000,000, with more to come. I have seen similar statements also in the other newspapers. Now, I submit in all fairness that that is not a candid way of dealing with the public accounts. The word 'surplus' and the word 'deficit' have a meaning, a well established meaning, in the finances of Canada. It is not a meaning which I have created, it is not a new meaning, it is a meaning which has existed throughout the public accounts of Canada from the beginning of confederation to the present moment. If we go back to 1867 and look through the public accounts from that year down to the present, we shall discover that if this modern method of computing the surpluses be accepted, we shall be forced to the conclusion-a conclusion which I refuse to accept-that the Finance Ministers from Sir John Rose down to the hon. member for North Toronto (Mr. Foster), juggled with the accounts, falsified the accounts of the each year's operations. I say I do not make that charge; I say that it is not the ease. But I say that this tendency on the part of our critics to take the balance at the end of the year, the balance which is added to the public debt, as a deficit is altogether unfair and at variance with the established practice of the Dominion ol Canada.

Mr. AMES.

What is the established practice of Great Britain?

Mr. FIELDING.

I was dealing with the established practice of Canada.