Mr. RALSTON:

They promised work for

all who were willing to work. They have not been able to make good those promises, and I am going to point out some of the reasons for their failure. I submit the reason why this budget is not balanced to-day is that my hon. friend the Minister of Finance-as a member of the government, not personally- has not the courage to face the people and endure the criticism he knows would be levelled at him if he imposed the taxes that are necessary in order to balance the budget. That is the situation, and the country might just as well understand it. Some people are saying of this budget, "Well, it might be worse." It might be, and the question is whether it should not have been worse if the government had done its duty. The government is throwing over to future generations the obligations for unemployment relief, which after all, is a current obligation-just as they did with regard to war expenditures, when they never levied a dollar's taxation to take care of those expenditures. I do not believe my hon. friend has done his duty in his first budget speech when he has not let the people know the exact position into which he and his government have driven this country-and the only way the people can know it is by paying taxes.

If my bon, friend expects there will have to be $25,000,000 spent for unemployment relief

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this year, it would take another five per cent excise tax on imports in order to cover just that expenditure alone. You will understand now, Mr. Speaker, why my hon. friend does not put on that taxation. There would be different comment in the press if he had imposed that taxation. This talk about the budget "not being so bad" would have vanished into thin air, for the people would have realized who are in power and into what position the country was being led. There is not in this budget anything in regard to the wheat bonus. There is no announcement of the government's policy in regard to this matter. Nothing has been suggested in regard to a bonus to the fishermen, although a strong delegation met the cabinet a few weeks ago urging assistance along the same lines as the bonus to the wheat producers of the west. There is no provision whatever for additional subventions in connection with coal, although my friend the acting Minister of Mines (Mr. Gordon) says the government are considering the matter. I submit that these matters should be in the budget, and we should know what we are going to spend this year, instead of just having the usual government services provided for, but these other expenditures left out entirely and will not be dealt with until probably just before the close of the session. So I submit my hon. friend the Minister of Finance has not done properly by the country, or perhaps by himself, in leaving these matters on one side and not making in his budget the provision that was necessary for them. He should have taken the house into his confidence with regard to all the expenditures which will have to be made, for after all these expenditures involve taxation.

With regard to unemployment relief, I find a great deal of difficulty-no doubt my own fault-in understanding exactly what commitments have been made. My hon. friend was good enough to instruct his officers to give me all the information possible, and I desire to express my appreciation of his courtesy, but I did not know of that until Friday or Saturday morning, and it was only this morning that I was able to get together some of the data I desired. I have not had an opportunity to digest some of the information in regard to unemployment relief. The information which I get from the budget speech does not seem to correspond with the information which wlas given by the Minister of Labour or the right hon. Prime Minister as to the commitments of the federal and provincial governments in regard to this matter. I am simply going to take the statements which have already been made in this

house. By and large it has been said that the government has become responsible, either by way of contribution to the provinces and the municipalities or directly by way of dominion public works or for direct relief for about $50,000,000; the provincial and municipal authorities and the railways have become responsible for $90,000,000-a total of $146,000,000.

I deprecate this practice which has grown up whereby the federal government is loaning to the provinces certain amounts of money, and to some extent making the provincial subservient to the federal authority. I say the thing which should take place is a reconstruction of the financial relationship between the provinces and the dominion, so that the provinces will be supreme in their own sphere and the federal government supreme in its sphere. This idea of swapping cheques between the provinces and the dominion is not good for either party; when you find that $11,000,000 of the national service loan has been invested in treasury bills of one of the provinces and when you find that there is a l'oan of $22,000,000 on the books, it seems to me to indicate a state of affairs that is not good for our country if we want to maintain our constitutional relations, and it is not going to be good for the autonomy of the provinces either. Therefore I say there should be some adjustment and settlement of this matter. This conference which was held last Saturday should have been held long ago in order to make that adjustment and in order that this position of debtor and creditor, this position of subserviency of the provinces to the dominion, should not be set up as it appears in the public accounts to-day.

I leave it at that for the moment, and my other point is this: If the amount I have given is correct-and no matter if the amount should be reduced the principle still applies-it seems to me apparent that this system of affording unemployment relief by forcing the provinces and the municipalities to pledge their credit is basically wrong and is going to lead to financial disaster in this country. For two years my friends opposite have been working on the problem of unemployment relief. They promised to relieve unemployment, and in September of 1930 they brought down their $20,000,000 legislation. It was expected that in February or March of 1931 they would have a definite policy, but they came here and asked for the blank cheque and for full power, and they were given what they asked1. They came again this year with no policy and asked for a makeshift renewal for one month. I say to you, Mr. Speaker, that a proper policy to

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develop employment, which hon. members opposite promised, is long overdue; this situation whereby between the federal, the provincial and the municipal authorities the country has been plunged into debt to the extent of $140,000,000, is something which will be laid at the doors of my hon. friends opposite because of their lack of a policy and their lack of courage to deal with the matter.

My hon. friend omitted from his budget some items which have appeared in the past. One item to which I refer particularly is a comparison of the debt from year to year. My hon. friend said that the net debt of the country had been increased by $119,500,000. I did not hear any applause from either side of the house, but I took occasion to compare the statement of the funded debt of this country, as it appears in my hon. friend's budget statement, with the statement of the funded debt of this country which appeared in the budget statement of the right hon. Prime Minister a year ago, when he was Minister of Finance. I find quite a difference in the figures. On March 31, 1931, the unmatured public debt represented by bond issues on which the Dominion of Canada was directly responsible was $2,319,196,847.39. That appears in the speech of the present Prime Minister at page 2328 of unrevised Hansard for 1931. According to the statement of my hon. friend the Minister of Finance, the unmatured public debt of this country as on March 31 this year amounts to $2,501,782,733.23, so there is a net increase of $182,585,885.84, which is rather different from $119,500,000. I asked the Department of Finance for, and was furnished with, a reconciliation of those figures. I just received it before luncheon and I do not have it under my hand at the moment, but I think I can give most of the items. The reconciliation showed that something like $41,000,000 was owing by the Canadian National Railways; that this $22,000,000 was loaned to the provinces; that $12,000,000 was loaned to harbour commissions, and that there was a certain amount of cash on hand. But I point out to you, Mr. Speaker, that this is not the way we figure the debt of the dominion when we come to find out exactly what has to be paid and what are our obligations. There is some doubt as to whether or not some of these loans will be repaid.

This question has 'been raised previously in this house; the real question is what is the solemn obligation of this country on unmatured bonds on which we have to pay interest, and that amoilnt is the amount I just gave, which shows an increase of $182,000,000. I have pretty good authority for that contention, or at least I am sure my hon. friend will

regard my authority as good. I quote from a speech by the present Minister of Justice (Mr. Guthrie) in 1929. He said:

We have never had very serious controversy about the funded debt of the country, but I am glad to note that in his speech last Friday the minister for the first time took serious account of w'hat we know as the funded or bonded debt or, as he put it in his remarks, the dead weight debt of the Dominion of Canada. That, after all, is the important item in the financing of this country. The net debt is not a matter of the greatest consequence; in England they never refer to it at all. There they use the one term "dead weight debt," and I am glad that the minister has used that term on this occasion, because that is the debt which counts. It is the amount for which the government of this country has issued in solemn form its bonds and obligations, signed, sealed and delivered, which bonds are now held by people who have invested in our securities. These bonds have to be paid at maturity, and in the meantime interest must be met. They therefore constitute the real burden which the people of this country are compelled to carry.

The net debt is comparatively unimportant: it is a matter very largely of book-keeping and depends upon how you see fit to estimate the value of your assets. We have assets that are certainly good liquid assets, but we have a lot of assets in this country which we carry as non-active assets, and if you want to transfer some of these non-active assets to the active list you can immediately decrease your net debt. It is, I say, a matter largely of bookkeeping. But the debt which counts is the dead weight debt.

I say to you, Mr. Speaker, that on that basis the debt of this country, instead of being increased by $119,000,000, as my hon. friend suggests, has been increased by $182,000,000-I should like to show just how far hon. gentlemen opposite have gone in the matter of debt increase, and I should like to. compare the funded debt as of March 31, 1930, when Hon. Charles A. Dunning delivered his budget speech, with the funded debt as it appears to-day. On March 31, 1930, the funded debt was $2,194,746,563.57; I have already given the figure for March 31, 1932, so under the administration of my right hon. friend the present Prime Minister, in the last two years there has (been an increase in the funded debt of Canada of $307,036,168.66.

I am not going to trouble the house with extended references to the debt reductions made during the last five years of Liberal administration, except to remind hon. members that in that period reductions in the funded debt totalled $257,866,939. Now we see that this whole reduction has been wiped out in two years under this government and we are $50,000,000 worse off than we were before. Let me remind the house also that from 1921 to 1930, when the government of my right hon. leader was in power, the interest saving

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was $20,500,000, and of that sum $5,100,000 was saved through conversion loans. The Prime Minister seems to think that conversion loans are his own idea, but note this; that $5,100,000 was saved by the refunding of maturing loans at lower rates of interest; in other words, there were conversion loans even in the days before the right hon. gentleman became Minister of Finance.

There is another matter I wish to discuss, and on this point I wish my right hon. friend were in the house. I said that the Minister of Finance had made certain omissions with regard to possible expenditures for unemployment relief-wheat bonus, bonus to fishermen, subventions on coal and so forth. But there is a definite obligation he also omitted. The Minister of Finance has attempted to list the indirect obligations of the Dominion of Canada, and I do not find anything here about the seven or eight or ten millions-no one knows just how much it is-which has been guaranteed, so the newspapers tell us, by this government in connection with the Beau-harnois project. Not a dollar is mentioned with reference to this matter; no information is given concerning it. The story is that there have been guarantees but they have not been mentioned in this statement which has been submitted by the Minister of Finance. Let me say, with regard to that project, that in my opinion the general feeling is that it is being bedevilled at the present time by the vacillation and the lack of policy on the part of my hon. friends opposite. There was a project which was a perfectly good one; that was the report of the engineers and of everyone who had anything to do with it. It is a project in which a good many small investors have money. But at the present time, for some reason or other, my right hon. friend who has taken hold of it is simply dandling it and nursing it, but he will give no information concerning the matter. No information can be obtained at all by those people who have their money in it and who naturally are interested in the undertaking. They do not know" what is going to happen to what is probably the greatest power project in North America. I protest against the fact that there is no statement here with regard to what direct or indirect obligations we are undertaking in connection with this project, nor with regard to what policy my hon. friends opposite intend to pursue so far as Beau-harnois is concerned.

Time is passing, but I should like to put on record one or two facts with regard to the Canadian Nation! Railways-facts which have been mentioned before but which it seems to 41761-119

me ought to be reiterated in the presence of those who have to do with the country's business and particularly with the country's finances as affected by this great national enterprise. The Minister of Railways (Mr. Manion), even this session, has made two or three illuminating speeches with respect to the Canadian National Railways, and the Minister of Finance (Mr. Rhodes) has put on Hansard some figures bearing on the subjecv. I venture to say, however, that even now it is not clear in thei minds of the public just exactly in what the financing of tha Canadian National Railways -consists. In the first place, successive governments have advanced to the various constituent railways which go to make up the present Canadian National railway system-that is to say, the Canadian Northern, the Grand Trunk, the Grand Trunk Pacific and the Canadian National-something like $604,000,000, in addition to which there have been appropriations on account of government roads of something like $405,000,000, making a total of about $1,000,000,000. But there is also added to this-and this has been mentioned repeatedly in the house- interest on this amount as if the present Canadian National Railways would have to pay it. May I direct to the attention of the house the fact that the Minister of Finance, in the statement he has brought down, do-es not even include interest, in connection with these advances in the non-active assets. No mention whatever is made of it. With regard to the $604,000,000, this has 'been called a bookkeeping item by the Minister of Railways; it has been called a bookkeeping item by the present Minister of Justice (Mr. Guthrie). Well, everyone agrees that it is a bookkeeping item. Nevertheless, that amount is being rolled over and over and is always being talked about.

Mr. MANION:

To avoid any misunderstanding, will my hon. friend allow me to say this. There is another item which the hon. gentleman has not mentioned but to which he has alluded, namely, interest owing to the government amounting to $350,000,000. It is not in the Public Accounts, and no doubt that is why the Minister of Finance does not mention it. But it is mentioned, as it always has been mentioned, even under the regime of my hon. friends opposite, and mentioned continuously, in the books of the railways. That is where the figure appears.

Mr. RALSTON:

I would point out to my hon. friend that that amount of interest is not even carried or regarded as a non-active asset, let alone an active asset. It is carried

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on the books of the railway to the prejudice of the railway. It never should be on the books of the Canadian National Railways any more than the 8604,000,000 should be. The fact is, there has never been a definite reorganization of the capital of the railway, with the result that not only does the Canadian National system carry on its books that interest, but it carries principal as. well. The Minister of Railways will agree with me also that there should be a reorganization of the corporate units going to make up the Canadian National railway system-there are anywhere from one hundred to one hundred and twenty-five of them-so that people might be able to think clearly about them. The $604,000,000, the $400,000,000 for Canadian government railways, the $350,000,000 for interest, are items which we might as well forget all about so far as our public accounts are concerned. And what does that leave? It leaves the moneys advanced from time to time, since away back in 1878, amounting to $1,276,000,000, of bonds which have been sold periodically and on most of which the Dominion government is liable. That is what is called the debt to the public. That is the amount which is charged to the railway, and when there is a deficit in the railway accounts it is arrived at after the railway has been charged with the interest on these bonds. That is the situation with regard to the Canadian National Railways.

May I point out that even this year the Canadian National Railways more than met operating expenses. It had a balance of from $2,000,000 to $3,000,000; but when interest on the $1,276,000,000 is charged, you get a deficit.

Mr. MANION:

That is not the money

owing to the government.

Mr. RALSTON:

No. I repeat that the

money owing to the government we have put to one side. We have set aside both the money owing to the government and the interest thereon, because the interest is not even carried by the government as an indebtedness of any description. Let us forget it, because everyone has agreed that we might as well do so. As I say, the Canadian National Railways' operating account had a surplus this year of two or three million dollars, which is eaten up and much more than eaten up by the interest on the $1,276,000,000 due to the public. That statement will, perhaps, help to an understanding of the situation. The deficit, after you have charged that interest which is due to the public, is something like $52,000,000.

My hon. friend in one statement was not quite fair to the Canadian National Railways,

and I presume it was a slip. In dealing with the finances of the country he said that Canada, in common with all other countries, had experienced a period of depression. But when he dealt with the Canadian National Railways he did not suggest that the Canadian National, in common with all other railways, had also suffered a period of depression. I want to give the figures to compare the Canadian National Railways with the Canadian Pacific Railway and the roads in the United States. From 1928 to 1931 the revenues of the Canadian Pacific Railway fell off 35.8 per cent, while the revenues of the Canadian National Railways -I have not the revenue figures but I have the traffic figures and they will be practically the same-fell off a little more, 37.65 per cent. For 1931-32, the revenues for the Canadian Pacific Railway fell off 23 per cent, while the Canadian National showed a falling-off of 20.3 per cent; and on all North American railways it was 20.7 per cent. So that the Canadian National railway system is entitled at least to this credit, that it is doing as much business as the rest of the railways; and it is in common with those railways that it is suffering this period of depression.

One thing more. It has been repeatedly said that there has been a large amount of capital expenditure on the Canadian National Railways. I referred to this briefly last year, but since then I have looked up the records of the special committee on railways, and I find that these expenditures, which were made, have been voted every year by that committee unanimously, without objection. I have here the record which I could read if I had time. I have the yearly record of the committee and the yearly reports which were presented to and adopted by this house. Everything was concurred in and passed by the committees and the reports were passed by the house. All of this in connection with capital expenditure. For the purpose of reference, I refer particularly to the journals of the house for 1926-27, page XIII; for 1928, report of the special committee, page VIII; for 1929, page IV and for 1930, page 3.

Last year I quoted the statement of the Minister of Justice (Mr. Guthrie) in which he boasted of the success of the Canadian National Railways, alleged that the real credit should be laid at the door of his former leader, the present leader of the Senate. I do not intend to bother again putting that on record, but I desire to sum up with regard to these roads which make up the present Canadian National Railway system. In the first place, they are a conglomeration of railways, obviously not built with the intention of being one system but which had to be put to-

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gether in order to make one system. Secondly they are the combination of the policies of all governments. The other day someone intimated that the trouble was caused because three transcontinental roads had been built. It was the policy of everybody that three transcontinental roads should be built.

No.

Mr. RALSTON:

In 1904 my friends voted to have a second transcontinental railway built as a continuation of the Intercolonial. In 1913 and in 1914 guarantees were given in order that the Canadian Northern might be completed from the Pacific coast to Montreal. Everybody agreed that there should .be three transcontinental railways. There is no use of my hon. friends gainsaying that fact; there is no use of their going back into ancient history and talking about the past.-everyone was vying with each other in order to have the railways developed, and it was only a question of method. The Canadian National Railways is a combination of the policies of all governments. Thirdly, the advances made by the government have been wiped out by common consent. Fourthly, the Canadian National Railways' capital expenditures have been approved by both parties in this house. Fifthly, the revenue losses on this road .have been no greater than they have been on other roads. Sixthly, I ask the house to note this: The capital structure of the Canadian National Railways are not represented as they are in private railways by common stock on which no interest or dividend is paid unless warranted by the earnings. The capital is represented by bonds which are an annual charge against the road and which show up much more clearly than they do in the case of roads whose capitalization consists partly of bonds and common stocks. In other words, the Canadian National Railways is in a class by itself. Naturally, its financing is more difficult since the annual charges always come before the public in the shape of bond interest.

Seventhly, the management of the railways has been approved of by all parties, and in this connection I refer to the statement of the Minister of Justice. And, finally, there has been a surplus on operating account for many years.

But there is no doubt that the problem of financing is a difficult one. It must be faced squarely but I shall say nothing more in view of the fact that as the Minister of Finance has said that there is now a commission engaged in considering the whole railway problem of this country. I simply bring these facts to the attention of the house and the country.

I come now to what is the interesting but after all the most sombre part of my hon. friend's address, and that is in connection with the ways and means of finding funds to carry on government. In one fell swoop he provides that the twenty per cent discount on income tax put into effect by the former government shall be wiped out. He provides that there shall be a five per cent surtax on the tax on incomes above $5,000. He next provides, and I think this the most difficult feature to justify, that exemptions for married men shall be reduced to $2,400 and that this charge shall apply to last year's salary. What is the effect of this? I think my hon. friend sees and knows the result which will follow. An individual who received last year an income of $2,800 found it pretty close going for himself and family. He did the best he could to live within his income and made his expenditures believing that he would have no income tax to pay as he was exempt up to $3,000. However, this year he finds that notwithstanding the fact that he has spent his $2,800 earned last year, his salary is cut-'he may be a civil servant or employed in a factory or anywhere else-wages are down, and he has now to pay a tax on his last year's salary out of his reduced salary of this year. This hits the man with a modest income and it falls particularly hard upon the civil servant. My hon. friend has said that he was picking out the civil servant in order to make a levy upon him; he is making a levy of ten per cent by reducing his salary and in addition he is collecting a tax on last year's, salary. This tax will fall heavily upon a lot of people. My hon. friend has not given us the figures but he probably knows how many incomes there are between $3,000 and $2,400. I venture to say there is a large number and I question whether the collection of this tax will be worth the expense, my hon. friend probably has made an estimate. But he ought to realize that this tax falls heavily on the man receiving a small salary and who has to face a reduction this year.

What would have been the obvious thing to do? The obvious thing to ha/ve done would have been for the Prime Minister to have gone ahead last year with his income tax proposals instead of taking such a personal dislike to some remark which was made about one feature of the measure which favoured those who enjoyed large incomes. He jettisoned the whole question of income taxation. Had he not done so probably sufficient taxation would have been raised from the higher bracketed incomes to have made it unnecessary

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to reduce the exemptions this year. Because of a little pique, or considerable pique as a matter of fact, the right hon. gentleman dropped his income tax proposals; he would have nothing more to do with them, and the result is the burden falls not only on the man with the large income but on the man with the small income which has already been considerably depreciated. This rearrangement of the income tax will be difficult for my hon. friends to justify. _

We now come to our dear old friend the sales tax. Two or three years ago this tax was roundly reviled by the Secretary of State (Mr. Cahan) and the Prime Minister termed it the poor man's income tax. This is what he said as appears on page 397 of Hansard of 1927:

And that sales tax is the poor man's income tax-the tax upon his clothes, the tax upon the commodities that enter into his everyday life-[DOT]

In 1928 my hon. friends introduced a resolution asking for the abolition of the sales tax which was then only three per cent. At that time the Secretary of State said:

They then discovered that this rate was an intolerable burden on the country, increasing exorbitantly, as every per cent of it did, the cost of living. They first reduced it to 5 per cent, then to 4 per cent, and now they propose to reduce it to 3 per cent-just where they found it on attaining office. I think the opinion on both sides of the house is that when making their last reduction they should have announced the abolition of this tax, for thereby they would have done more than by any other single act of government to reduce the average cost of living in this country, which is so high in comparison with the cost of living in the same state of society across the border.

The Prime Minister is reported on page 1253 of Hansard of 1928 as saying:

AVe contend that the sales tax should be abolished. Why? The Minister of Finance asks, where shall we get the revenue from? If economy were practised in this country, if an annual sinking fund were put away-

Where is that sinking fund to-day?

-money being earmarked for this purpose when derived from the sales tax, then I could understand my hon. friends desiring to continue the tax.

The Minister of Justice is reported on page 1124 of Hansard of 1928 as saying:

I have only one other observation to make, and I have but a few minutes in which to make it. There is another aspect of the budget I do wish to mention, and it is in regard to what I call the iniquitous sales tax. On a former occasion during the present session I mentioned the sales tax, and I told the Minister of Finance that so far as it was in the power of an opposition to make demands upon the government, this opposition was going to demand the abolition of the sales tax during the present session of parliament. I regret that the tax has not

been abolished; it has merely been reduced to that point at which it was seven years ago when the Liberal government took office. The sales tax was imposed as purely a war measure. The war has been over for ten years, but this administration still maintains that iniquitous burden on the people of this country. My hon. friend the Finance Minister may wave his hand and announce that he has made another cut in the income tax, and the wealthy men of Canada will appreciate that no doubt; but if he had wiped out the sales tax he would have conferred a benefit, not upon the wealthy, but upon the people of the dominion least able to bear that tax.

Then for a moment he turned aside to discuss the changes in the tariff rates on woollens and later he came back to the sales tax; it seems to have been on his mind. He said, referring to the Minister of Finance:

Now, cannot I warm up his heart in regard to the sales tax? I agree that ours is a cold climate in the winter season; people must wear woollen clothes. By retaining this sales tax of three per cent- '

Only three per cent, mind you!

-a man has to pay an extra ninety cents on a $30 suit of clothes. Do the people of Canada yet realize that they are paying this iniquitous tax into the treasury? Do they know that this war burden is still in force? I know the complaint is made from time to time that the retail merchants are still keeping up prices, but do the people realize that on $100 worth of purchases of boots and shoes, clothing, furniture, everything save food, they have to pay to-day $3 into the treasury of Canada to help in the reduction of the national debt? I do not believe they realize that. Four per cent they paid last year, five per cent the year before, and 6 per" cent for a while, and with what a grand flourish the ministers of the crown announced these reductions! Last year the minister said: We have reduced the sales tax 20 per cent. It sounded like a large reduction, but it is only one per cent as a matter of fact-one cent on a dollar. The other day the minister announced: We have reduced the sales tax 25 per cent. The ordinary people thought: It must be gone this time sure. But only another cent has been shaved off the top, and for every $100 worth of clothing, hats, mitts, boots and shoes, to be worn in this cold climate of ours, $3 must be paid into the treasury, although the war was over ten years ago. What did the minister say last session? "Why," he said, "how can I do it?"

Then the Speaker called time. I have no doubt my hon. friend will have a good deal of enjoyment in making that same speech in cabinet councils as they discuss the new 50 per cent addition to this iniquitous sales tax. Let me point out to him that if a family spends, say $750; they paid $7.50 sales tax under the rate as it stood when the Liberal party went out of power, whereas under the rate this year they will pay $45.

Mr. STEWART (Edmonton):

In this cold climate.

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Mr. RALSTON:

Yes, in this cold climate, and I understand also some of the articles of food are going to be removed from the exempted list. But even that is not the worst of the situation. My hon. friend said: People do not realize this. He is quite right; the people do not realize how much they pay. Last year I noticed a letter sent, I believe, to all the members from the secretary of the Wholesale Grocers' Association, and this is the naive way in which he put the matter with regard to sales tax. He was arguing against the turnover tax. He said about the sales tax.

It is being enforced fairly, working smoothly, and equitably, and seldom comes before the public eye as it is buried in the price of an article, and is almost an unknown and unheard-of quantity.

It is there just the same and the people will be paying it this year.

And besides that the government are going to be offending against another principle which was laid down by the present Prime Minister. In this house in 1927 he waxed most eloquent with regard to this matter of taxing a tax. Does he realize that the sales tax is imposed after the duty and, indeed, after the dumping duty are imposed on an article? This is what the present Prime Minister said as reported at page 402 of Hansard of 1927, it will be noticed that he had the cart before the horse, although I think this was just a slip of the tongue. He said:

It is not sound to tax a tax. and under the present tariff regulations the sales tax is added to the cost of the article and the duty computed upon the sales tax and that cost.

He was wrong about that; it was just the other way about. The duty was added to the cost of the article and the sales tax computed upon the cost of the article plus duty.

That is the present position. It would be in the interest of trade and the development of commerce that that should be removed if at all possible.

That is just one more thing with regard to which my hon. friends have made protestations, promises and professions and which they will have to face when the time comes. When the six per cent sales tax was imposed in 1923, we found the tax already pyramided; as everybody knows it was practically six per cent then. Further than that we had a legacy of debt which was the result of the previous administration and which had to be paid off. Our hon. friends have a legacy of surpluses, of reduction of debt, and still they are increasing the sales tax by fifty per cent in this

year alone after increasing it from one per cent to four per cent last year.

I say nothing with regard to the nuisance taxes. They will probably be dealt with when the resolutions come before the house. I will say just this at the moment: Sometimes I think, in order to make people realize not only in budget speeches, but in other ways, just how difficult things are with my hon. friends in power, these taxes should be raised so high that we shall not be able to enjoy * any more luxuries such as Pullman cars and that sort of thing. I am, however, making no protest now as regards nuisance taxes, something will be said about them on the resolutions themselves.

Let me come now to the matter of tariff. The subject of tariff and trade is perhaps the most interesting and certainly the most disquieting part of my hon. friend's speech; on trade depends the whole structure of our financial system. You cannot collect any sales tax if you have not transactions; you cannot collect any duties if you have not imports; you cannot collect income tax if there is not any income, and the amount to be collected on cheques, telephone messages and telegrams all depends on the amount of trade which is being done in this country. Further than that, you cannot make the Canadian National Railways or the Canadian Pacific Railway or any other railway pay if you cannot give them traffic. That is at the bottom of the whole trouble in Canada at the present time and the budget figures, viewed in that light, are most disquieting. What is the budget, when you come to size it up? Our trade has been depleted 50 per cent, and I have already spoken about the increase of debt, the deficits and the increased taxation. The government's statement amounts only to this: We have no remedy under the sun to suggest, but we are simply going to impose more taxes. There is not a. policy, not a suggestion of improvement to throw a little light into the darkness except the possibility of something coming from the Imperial conference. I think the way in which my hon. friend put it was: We are near events which may have some sort of happy augury for the future.

The budget figures, as I say, show a reduction of 50 per cent in our total trade in two years. There is no need of this. My hon. friend began his address by indicating the present difficulties throughout the world. Let me point out this to him: Canada is in a

unique position because she sells the necessities of life. She is therefore a country which should be in the best position to recuperate most quickly and to take advantage of

The Budget-Mr. Ralston

Excessive Rates Due to Increase of Tariffs-Arbitrary Fixing of Exchange Rate and Applying Dump Clauses (includes 1 per cent Excise Tax and 4 per cent Sales TaxJ

Woollen and cotton blankets.. ..

Gloves and mitts **

Children's socks and stockings. . Fabrics, wholly or in part artificial silk

No fabrics are more used to-day Printed or dyed cotton fabric.. Linen tablecloths

Pritish preference

Old New Percentagerate rate increase214 94 350214 43 10023i 99 300191 75 300than these: 191 461 15019 41 110General tariff Old New Percentagerate rate increase35 167 400364 90 150364 161 35036 133| 300281 83 200

I do not think there are many linen table-

Not of that class.

cloths manufactured in this country.

Mr. GUTHRIE:

Yes.

Mr. GUTHRIE:

Oh, yes, there are.

Cutlery, plated, not steel.. ..

Earthenware dishes

Axniinster carpets

Cotton sheets

Pillow cases

Silk fabrics (France) .. ..

Silk fabrics (Switzerland) ..

Old

rate

21J 194 23| 161 16

Mr. RALSTON:

I do not think so.

New Percentage Old New Percentagerate increase rate rate increase481 100 364 314 90 15043 125 701 13386 275 46 185 45 175 31 75 15030 75 150

I am putting those figures on record, Mr. Speaker, in order that people may know exactly how the tariff has been raised, because they will not find those figures in the tariff schedules. I need not say those figures include sales tax, excise tax, the exchange rate and the arbitrary fixing of the value for duty purposes by the Minister of National Revenue.

Mr. STEVENS:

How does my hon. friend justify the last two items, covering silk from France and Switzerland? I could not quite understand that.

Mr. RALSTON:

I want my hon. friends to justify them.

Mr. STEVENS:

My hon. friend misunderstands me. I quite understand his compilation in regard to Great Britain, but how does he arrive at those increases with regard to the last

two items?

Mr. RALSTON:

I am giving the two rates; I have the actual computations here, taken from actual invoices, which I will let my hon. friend see.

That is the position with regard to increases in duty. The situation in this country is that a man does not have to ask for protection; he is given more than he would ask for. A letter was sent out some time ago, and no doubt received by other members as well as myself, signed by Mr. James R. Dickson, representing the automobile dealers of this country, and with regard to the amendment passed last year

which prohibited the importation of automobiles this is what he says:

The foregoing amendment goes further than had been generally requested or anticipated, and places this commodity on the list of prohibited goods under tariff item 1215.

Further on the letter states:

. . . the government is being commended for the manner in which it has now so effectively met the issue, by going even further than was requested in the public hearing.

The request was only for an additional ad valorem duty of fifteen per cent. My hon. friends rush out to find people in order that they may give them the benefit of protection. It does not seem to be a case of asking for it, and there does not seem to be any idea of having anyone prove their right to it.

What has been the effect? Later on I shall show the effect so far as the increase in price is concerned. If my hon. friend wants to find out why the amount collected in customs duties this year is 820,000,000 less than it was last year, in spite of the astounding increase in the tariff at the last session, he can get his answer from just such instances as I have quoted. He is simply drying up the sources of revenue; people are not going to import goods. I would not mind so much if it had done the domestic industry any good, but I propose to show that it has not.

What else has it done? It has produced a state of uncertainty in this country among importers and consumers, and they have just as

The Budget-Mr. Ralston

much right to be considered as people in special industries. The effect of this uncertainty is hard to estimate. There is not a man who, when he gives an order for goods, can be certain that the duty on those goods will not be changed overnight. There is not a man who can send out a traveller to take orders for goods which he has to import without making some sort of reservation, because he may be caught by the fact that while to-day the duty is so much, under the special power given the Minister of National Revenue the duty may be increased 100 per cent before the goods arrive. That makes for uncertainty in business. I remember very well the pledge of the Prime Minister during the election, " The stabilization of economic conditions and the freedom from manipulation of home and foreign tariffs." Could there be any greater chance of manipulation, or any opportunity of which greater advantage has been taken than is the case here, with my hon. friends opposite sitting day after day in the east block passing these orders in council?

I say this is producing a state of uncertainty which is leading to greater difficulties than exist with regard to industry itself. Probably there are ten thousand importers in this country, and perhaps they have more people employed than are employed in the industries themselves. These people form the backbone of our nation; the consumer has a right to be considered, but no one can get or give absolute quotations because at any time the Minister of National Revenue may raise the value for duty purposes.

What has been said about this power? This quotation has been given before, but a good thing is well worth repeating. Back in 1923 a provision was placed in the statute with regard to some fifty items of natural products on which the value for duty purposes might be increased. I think that power was used only once or twice in the whole Liberal regime, and finally the provision was repealed. What was said about it by the gentleman who today leads the Senate in support of my right hon. friend?

There should never be an unrestrained discretion in the hands of any minister or any government. There should be some principle laid down by this house to which the government must abide, and beyond which they cannot go. That is sound, sensible legislation. That is the protective principle democratically and fairly applied. What is proposed here is the protective principle, autocratically, and perhaps unfairly, applied. [DOT]

For purposes of valuation the minister can fix the value where he likes, on any basis lie likes, to suit any interest he likes, as low as he likes, as high as he likes, and when he likes.

In a word, this simply puts into the power of the minister the whole elevation of the tariff of this country.

The minister can put on any valuation he thinks fit. In other words, it virtually enables him to fix the tariff where he pleases, and the house is asked to support the minister in that.

That statement was made with regard to the fixing of values for duty purposes on about fifty items of natural products out of a tariff list containing some eleven hundred items. This present provision applies to every item in the schedule, and what is more, this power is being exercised every day, as these orders in council, memorandums and bulletins show.

So much for uncertainty, Mr. Speaker, and so much for excessive rates. Now what about the effect on prices? I want to be as serious as I can with regard to this matter, but with all due deference I do not think there ever was any greater joke perpetrated than the suggestion that you can raise the duty as high as Haman's gallows and still not increase prices. I do not believe anyone in this house or in the country doubts that prices are being kept up in this country because of the fact that the duty has been raised. Let me give one or two figures. In a letter issued by the Bank of Nova Scotia in March I find the following:

At the end of seventeen months ....

Following the depression of 1920.

.... the index of Canadian farm products was 50'5 per cent below the 1920 maximum; the index of manufactured goods was 38 per cent below. ... To date ....

Since the present depression began.

.... the index of Canadian farm products has fallen by 46 per cent-a decline little less abrupt than that of 1921; the index of manufactured goods has fallen only by 15 per cent.

I ask you, Mr. Speaker, what is keeping up the prices of manufactured goods at this time? The tariff is responsible for the prices of manufactured articles to-day, and the farmer, the miner, the fisherman, the lumberman and all the people on the streets of our towns and villages, the ordinary, everyday people, are buying these articles and paying these artificially maintained high prices. While the products the farmer and the other primary producers have to sell are down fifty per cent in price the articles he has to buy for everyday use are down only fifteen per cent. Let me refer to the figures issued by my hon. friend the Minister of Trade and Commerce to show the fall in the prices of a number of articles:

August, February

1930 29,1932 DecreaseGrains . 64-3 43-1 21-2Live stock. . . . . 95 65-9 29-1Dairy products . . 85-9 59-3 26-6Textiles . 79-7 71-6 8-1

The Budget-Mr. Ralston

I have just read some of the duties imposed on artificial silk by reason of the power given the Minister of National Revenue to fix values for duty purposes. On artificial silks the price has actually gone up. The index figure was 62.4 on August 1, 1930, and 64.9 on February 29, 1932, or an increase of 2.5 per cent. In farm products the fall, as I have indicated, has been between 29 and 21 per cent. Take carpets; I also mentioned the high duties. The price figure was 92.4 on August 1, 1930, and 93 on February 29, 1932. In rolling mill products, the figure was 93 on August 1, 1930, and 92.2 on February 29, 1932. Take cast iron and steel: on August 1, 1930, it was 89.19 and on February 29, 1932, 84.19, or a drop of 5. In hardware it was 91.7 on August 1, 1930, and 88.6 on February 29, 1932, or a drop of 2.8. On wire it was 89.3 on August 1, 1930, and on February 29, 1932, 82.8, or a drop of 6.5. On boots and shoes it was 98.3 on August 1, 1930, as against 93.7 or a drop of 4.6.

The farmer sells his farm products, his live stock at 29 per cent less, and his grain at 21.2 per cent less, but he pays only 4.6 per cent less for his boots and shoes.

So much as regards prices. Let us look at the effect on domestic industries. Has the policy of putting a barbed wire fence around Canada helped the domestic industries and added to their number and developed trade as my hon. friends believed it would? Has the home market turned out to be the thing they boasted of? Employment is lower than ever in this country. Let us take employment by classes of industries, as taken from the Labour Gazette for March 1, 1932, page 328:

Aug. 1 Feb. 1 Aug. 1 Feb. 11930 1931 1931 1932All industries. . 118-8 100-7 105-2 98-7Manufacturing. 110-2 90-1 94-7 85-9Trade 126-4 123-1 120-9 117-2

And look at the unemployment figures, as taken from the Labour Gazette, March, 1930, page 334:

Jan. 1 Aug. 1 Jan. 1 Aug. 1 Jan. 1 1930 1930 1931 1931 1932All

10-8 9-3 16- 15-8 22-

Has protection made us rich? Has protection developed the industries of the country? Has it had the effect which my hon. friends predicted and boasted of when they put into force this policy of building an impregnable tariff wall around Canada? Let us look at employment in those industries in connection with which imports have decreased. My hon. friends opposite have said that if you decrease the imports, stop them coming into Canada in competition with Canadian

industries, we shall have more employment for Canadians in the industries so protected. Let us take two or three. Fibres and textile products is one industry that has been helped a good deal. According to Trade of Canada for the calendar year 1931, the imports in 1930 were 8149,000,000, and in 1931, $90,000,000. Well, if therei is that much less in the way of imports there must have been a correspondingly greater activity in Canada. But let us look at the employment figures. On February 1,1930, it was 103.5, and on February 1, 1932, 96.3. The diminution in imports does not seem, therefore, to have added to employment in Canada. Take farm implements; the imports in 1930 were $21,900,000, and in 1931, $3,900,000, five times less; but the employment figure was 47.9 in 1930 as compared with 29.7 on February 1, 1932. In machinery the imports in 1930 amounted to $50,000,000, and in 1931, $29,000,000, whereas the employment figure on September 1, 1930, was 113.4 and on February 1, 1932, 81.8. In rolling mill products the imports in 1930 were $46,000,000, and in 1931, $23,000,000; but the employment figure was 102 in 1930 and 67.4 in 1932. In automobiles and vehicles the imports were $47,000,000 in 1930, when the employment figure was 97.9; and in 1931 the imports were $23,000,000, but the employment figure was 70.3. In electrical apparatus the imports in 1930 were $30,000,000 and the employment figure was 157.9 and in 1931 the imports were $16,000,000 and the employment figure 124.9.

These figures show conclusively that not only has the tariff done no good to domestic industries, but apparently employment in domestic industries has gone down instead of up with the decrease of imports in connection with these different manufactures. That is the situation with regard to the moveable tariff legislation of my hon. friends.

My hon. friends, since I have been speaking somewhat critically, will not expect any suggestions from me, but I do venture to tender one or two. I submit that they had the [DOT] opportunity to make the first gesture towards remedjung this situation, buit they threw away that' opportunity when the Minister of Finance, in his budget speech, informed the house that nothing would be done regarding tariff until after the imperial conference. There was a chance, if ever there was one, for my hon. friends to make a gesture towards imperial preference, giving a reciprocal concession for the concession which had already been extended by Great Britain. Great Britain had imposed a tariff upon certain articles, but she had provided that it should not apply to goods from Canada, and there was a golden

The Budget-Mr. Ralston

opportunity, it seems to me, if my hon. friends opposite were really looking for an occasion to cement relations in anticipation of the imperial conference and to create an atmosphere in which a great deal of good might have been accomplished. The policy of hon. gentlemen opposite has been far different from the policy which was proposed two years ago by the then Minister of Finance when he brought down his budget in anticipation of an imperial conference. What did we find in the budget at that time? There were decreases on 270 items coming from Great Britain and increases on only 11; 589 items out of 1,188 were made free under the British preference. Hon. gentlemen opposite suggested that it was only a paper preference, but remember that that preference applied to $200,000,000 worth of goods which were imported into this country. That, it seems to me. was the kind of gesture which my hon. friends might have made; indeed, Mr. Speaker, it would not have been any mere gesture but genuine evidence of their desire to cooperate with Great Britain and with the various dominions of the commonwealth.

And is it not worth while endeavouring to encourage such trade? I sometimes think, Mr. Speaker, that the people of this country do not appear to realize what sort of customer Great Britain has been-to Canada; they seem to have the idea that we have been doing all the giving and Great Britain has been doing all the taking. Well, from 1921 to 1931 Great Britain bought from Canada $4,057,000,000 worth of goods. How much have we bought from Great Britain, British preference and all? We have bought SI,823,000,000; in other words, there has been a trade balance as between Canada and Great Britain of $2,234,000,000 in our favour. That is the sort of customer with whom the Hon. Charles Dunning and the government of which he was a member thought it worth while to deal; that was the sort of country toward which we deemed it wise to give preferences, and to adopt tariff schedules with definite provisions indicating our desire to trade with them. Let me quote to the house the words which the Hon. Mr. Dunning used on that occasion:

In other words, we do not intend to meet the other countries of the British commonwealth in a spirit of petty bargaining, but rather in the broad spirit of willingness to become in ever-increasing measure good customers to those who treat us in like manner. This is the spirit in which we desire to meet all nations, but we believe that within the British community of nations lies the greatest measure of opportunity for mutual development of trade because of our common heritage, kindred institutions, and a common patriotism.

That was an expression of faith, but it was an expression of faith accompanied by very practical works in the shape of a revision of the tariff. My hon. friends are coming to realize that there is something in this method of approach. When the Prime Minister went over to the imperial conference in 1930 he was not in that attitude of mind; barter was strongly in his mind and a bargain was the thing to be striven for. He said:

I offer to the mother country and to all the other parts of the empire a preference in the Canadian market in exchange for a like preference in theirs, based upon the addition of a ten per centum increase in prevailing general tariffs or upon tariffs yet be be created.

He accompanied his address with such expressions as these:

Take without delay the steps necessary.

No room for compromise.

No possibility of avoiding the issue.

Time for plain speaking.

The day is now at hand.

Decide once and for all.

Delay is hazardous.

The time for action has come.

Other projects have been carefully canvassed and while we would avoid anything which might savour of premature condemnation, we are constrained to state that none of them can be accepted by Canada as alternatives at all likely to achieve the purpose.

Universal acceptance.

Deliberations must be governed by the time factor.

If this change in our economic relationship is to be made, it must be made without delay.

These are the words he uttered when he left Great Britain:

But if her proposal is thus to be contemptuously rejected Canadians can only accept the rejection and act accordingly by embracing other means at hand of further strengthening her economic position in the world.

I do not hear very much to-day from the Prime Minister along that line. The Minister of Trade and Commerce (Mr. Stevens) has been on the road to Damascus, or at least on the road to Montreal, because in the issue of a day or so ago of the Montreal Gazette I find this expression:

I hope with all my heart that no delegates to the forthcoming imperial economic conference at Ottawa will arrive with any quid pro quo attitude; nothing could be farther than this from the minds of tile Canadian delegates.

And again:

There can be no question of what each is to ask. We shall all gather with the mutual desire and determination to work out general principles on which the economic well-being of the empire might be advanced and put on a firm basis. In this working out matters of detail affecting many industries will require careful study and consideration.

The Budget-Mr. Ralston

That is apparently the most he hopes for from the conference; it will be a conference for the working out of general principles and the details will be settled later. The following is the important part of the minister's remarks:

But the conference will under no circumstances develop into a market wherein bartering for terms will take place.

I hope that is to ibe so, and I hope that that indicates that my hon. friend realizes the situation. That is the only position which the Canadian government can take if it expects any successful results from the imperial conference. I regret that the government did not take the opportunity of holding out a hand to Great Britain and saying: We are not adopting a quid ipro quo attitude; these are the terms which we are willing to give and which are shown in our budget immediately preceding the conference.

The Liberal party stands not only for the statement of principle which I have already referred to, but it stands on a record of performance going back to 1897. I refrain, as did my hon. friend, from discussing the imperial conference policy in detail, but I do want to say that the Liberal party will welcome in every way possible every arrangement which my hon. friends can make for the development of trade between Canada and Great Britain. That has been and will continue to be the policy of the Liberal party.

But let me remind the house that we want trade not only with Great Britain but with all the world. Keeping in mind the assurances of the Prime Minister during the elections, let me sum up just what has happened during the past two years. This government has had a substantial majority in this house to carry all its proposals; it has had a free rein in the working out of its policies; it has had the treasury of the country at its disposal, it has had unlimited power, but what have been the results? They are found in the budget speech and in the facts which I have brought out. We had a deficit last year in the net debt of $119,000,000, and we will have a deficit this year, at least to the extent to which unemployment relief has to be provided for and for expenditures in connection with other items not mentioned in the budget. There has been an addition to the funded debt amounting to $302,000,000, while the shrinkage in total trade has amounted to 50 per cent, taxes have been increased enormously and unemployment has been worse during the present year than at any other time in the history of the country. This is the record presented by this government to the people.

The government has tried every possible expedient. It has proved conclusively that the home market is not sufficient to make it possible for our producers to produce, to sell and to make a living. I ask my hon. friends opposite in all seriousness: Do they believe that Canada as a storekeeper can market the commodities she produces under their policy of restricting trade? The National Revenue report for February, 1932, gives the following as the principle items of export:

Wheat.

Wheat flour.

Fish.

Furs.

Meats.

Cheese.

Blanks and boards.

Wood pulp.

Newsprint.

Automobiles and parts.

Copper (unmanufactured).

Nickel (unmanufactured).

That is what Canada has on her shelves to sell to the world. The only manufactured article mentioned is automobiles, and the export of automobiles has dropped from $15,000,000 in 1931 to about $3,000,000 in 1932, notwithstanding the prohibition of the import of used cars. Employment in the automobile industry during the same period has dropped from 87.9 to 70.3.

Do my hon. friends think that we can sell these natural commodities by putting up tariff walls? They have had two years in which to try, and they ought to know. They should know what the result has been and the reasons for that result. We might just as well talk of Canada selling commodities 'like these and finding a market behind the tariff walls which my friends have put up as to talk of a storekeeper solemnly barricading his front and back doors and sitting down in his shop to swap jackknives with his family across the head of a barrel and thinking he is carrying on trade. It cannot be done. My hon. friends have blocked up every possible chink; they have attempted to preserve the home markets for the sheltered industries.

They would be better employed to spend their time studying the tariff schedules to find out not how little but how much they can buy. They should realize that the more they buy, the more they can sell. The Prime Minister is fond of quoting from scripture, but I would remind him of the old saying:

A giving that doth not impoverish, a withholding that doth not enrich.

There is a buying which does not hurt a country. My right hon. friend is also quite fond of quoting Gladstone, and I refer him to a recent book on Gladstone as a financier,

The Budget-Mr. Ralston

which contains the following quotation from that great statesman:

Though we cannot in every particular case assume an immediate trade outwards when we create a trade inwards, yet it is manifest that upon the whole such is the law which must govern our commercial transactions.

Will my hon. friends get that idea into their minds? It seems to me that by this time they should have realized this fundamental truth. Last year I quoted references by great economists in various countries to the effect that high tariffs were strangling the trade of nations; I do not need to quote similar references this year because it can be heard on the streets, on the trains, in the clubs, or anywhere where men meet together. I do not know why my hon. friend does not realize the force of this truism. He should accept it, and his first step should be towards reversing the tariff policy which has been adopted by his government.

I have quoted Mr. Dunning's budget speech of 1930, and I submit that the statements which he made at that time as to Canada's trade policy hold just as true to-day as they did in 1930. They are even truer, because we have had the experience of my hon. friends dealing with the other sort of policy and making the mess of it that has been made during the last two years. This is what he said:

Canada will not engage in a tariff war with other countries.

I commend that to the Minister of Railways (Mr. Manion), who has been so red-blooded.

The world shows at the present time too many examples of disaster following such a course. As a great exporting nation our course must be the contrary one of facilitating trade with those who facilitate trade with us. Those who raise prohibitive barriers against our products entering their markets must expect that we will extend favour to our own good customers rather than to them. I speak in no spirit of retaliation. I would much rather extend lower tariff favours to those who extend them to us than to impose prohibitive tariffs in return for like treatment.

Lower tariffs to those who buy most freely from us make for trade extension and wider markets for our products, while prohibitory duties to meet prohibitory duties generally applied -would constantly tend to restrict our export markets.

These tariff favours tp those who favour our products are not the result of any bargain with any other country but of an attitude in international relations which we believe to be mutually beneficial and are an expression of the spirit in which Canada will approach the Imperial economic conference in a few months' time.

In the light of that enunciation of principle, in the light of the bitter experience

rMr. Ralston.]

which we have had in the last two years and in the light of the very different experience which this country had from 1921 to 1930 and from 1896 to 1911, the policy that we on this side of the house advocate is one of expansion rather than restriction of trade. It is the policy of the prudent salesman dealing with a good customer; it is not that of the warrior trying to overcome an antagonist or of a sharp trader bartering for the most and giving the least. It is a policy which recognizes that there are no finer industries in this country than those of farming, fishing, mining and lumbering and that on those industries Canada depends for her basic wealth and prosperity. We believe in the policy which will set flowing again the stream of external trade which is the dominion's very life-blood. We believe in giving Canadian enterprise room to breathe. We believe in throwing open the windows. We believe that what Canada wants at the present time is the fresh air of trade upon the seven seas.

The Minister of Finance calls for courage and endurance. Canadians have plenty of both. In spite of all that this government has done, Canadians are still courageous and resourceful and can still endure. Canadians have , not lost faith in their country, but if they are effectively to bend their backs to the burden of taxes, they must have the right and opportunity to produce and to sell. So they demand that the measures which for the past two years have stifled and throttled the country's prosperity, be abandoned, and that the government, even at this eleventh hour, recognize that in a policy not of simply imposing taxation and calling upon people to bear it bravely, but of stimulation and revival of trade and the resumption of production, lies our hope for improved conditions, for which this government piously hopes but which it does absolutely nothing to bring about.

Therefore, Mr Speaker, I move, seconded by the hon. member for West Edmonton (Mr. Stewart):

That all the words after the word "that" be struck out and the following substituted therefor:

"this house is of the opinion

"that increases made by the present administration in the customs tariff have been arbitrary, ill-considered and inordinate, and have had the effect of stifling agriculture and other industries, restricting trade and commerce, and increasing unemployment;

"that the fixing of values for duty purposes by orders in council is an interference with the inherent right of parliament to regulate duties and determine taxation, and has had an unsettling effect on commerce, a depressing effect on business, and has been detrimental to the interests alike of producers, importers, distributors and consumers;

that a reversal of the present fiscal policy m relation to customs tariffs and an immediate resumption of parliamentary direction and control with respect thereto are essential to a revival of trade, and improvement in business, and to the ultimate return of prosperity in * Canada."

At six o'clock the house took recess.

After Recess

The house resumed at eight o'clock.

Hon. H. H. STEVENS (Minister of Trade and Commerce):

revival of trade, and improvement in business, and to the ultimate return of prosperity in Canada.

I submit, and shall show during 'the course of my remarks, 'that a reversal of the action, taken by this government during the past year and a half would result in precisely the opposite to what my hon. friend indicates in this amendment to be his desire. I shall not further analyse the amendment, but as I proceed with my remarks I hope to deal with practically all the points there raised.

Before addressing my remarks to the subjects I intend particularly to discuss I wish ito deal with two or three matters raised by my hon. friend, and to dispose of them briefly and without labouring the points-.

My hon. friend was put to pretty extreme limits when he went back to the old cry which years ago was proven to be false, namely, that the Conservative and Union governments during the war did not raise one cent from taxes for war expenditures. That statement has 'been disproved over and over again. It is well known that several hundred million dollars of the war costs were raised by taxation and paid in cash. I am surprised that my hon. friend would direct the attention of the country back to something which he thinks perhaps, the memory of the people being short, he would be able to get away with. I simply brand it as a statement absolutely without any foundation in fact.

Then he referred to the conversion loan in rather sneering tones. I think the people were proud of the achievements of the country and of its Prime Minister, its leader, in that conversion loan. My hon. friend went to great pains this afternoon to indulge in some not commendable quips about the Prime Minister n connection with that loan. The conceiving, he organizing, and the selecting of the time vvhen that loan should be put out was a masterly stroke, I care not who did it. Furthermore, its absolute success is proven by the result. Now my hon. friend says, "Oh, but there are people to-day who are sorry they converted their bonds." I have not heard of complaints from any persons in Canada regarding the conversion of their bonds; there may have been some, but I have not heard of them. But what will that conversion loan mean for the country is the question to be asked; that is the test for the whole business. The result will mean a progressive saving in interest to this country of one, two, and ultimately around five or six million dollars a year. That is an achievement. That financing had been hanging over the governments of this country for several years. I recall

very well a few years ago ministers of finance of the government of my right hon. friend opposite reminding the house that the time was coming when those large war loans were maturing and that some serious financing would have to be done. The 1 serious financing" was done, and it was successful largely because of the foresight and the skill with which it was handled by the right hon. leader of this government.

My hon. friend criticized the action of the government in coming to the assistance of the provinces. He was rather careful, he did not take the stand definitely that the government ought not to have assisted the provinces; he would not put in the form of an amendment a motion to condemn the government, but he hinted and insinuated that there was something sinister, something lacking in statesmanship on the part of this government or its leader in coming to the assistance of the provinces at this time. Mr. Speaker, we welcome manly criticism, criticism frank and open with reasons for it. My hon. friend gave no reasons this afternoon for his position. He simply suggested that in some way or other there was something sinister in the action of the government. What are the facts? They are clear and simple. The two old provinces, and indeed the maritime provinces as well, with their well-established methods of finance, have been able to finance themselves up to the present. It is true the federal government had in some respects to render them assistance in the movement of gold, but generally speaking those provinces have been quite able to look after themselves. When, however, we come to the four western provinces, new, young provinces where there has been an outpouring in very large measure of extravagant -shall I say?-costs in constructing roadways, public buildings and all that sort of thing for a number of years, the position was different. It may be charged that those western provinces have been extravagant, but the fact is, confronted as they were, in regard to three of them, with collapse in their main item of revenue, namely, the wheat crop, for three successive years in many places, and two years in others; confronted with that and other difficulties, they found themselves in the face of the collapse of the international exchange market unable to meet some of their obligations abroad except at costs that would be unwarranted. Rather than put them to that necessity, rather than force them into a position of delinquency-shall I say?-this government considered it was the part of wisdom in the interest of the credit of Canada to render some assistance to them. So because

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we were able on the markets of the world and within the dominion to secure funds for the purpose, we properly, and I think wisely, having in mind the credit of the country at large, came to their assistance and offered them some advances-nothing very extravagant up to the present. I say to hon. gentlemen opposite, if we are properly to be subject to the criticism of the hon. member for Shelburne-Yarmouth on this head, let those criticisms be put in the form of an amendment to the budget, thus placing themselves on record as condemning the government for their western financial policy.

My hon. friend also harked back to the transcontinental railways. In this he was unhappy, very unhappy. Seeking by the way merely 1o justify the position of his party during the years they were in office regarding the expenditures by the Canadian National Railways, he said in sweeping terms, "Why, every man in the house, every party in the house, the old government, the Borden government, all endorsed this measure, all stood for three transcontinental railways." They did not. Turn to the debates of 1903 and 1904-

Mr. RALSTON:

I have.

Mr. STEVENS:

-and read what Sir Robert Borden said. I recall it very well. I have not had time to bring those debates here, and I should not want to read lengthy excerpts from them, but anybody who desires can do so. What was Sir Robert Borden's proposal on behalf of the Conservative party of the day? I ask hon. members opposite to consider it and then give to that right hon. gentleman, that venerable statesman, credit for an insight into the future that is seldom found in any man. What did Sir Robert Borden say? He said: Secure the Canada

Atlantic, extend it to North Bay and make it a common road for the Canadian Pacific and the Grand Trunk; follow the Canadian Pacific from North Bay to the head of the lakes, double track it if necessary, but let that railway be occupied by the two systems that you propose; then when you get towards the prairies where the broad wheat fields are located spread your line out, have two or three railway systems there if you wish; then carry your line through the Yellowhead pass, to give you a good grade, down to Kamloops, two hundred and fifty miles from the coast; double track the Canadian Pacific from that point to Vancouver, and there again make it a common road. I ask hon. members this question: Had the people of Canada accepted the advice of Sir Robert Borden would it not

have saved this country hundreds of millions of dollars of investment in railways? Of that there is no doubt. Sir Robert Borden and the Conservative members of the day did their best to persuade the then government against three transcontinental railways. I would not have wasted the time of the house to point this out but for the fact that my hon. friend brought up the subject and indulged in what I think was grossly unfair criticism.

Regarding income tax, he criticized the retroactive feature, and suggested that one of the reasons prompting the Minister of Finance and his colleagues in amending the income tax, in proposing the five per cent surtax and withdrawing the twenty per cent discount, was that we wanted to injure the civil servants of this country. He said that we had deducted ten per cent from their wages and increased the income tax to spite the civil servants of Canada. As a matter of fact those receiving under SI,200 will not be touched at all by the income tax proposals. Those who will be affected by the present income tax proposals of the Minister of Finance are those who, to use the common phrase, are most able to pay and most able to bear the burden.

In the course of my remarks, Mr. Speaker, I shall refer to other observations made by the hon. gentleman, but I will not at the moment follow his speech further.

In presenting his budget the Minister of Finance gave to the country a clear, concise outline of the financial affairs of the country. There were no evasions and no equivocations. It was an unadorned statement of fact, and for this I think he should be complimented and commended. He fearlessly laid bare to the country losses in revenue, a falling off in trade and an increase in debt; he tells us that we must curb expenditures and increase taxation. All this may be very disagreeable, and it may be useful material for the destructive critic to take before the people, but it was necessary, and to my mind it was wise and courageous. I contend, Mr. Speaker, that the minister has discharged a difficult task with such marked ability that the country will share with us a feeling of confidence in his capacity to guide us wisely and safely through these troublous days.

Referring to the budget, with which I shall now deal briefly, my hon. friend (Mr. Ralston) indicated that the only safe way to prepare a budget was carefully to avoid mailing any estimate of revenue. The ministers of finance of the party opposite did not bring down budgets in which estimates of revenue for the coming year were given; they simply presented to the house abbreviated statements of past

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revenues and expenditures. Last year the right hon. leader of the government presented to the house certain estimates. It is now argued that those estimates fell short of what was actually realized, and to-day the right hon. gentleman is arraigned by my hon. friends opposite for failure to realize the estimated revenue of last year. In fairness to the government and to the Prime Minister I invite the house to consider the facts, and in doing so we are not seeking quarter from those who refuse to recognize any argument or any reason for the course pursued by the government. I do think, however, it is wise to consider the facts.

The failure to realize the amount of revenue estimated is due to certain causes. First there was the dropping off in commodity .prices during the past year, amounting to at least ten per cent. I shall deal with that in considerable detail a little later, but for the moment let me point this out: The drop in commodity prices, under our system of revenue, with sales tax, excise tax and customs duties, necessarily must be immediately reflected in a falling revenue. There is no question at all of that. The only thing that remains is to analyze the causes of the drop, which I shall attempt to do later, in order to see if there is anything we can do to correct it. Then there was a drop in volume of business which was unforeseen. It may be argued that the government should have foreseen it; indeed, this afternoon my hon. friend stated very definitely that the government should have known what was ahead. I notice, however, that in no part of the world is there anyone who claims that he could foresee the extent of this depression, the drop in prices and so forth. Even some of the most skilled economists, who predicted in part something of this kind, never dared predict the length to which this depression would go. There was a drop in volume of business of from ten per cent to thirteen per cent, so these two factors alone, over which this government had no control whatever, account for over twenty per cent of the drop in the revenues of this country. I do not think, therefore, that it is the part of fair criticism to point a finger at the Prime Minister to-day and say that last year he failed properly to estimate the revenues of the country. The fact remains that we come forward and show what are the true facts, and we are quite ready to take whatever responsibility is ours.

If it were possible to do so briefly, and if I felt warranted in doing so, I might remind my hon. friends of how frequently in the past they measured the burden of taxation upon the people of Canada by the amount of revenue raised through taxation.