Mr. SPEAKER:

I have the honour to inform the house that I have received a communication from two members notifying me that the following vacancy has occurred in the representation, viz.: of D'Arcy Britton Plunkett, Esquire, member for the electoral district of Victoria, B.C., by decease.

I accordingly issued my warrant to the chief electoral officer to make out a new writ of election for the said electoral district.

Right Hon. W. L. MACKENZIE KING (Prime Minister):

Mr. Speaker, I have given notice of a motion for Monday with reference to adjournment of the house over Ascension day and the Monday following, Victoria day. It might be well for me to say a word at this moment as to the view of the government in the matter. We are anxious to suit the convenience and further the wishes of hon. members. The motion is to the effect that the house adjourn over Ascension day and also over the Monday following, Victoria day, but if it should appear after consultation between the whips that it is the wish of hon. members that the house should sit on either of those days, or on both, so far as the government is

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concerned we shall be glad to be governed accordingly. I have been speaking to the assistant government whip and he informs me, after some consultation with members of the house on all sides that it would1 appear as though the general wish were to adjourn over each of these days, but if the general desire should be to the contrary the government will be glad in the interim between now and Monday to consider any other view.

Right Hon. R. B. BENNETT (Leader of the Opposition):

Mr. Speaker, I think the opportunity afforded by allowing the motion to stand until Monday will enable us to ascertain what action is most convenient having regard to all the circumstances, and I shall communicate with the right hon. gentleman accordingly.

Hon. ERNEST LAPOINTE (Minister of Justice):

Mr. Speaker, the new appointment will be made at as early a day as possible, andi that means pretty soon.

Right Hon. R. B. BENNETT (Leader of the Opposition):

Mr. Speaker, when we

rose yesterday I was pointing out to the house that there was no necessity for having any legislation passed by the imperial parliament with respect to the second branch of this resolution. I need hardly point out that section 2 of the resolution contemplates the parliament of Canada passing an act to guarantee the payment of principal and interest and sinking fund of securities of the various provinces which may desire to have this action taken after arrangement with the federal power.

Yesterday it was suggested that we had never guaranteed the securities of provinces. On the contrary, under the provisions of the Relief Act enacted by this parliament, the government in the exercise of the power thus conferred upon it has given guarantees with respect to provincial obligations, the legality of which has never 'been questioned, nor has it ever been called in question by anybody representing the banks or others. I do not think I need do more than point out that when this parliament has enacted legislation empowering the executive to guarantee the securities of the province, that action has always been taken without question as to either its legality or its validity. Therefore the first paragraph of the second part of the resolution is wholly unnecessary and not at all required for our .purposes. I could go into the matter in greater detail but I do not .think it is necessary as it is so axiomatic. I do not think any counsel would for one moment suggest that this parliament has not the power to give any guarantee that in its, wisdom it may deem it desirable to give*

The next paragraph reads:

The legislature of any province of Canada may, with reference to the principal, interest and sinking fund of securities which the province may from time to time make or issue, authorize the government of the said province to enter into an arrangement with the government of Canada whereby the government of Canada shall guarantee the payment of the principal, interest and sinking fund of such securities.

That requires no legislation. That power now exists and is as complete and amply possessed iby every province of this confederation as was possible for the imperial parliament in the plenitude of its powers to confer. Therefore that section is wholly unnecessary.

We come now to the fourth paragraph, which reads:

(1) For the purpose of securing Canada against loss resulting from the giving of a guarantee under the authority of this act, the government of Canada, whenever in its opinion any default has occurred in respect of any payment on account of principal, interest or sinking fund of the guaranteed securities, may:

(a) withhold any payment to the province on account of any grant payable by the government of Canada to the province for its local purposes or for the support of its government and legislature or on account of interest in respect of its public debt or in lieu of public lands or on any other account whatsoever;

(b) effect payment in whole or in part of any such grant by payment direct to a creditor of the province of any amount owing to such creditor on account of the guaranteed securities. In this and the next succeeding paragraph "creditor" shall include a trustee of a sinking fund;

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(c) out of any revenue received or collected by the government of Canada or any department or officer thereof for or on behalf of the province, make payment direct to a creditor of the province of any amount owing to such creditor on account of the guaranteed securities.

I need hardly point out that we have done that quite frequently. We paid the obligations of the Montreal harbour board direct to .the holders of the coupons under an arrangement with the commissioners. We have paid and are continuing to pay sums in respect of the guarantees given by the provinces of ALberta, Saskatchewan, British Columbia and Manitoba to the railways. We are to-day meeting the guarantees given by the province of Nova Scotia to the Halifax and Southwestern Railway, which if paid by the province would result in its practical bankruptcy. We have paid all these sums. Therefore, so far as this matter is concerned, it requires no legislation on the part of the imperial parliament to authorize us to do so,

Let us proceed. The next and only question is whether or not this paragraph is competent for us to withhold from a province the [DOT]payment of moneys which under various statutes it is entitled to receive, in the event of its making default in the payment of its guarantee or its obligation under an agreement made between the dominion and the province. In my judgment there is no doubt as to that power. I desire only to point out, first, that when the dominion has undertaken to guarantee the securities of a province, in pursuance of competent legislation, the province then enacts such legislation as it may think necessary for the purpose of enabling an agreement to be arrived at between the dominion and the province.

Last evening I read certain extracts to this house-I regret having had to take up so much time in doing so-to show that the province was an entity clothed with all the powers that the imperial parliament in the plenitude of its powers could confer upon it. It is the right of a province to borrow; it is one of the incidents of its being thus created. True, the power to borrow is set out in terms in the statute; but it is one of the implied powers that arises by reason of the creation of the entity called a province. Therefore, inasmuch as the power to borrow is incidental to these powers-it was pointed out in the harbour commissioners case-

Mr. DUNNING:

It is expressed as a power in the British North America Act.

Mr. BENNETT:

Surely, but I say it is

part of the incidental power that arises in the creation of the entity; it is part of the powers that could be exercised by such an entity as a province. The province can do anything within the provisions of section 92, that is, within its legal competence. Every power thus granted may be exercised in any manner-that is within the discretion of the legislatures of the provinces. This discretion is exercised in various ways. At times provinces exercise their discretion in certain, and what are thought to be undesirable, ways. For instance, the legislature of one province may repudiate a contract which the legislature of another province would not think it desirable so to deal with. The legislature of one province may declare for publicly owned utilities, which another province may think undesirable, and so on in connection with all these matters.

So far as the borrowing of money is concerned, it is one of the powers given to the province under section 92, and one of the powers given to the dominion under section 91. Whether it be the dominion or the province, in the exercise of these powers they may make such arrangements as they think desirable in the interests of their respective communities. That is, the dominion may make any agreement it thinks desirable, and the province may make any agreement it thinks desirable, the governments of the day being chargeable with responsibility as to what they consider to be the best interests of their respective communities.

If one will observe the language of paragraph 4 of this resolution and then read the words of the judicial committee to which I referred yesterday, he will realize that all the power that is sought under section 4 now exists except with respect to possibly one matter, to which I now purpose to address myself. Has the province through its legislature the power to agree that sums of money payable to it by the dominion may be withheld for the purpose of satisfying debts due by the province to the dominion under an arrangement that may be arrived at? My answer is in the affirmative. At first I had some doubt about it, but if you look at section 118 of the British North America Act you will find these words:

The following sums shall be paid yearly by Canada to the several provinces for the support of their governments and legislatures:

Ontario $80,000

Quebec 70,000

Nova Scotia 60,000

New Brunswick 50,000

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Two hundred and sixty thousand; and an annual grant in aid of each province shall be made, equal to eighty cents per head of the population as ascertained by the census of one thousand eight hundred and sixty-one, and in the case of Nova Scotia and New Brunswick, by each subsequent decennial census until the population of each of those two provinces amounts to four hundred thousand souls, at which rate such grant shall thereafter remain. Such grants shall be in full settlement of all future demands on Canada, and shall be paid half-yearly in advance to each province; but the government of Canada shall deduct from such grants, as against any province, all sums chargeable as interest on the public debt of that province in excess of the several amounts stipulated in this act.

That is, with respect to guarantees that have been given and amounts that have been lent by the dominion to the provinces, even during recent years, we have the right to deduct from the sums which we have obligated ourselves to pay, the amount that may be necessary for the purpose of the payment of the interest that is due in excess of the sums mentioned in the statute. That does not arise at the moment. The sole question is whether or not there is such power in the provincial legislature as will enable that legislature to authorize an agreement to be made with respect to the portion of its revenues derived from the federal power so that they may be utilized for the purpose of discharging the debts and obligations of the province to the central authority or power. In the very nature of things it seems to me that that is elementary. Why? Because this parliament has authorized the payments that are being made under the British North America Act. In the opinion of some, and it is an opinion that does prevail in some quarters, there should be an imperial statute. Subsidies were in a sense sacred as distinguished from other forms of payments which might be made, and could not be retained or dealt with by the federal power. The answer is this, that section 118 of that statute as it stood in 1867 has been entirely modified and amended so that we have paid increasing sums, to which I shall presently refer, to all the provinces. And as those moneys are voted by this parliament to a province and the province receives them as part of its revenue, it follows that if the legislature of a province authorizes the dominion to withhold a portion of that money for the purpose of interest or sinking fund, the payment of principal or otherwise that may be due by the province to the dominion, there can be no question as to the validity of such action.

Mr. DUNNING:

Has the right hon. gentleman considered it in the light of sections 113, 114 and 115, respectively?

Mr. BENNETT:

Yes, surely. The sections referred to are as follows:

113. The assets enumerated in the fourth schedule to this act belonging at the union to the province of Canada shall be the property of Ontario and Quebec conjointly.

114. Nova Scotia shall be liable to Canada for the amount (if any) by which its public debt exceeds at the union eight million dollars, and shall be charged with interest at the rate of five per centum per annum thereon.

115. New Brunswick shall be liable to Canada for the amount (if any) by which its public debt exceeds at the union seven million dollars, and shall be charged with interest at the rate of five per centum per annum thereon.

That has been modified; the whole financial position has been changed. The right of the provinces, for instance, to receive part of the money in the possession of the federal government in trust has been made abundantly clear, and they have absolutely taken from the public exchequer, under the terms and conditions of the statute in that behalf, sums of money that were receiving interest from the dominion, and which provided a portion of their revenues until they were expended for purposes mentioned in the act.

It will be recalled that we had one case of that kind not many years ago. During his premiership of New Brunswick, the late Mr. Blair thought it desirable to use money to greater advantage than leaving it on interest with the federal government, and he withdrew portions for the purpose of increasing the revenues of the province and enabling certain public undertakings to be proceeded with. If there were any doubts about the matter it would seem to me that it could easily be resolved by making a simple test.

This parliament had control of the money that it voted to the provinces; the British North America Act had nothing to do with that. It was done by act of this parliament. It was not under the British North America Act, but by arrangement made between the provinces and the dominion. And I shall presently show that during recent years certain steps were taken in connection with the western provinces that indicated an entire departure from the principle of finance which governed in days gone by.

Leaving that for the moment, it must be apparent even to laymen that it would be a very peculiar thing if the provinces and the dominion could not make arrangements without getting further power from Westminster to provide that the provinces and the dominion may arrive at an arrangement by which the money due to the one shall not be paid if that one owes money to the dominion. That is the whole story. There cannot be anything more to it than that.

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Mr. THORSON:

Has the right hon. gentleman given consideration to the words used in section 118, respecting the provincial legislatures, and the question whether these words might not constitute a trust binding both upon the dominion and upon the provinces?

Mr. BENNETT:

I certainly can answer

that question. Section 118 states:

The following sums shall be paid yearly by Canada to the several provinces for the support of their governments and legislatures.

That money becomes subject to the appropriations of the legislatures of the provinces-by statute; the supply bill. Therefore if a legislature in the exercise of its discretion indicates that for that province and for that legislature it is desirable to secure a dominion guarantee, and that the moneys made available shall be utilized for the purpose of making good obligations created, they have it within their power. These moneys enter into general revenue funds and become subject to the appropriation bill, the supply bill, such as you see from year to year in the statutes of the various provinces.