May 1, 1936


the interest in cash as it became due, but the province of Saskatchewan, being unable to meet all of such payments, has covered the interest accruals on the major portion of its outstanding loans by tendering treasury bills to the dominion. A statement of the loans to date by provinces, showing generally the purpose for which they were granted, follows: Loans to Provinces under Relief Acts Net Amount outstanding at March 31, 1936 - Loans specifically to meet maturing obligations and interest Loans specifically for agricultural relief including purchase of seed grain Loans for provincial purposes generally including public works and direct relief Totals 1,139,455 3,934,341 8,577,000 11,262,109 $ 244,400 13,892,633 3,322,000 $ 14.121.000 30,541,655 13.182.000 16,310,571 $ 15,504,855 48,368,629 25,081,000 27,572,680 British Columbia 24,912,905 17,459,033 74,155,226 116,527,164


OTHER LOANS AND INVESTMENTS


Loans to the Canadian National Railway Company for capital expenditures and retirement of debt, as already referred to, amounted to 87,574,000. Purchases of equipment for the Canadian Pacific Railway Company and loans to that company for equipment repairs -all as provided under the Supplementary Public Works Construction Act-amounted to 84,629,000. Agreements between the gov-jrnment and the company provide for the payment of interest and repayment of the principal by instalments over a period of years. The government's investment in the Canadian Farm Loan Board was increased in the year by 87,933,000. Of this amount, $175,000 was for the purchase of capital stock of the board, $7,550,000 for purchase of bonds, and $208,000 for the purchase from various provinces of capital stock subscribed by them during the period in which the provinces participated in the farm loan scheme. The total investment of the government in the board now amounts to $16,790,000. While the board operated at a loss during the fiscal year, provision therefor will be made from the reserves set aside in previous years. Bonds of the board are now being purchased on a 3J per cent basis. Under investments there are also included $1,439,000 advanced during the year to the harbour commissions at Montreal and Vancouver. These loans are carried as active assets as both these commissions have paid a substantial proportion of the interest charged on their indebtedness. During the year, repayments totalling three and a half millions were received in reduction of soldier settlement loans and loans to provinces for housing. The following statement shows the amount of loans and investments (active assets) during the last fiscal year, with comparisons for the four previous years: Loans and Investments Active (000 omitted) - 1931-32 1932-33 1933-34 1934-35 Estimated 1935-36S 22,634 $ 15,565 $ 13,115 $ 22.909 S 42,3041,608 871 416 353 7,93341,121 14,677 2,628 16,579 7,5744,62912,138 650 1,677 393 1,439483 Cr. 92 Cr. 2,492 Cr. 571 Cr. 555 Cr.150 Cr. 139 Cr. 213 Cr. 397 Cr. 3,003 Cr.Other 115 Cr. 469 8276,753 32,001 15,131 39,266 60,403



The Budget-Mr. Dunning


LOAN FLOTATIONS


New issues of dominion obligations during the year totalled $500,000,000, exclusive of temporary financing in connection with which repayment was made before the close of the fiscal period. These issues, to the extent of $297,000,000, were for the purpose of refunding maturing obligations. The balance of $203,000,000, representing the net increase in funded debt and treasury bills during the year, was issued for deficit and other current purposes. This large amount of financing was successfully carried out at lower rates of interest both for short and long term issues than ever before. At the close of the fiscal year the average rate of interest on the outstanding funded debt and treasury bills, was 3-9 per cent as compared with a corresponding figure of 4-15 per cent a year ago. Three issues amounting in the aggregate to $164,000,000 were made in the United States for refunding purposes, including redemption of Canadian National Railway bonds already referred to. These were the first public flotations by the dominion government in that market for several years and necessitated registration under the United States Securities Act. The interest cost to the government was 2-09 per cent for three-year notes, 2-96 per cent for ten-year and 3-63 per cent for twenty-five year bonds. The issues in Canada, exclusive of treasury bills, totalled $303,000,000. The sale of $135,000,000 of one-year and three-year notes was made to Canadian chartered banks in September last, mainly to meet maturing short term obligations held in large part by those institutions. Two public offerings were made, one dated June 1 for $60,000,000 and one dated November 15 for $75,000,000. The interest cost to the government ranged from 1-90 per cent for one-year notes to 3-10 per cent on twenty-year bonds. The $33,293,000 of 5 per cent school lands debenture stock held by the prairie provinces were again renewed for one year at the same rate of interest. The policy of selling three-months treasury bills in the Canadian market was continued during the year, and the amount of issues outstanding was increased by $33,300,000. The rate of discount on these bills dropped from 1-698 per cent on April 15, 1935, to -999 on March 16, 1936. Since that date, further issues have been made, the record low cost of -879 per cent being obtained on April 15. I now place on Hansard a statement giving the essential details of the new issues made during the year: Loan flotations 1935-1936 Issue date Maturity date Interest rate Where payable Price Cost to Govt. Amount Issued per cent per cent 193.5- 2i 3 99-50 2-57 20,000,0001 40,000,000/ 33,293,471 98-50 3-10 July 1 July 1/36 5 Canada (School Lands) 100-00 5-00 21 li 2 New York 96 00 2-96 76,000,00099-61 1-90 45,000,000\Oct 15 . . Oct. 15/38 99-2175 2-275 90,000,000/Nov. 15/39 2 99-43 2-15 20,000,000'3 98-75 3-08 55,000,0001936- Jan. 1/39 2 99-75 2-09 40,000,000Jan. 15 Jan. 15/61 31 New York 93-86 3-63 48,000.000 467.293,471Increase in short term treasury bills outstanding March 31,1936, over March 31,1935 33,300,000 $500,593,471 The Budget-Mr. Dunning



The following is a statement of the unmatured funded debt and treasury bills of the dominion outstanding at March 31, 1936, showing also the annual interest charges thereon: Unmatured Funded Debt and Treasury Bills, as at March 31, 1936, and Annual Interest Charges Date of Maturity Kate per cent Where Payable Amount of Loan Annual Interest Charges $ cts. $ cts 5 33,293,470 85 1,664,673 54H 45,000.000 00 675.000 002 63,336,000 00 1,266,720 005 79,535,200 00 3,976,760 001937 Mar. 1 (a) 5 Canada and New York.... 89,787,000 00 4,489,350 005| 236,299,800 00 12,996,489 001938 July 1,. 3 8,071,230 16 242,136 903 18,250,000 00 517,500 00July 1 3 10,950,000 00 328,500 003$ 15,056,006 66 526.900 23Oct. 15 2 90,000,000 00 1,800.000 001939 Jan. 1 2 40,000.000 00 800.000 00Oct. 15 4 47,269,500 00 1,890,780 00Oct 15 2\ 7,933,000 00 198,325 002 20.000 000 00 400.000 001940 Mar. 1 3 115,013,636 82 3,450.409 104* 75,000.000 00 3,375,000 005 141,663.000 00 7,083.150 001942 Oct. 15 3 40,409,000 00 1,212.270 002i 20,000,000 00 500.000 00Oct. 15 5 147,000,100 00 7,350.005 001944 Oct. 15 a 50.000.000 00 2,2.50.000 001945 Aug. 15 2} 76,000,000 00 1,900,000 004 88,337,500 00 3.533,500 001946 Feb. 1 w 45,000.000 00 2,025,000 001947 Oct. 1 21 4,888,185 64 122,204 641949 Oct. 15 3i 138,322.000 00 4,841.270 003i 137,058,841 00 4,797,059 431952 May 1 5 100,000.000 00 5,000,000 00Oct. 15 4 56,191,000 00 2,247,640 0031 48,666,666 67 1,581,666 673 40.000 000 00 1,200.000 003 55,000,000 00 1,650.000 0041 43,125,700 00 1,940,656 501957 Nov. 1 4J 37,523,200 00 1,088.544 001958 Sept. 1 4 73,000,000 00 2,920.000 00276,687,600 00 12,450,942 00n 289,693,300 00 13.036,198 501960 Oct. 1 4 93,926.666 66 3,757,066 674 100,000 000 00 4,000,000 001961 Jan. 15 31 48,000,000 00 1,560,000 00Treasury bills due April 1, 1936, 1-19 per cent Canada.. 25,000,000 00 297,500 00Treasury bills due April 15, 1936, 1-15 per cent. Canada.. 25,000,000 00 287,500 00Treasury bills due May 1, 1936, 1 09 per cent, Canada... 30,000,000 00 327.000 00Treasury bills due May 15, 1936, 1-05 per cent, Canada... 20,000.000 00 210.000 00Treasury bills due June 15, 1936, 0-999 per cent, Canada.. 20,000,000 00 199,800 003,265,287,604 46 128,597,577 18Payable in Canada Payable in Canada and New York Payable in New York Payable in London Less bonds and stocks of the above loans held as sinking funds $2,401,633,007 67 73-55% 89,787,000 00 2-75% 364,000,000 00 11-15% 409,867,596 79 12-55% $3,265,287,604 46 100-00% 58,168,944 35



(a) Tax tree in Canada. [Mr. Dunning.} The Budget-Mr. Dunning Now with regard to our old friend the national debt.


THE NATIONAL DEBT


At March 31, 1936, the unmatured funded debt and treasury bills of the dominion outstanding, less sinking funds, amounted to $3,- 207,000,000. To this amount are to be added other liabilities, mainly composed of insurance and superannuation funds, post office savings deposits and certain trust and contingent accounts, amounting to $225,000,000, to arrive at the gross liabilities of $3,432,000,000. Active assets, including cash on hand and investments, amounted to $424,000,000. After deducting the latter figure from the gross liabilities, the net debt at the close of the fiscal year amounted to $3,008,000,000. When we left office in August, 1930, the net debt of the dominion stood at $2,141,000,000, the increase in the interval being $867,000,000. The total funded debt increased almost one billion dollars in the period. I now place on Hansard a statement showing the assets and liabilities as at March 31, 1936: Liabilities, March 31, 1936 (estimated) Bank Circulation Redemption Fund Insurance and superannuation funds- Government annuities Insurance fund, civil service Insurance fund, returned soldiers Retirement fund Superannuation funds Trusts funds- Indian funds Common school funds Contractors' securities deposits Other trust funds Contingent and special funds Post Office money orders, postal notes, etc. outstanding.. Province accounts Post Office savings bank deposits Funded debt- Unmatured Matured but not presented for payment Interest coupons matured but not presented for payment $ 6,858,000 66.835.000 9.990.000 14.777.000 8.361.000 51.140.000 151,103,000 13,929,000 2.676.000 1.551.000 2.870.000 21,026,000 5.877.000 2.736.000 9.624.000 22,050,000 3,207,119,000 4,228,000



3,211,347,000 2,050,000



Assets, March 31, 1936 (estimated) Active assets- Cash, working capital advances and other current assets Gold bullion account Loans to provinces- Housing Relief Acts Loans to foreign governments- Greece Roumania Loans to harbour commissioners- Montreal Vancouver New Westminster Loans under Dominion Housing Act Bond holding account Canadian National Railways Canadian Pacific Railway Canadian Farm Loan Board Soldier and general land settlement Seed grain and relief advances Canadian government railways open and stores accounts Deferred debits- Unamortized discount and commission on loans



6,768,000 116,996,000 6,525,000 23,969,000 59.134.000 23.744.000 275,000 24,043,000 2,287,000 123,764,000 30,494,000 83.153.000 82,000 659,000 41.458.000 4.629.000 16.790.000 43.630.000 2.358.000 15.749.000 35.284.000



Net debt March 31, 1936 (estimated) 3,008,291.000 Represented by- Non-active assets, March 31. 1936 (estimated) The Budget-Mr. Dunning



Assets, March 31, 1936 (estimated) Concluded Capital expenditures- Public Works- Canals $ 242,871,000 Railways 443,190,000 Public buildings, harbour and river improvements 264,929,000 Military property and stores 12,035,000 Territorial accounts 9,896,000 Loans non-active- Canadian National Railways Railway accounts (old) Canadian National Steamships Harbour commissioners- Quebec 26,293,000 Chicoutimi 3,539,000 Halifax 9,515,000 Saint John 14,046,000 Three Rivers 3,144,000 Montreal (Jacques Cartier bridge) 2,504,000 Seed grain and relief advances Soldier and general land settlement Miscellaneous advances Consolidated fund- Balance, consolidated fund, brought forward from March 31, 1935.. 1,042,806,000 Excess of expenditure over revenue, fiscal year ended March 31, 1936 (estimated) 153,514,000 972.921.000 655.527.000 88.399.000 15.508.000 59.041.000 536,000 16.514.000 3,525,000 1,196,320,000


$3,008,291,000 INDIRECT LIABILITIES


Bonds and debenture stocks bearing the guarantee of the dominion outstanding in the hands of the public at the close of the fiscal year amounted to $994,600,000. The increase during the year was $7,300,000, accounted for by changes in Canadian National Railway issues, including the funding of a temporary loan from the government outstanding a year ago. Other contingent liabilities are those arising out of guarantees given pursuant to the relief and other acts. During the year the government gave guarantees under authority of the Canadian Wheat Board Act. The amount of these guarantees at Maroh 31, 1936, was about $58,000,000. The guarantee of bank loans to the Canadian Pacific Railway Company, the original amount of which was $60,000,000, was further reduced during the fiscal year by $12,000,000, the indebtedness at March 31 being $36,000,000. The government is advised that the company has made arrangements to liquidate the balance of the loans on May 1 and the dominion will be relieved of its liability without loss. The guarantee arising out of the assumption by the chartered banks of the liability of the Province of Manitoba Savings Office was further reduced during the year by $1,500,000. The amounts of the bonds and debenture stocks and other indebtedness guaranteed by the dominion are shown in the following statement: fMr. Dunning.] The Budget-Mr. Dunning Bonds and Debenture Stocks Guaranteed by Dominion Government As at March 31, 1936 Date of maturity Issue Interest rate Amount outstanding per cent cts. Sept. 1, 1936 May 1, 1938 Feb. 15, 1943 May 1, 1944 July 1, 1946 April 1, 1948 Dec. 15, 1950 Sept. 1, 1951 Aug. 1, 1952 Feb. 15, 1953 July 10, 1953 Feb. 1, 1954 Mar. 1, 1955 June 15, 1955 Feb. 1, 1956 July 1, 1957 July 20, 1958 May 4, 1960 May 19, 1961 Jan. 1, 1962 Jan. 1, 1962 July 1, 1969 Oct. 1, 1969 Nov. 1, 1969 Feb. 1, 1970 By tenders or drawings, Various dates, 1936-54.. Serial, Feb. 1 and Aug. 1, 1936-1938 Perpetual Grand Trunk Canadian National Canadian National Canadian National Canadian Northern New Westminster Harbour Commission Canadian National Canadian National Saint John Harbour Commission___ Canadian National Canadian Northern Canadian National Canadian National (West Indies) Steamships Canadian National Canadian National Canadian National Canadian Northern Canadian Northern Alberta Canadian Northern Ontario Grand Trunk Pacific Grand Trunk Pacific Canadian National Canadian National Harbour Commissioners of Montreal Canadian National Canadian National City of Saint John debentures, assumed by Saint John Harbour Commission Canadian National eqpt. "G" Grand Trunk guaranteed stock.... Grand Trunk debenture stock Great Western debenture stock... Grand Trunk debenture stock Northern Railway of Canada debenture stock 2 3 6$ 24.220.000 00 13.400.000 00 55.000. 000 00 35.000. 000 00 24.238.000 00 4| 700,000 00 3 20,500,000 00 44 50,000,000 00 5 667,953 04 3 25,000,000 00 3 9,359,996 72 5 50,000,000 00 4! 44 34 3 5 5 5 5 2 9,400,000 00 50.000. 000 00 70.000. 000 00 65.000. 000 00 7,896,-548 57 3,149,998 66 34,229,996 87 34,992,000 00 8,440,848 00 60.000. 000 00 60,000,000 00 19.000. 000 00 18.000. 000 00 25,189,243 73 Various 4 5 5 4 1,208,527 74 3,750,000 00 60,833,333 33 20,782,491 67 13,252,322 67 119,839,014 33 4 1,499,979 67



Other Indebtedness Guaranteed Estimated principal amount outstanding March 31,1936 Bank advances, re Province of Manitoba Savings Office $ 7,305,541 Bank advances, re government of Newfoundland 025.000 Bank advances, re Canadian Pacific Railway Company 36,000)000 Bank advances, re Dominion Steel and Coal Corporation (order for rails).. 217.134 Province of British Columbia treasury bills 626,533 Province of Manitoba treasury bills 5,894,127 Bank advances, re Canadian Cooperative Wheat Producers Ltd 370,000 Bank advances and other liabilities, Canadian Wheat Board 58.260,000 Reserve of chartered banks on deposit in Bank of Canada 188,202,917


BUDGET FORECA8T 1936-37


I have already announced that the overall deficit for the last fiscal year is estimated at 8162,191,000. The size of that deficit cannot fail to have impressed1 the house. Its seriousness is enhanced by the fact that it is but the latest in a series of deficits which have averaged over $138,000,000 per year during the past six depression years. The magnitude of these deficits, and particularly of the latest one, is such that in my opinion few honourable members will be disposed to question the declared purpose of the government to end in the shortest practicable time the era of recurring deficits. That purpose the government intends to pursue steadily as an The Budget-Mr. Dunning


May 1, 1936