The house in committee on Bill No. 6, to amend the Customs Tariff-Mr. Ilsley-Mr. Sanderson in the chair. Bill reported, read the third time and passed.
The house in committee on Bill No. 8, to amend the Special War Revenue Act- Mr. Ilsley-Mr. Sanderson in the chair. Bill reported, read the third time and passed.
The house in committee on Bill No. 9, to amend the Income War Tax Act-Mr. Ilsley- Mr. Sanderson in the chair. Sections 1 and 2 agreed to. On section 3-War surtax 20 per cent.
Mr. LAWSON:
I have not before me the Income War Tax Act. May I ask which of these schedules relate to rates payable by non-resident owned investment corporations?
Mr. ILSLEY:
My information is that they do not. -
Mr. LAWSON:
These amendments do not affect non-resident owned investments?
Mr. ILSLEY:
No.
Mr. CAHAN:
The wording of this amendment is clear on its face; but, not having the original act before us, one finds some diffi-
Department oj Munitions and Supply
culty in grasping the connection. In working out the percentage, is there an increase of one-fifth in percentages, or will the income tax be computed as in the previous year and one-fifth added?
Mr. ILSLEY: The latter is the case. Thisis a surtax on the income tax. It is an
increase of the income tax, made up as before, by 20 per cent. Is there any ambiguity?
Mr. CAHAN: In computing that, the
amount of the tax will be reckoned as in the previous year and one-fifth of the tax of the previous year will be added as surtax?
Mr. ILSLEY:
Yes, that is correct.
Section agreed to. Sections 4 to 7 inclusive agreed to. Bill reported, read the third time and passed.
Right Hon. W. L. MACKENZIE KING (Prime Minister) moved the second reading of Bill No. 5, respecting the Department of Munitions and Supply. He said: I had the permission of the house to present the resolution at an earlier stage without debate and to have the bill introduced and read the first time. When that permission was granted, I indicated that I would make a statement on the second reading of the bill with respect to its purpose and provisions. The bill before the house intituled "An act respecting a Department of Munitions and Supply," is intended to give the government the necessary authority to set up a department of munitions and supply. In the United Kingdom during the last war, as hon. members are aware, it proved necessary, in order to meet the unprecedented demands for munitions and other supplies, to set up a separate ministry of munitions. Mr. Lloyd George, in his Memoirs, makes some very significant observations which bear directly on the proposal being made by the. government. In a speech at Manchester, while organizing the Ministry of Munitions, he had this to say of its purpose: We want to mobilize in such a way as to produce in the shortest . space of time the greatest quantity of the best and most efficient war material. That means victory; it means a great saving of national strength and resources, for it shortens the war; it means an enormous saving of life. 87134-12J That reference will be found in Mr. Lloyd George's Memoirs, volume 1, page 258. He also stated: It requires some effort to envisage the wide range of our task. Few people would at the outset imagine how much is covered by the phrase " munitions of war " or dream of the colossal ramifications of the industries concerned in their production. That will be found on pages 269 and 270 of the Memoirs. Mr. Lloyd George also stated: Most of the special steps that were taken after the formation of the Ministry of Munitions to stimulate production could equally well have been taken in 1914. It was to those special steps that the greatly accelerated yield on account of outstanding war office orders in the latter part of 1915 as well as the immense augmentation of output in 1916 on direct orders of the ministry was mainly due. That will be found at page 269 of the Memoirs. The government is determined to avoid if at all possible similar consequences flowing from any delay in setting up effective machinery in Canada to meet the urgent demand, inseparable from modern war, for munitions and supplies. It is for these reasons that we are asking parliament to give us authority to set up a new and comprehensive department with far-reaching powers. Hon. members will recall that following upon the commission established in 1915 for war purchasing, the war trade board was established in 1918, both under the authority of the War Measures Act. We intend to take at once measures which were found necessary as the result of experience gained after the war of 1914-18 had been in progress for some time. We propose to establish at once under the provisions of the War Measures Act a war supply board responsible to the Minister of Finance with comprehensive powers similar in character to those being asked for in this bill. At the same time, as the result of legislation being asked for in this bill, the government will have in reserve the authority to create at any moment a separate department of munitions and supply. The new department, if it becomes necessary, will have the advantage of the experience and organization which the activities of the war supply board will have made available. At the last session of parliament we established a defence purchasing board. That was in a time of peace. This is a time of war. Hon. members will recall that at the time the defence purchasing board was set up the Minister of National Defence (Mr. Mackenzie), in reply to a specific question, said: The answer is this, that this is a measure for peace time, and I trust that it will long be used for that purpose. If an emergency arises, doubtless other measures will be enacted immediately to deal with the emergency. 172 COMMONS Department oj Munitions and Supply That quotation will be found at page 1972 of Hansard for this year. The main concern at that time was to ensure that there should be no profiteering incidental to preparations for defence. The then Minister of Finance (Mr. Dunning) envisaged different methods for controlling profits in the event of war. In the same debate he said: And of course if-God forbid-war should come and we have to consider the results of war inflation of one kind and another, outside of this measure altogether we shall have to evolve schemes for profit control which will apply not only on purchases by the Department of National Defence. I think there is no doubt we would come to that. That is to be found in Hansard for March 29 of this year, at pages 2397-8. I hope I have already made it abundantly clear that the attitude of the government to-day is just as firm in that respect, and if anything more were needed to show our firmness the tax proposals in the budget speech should leave no room for doubt on this score. What we do want to ensure is that the procedure for which there might have been time in days of peace does not hamper and slow up the meeting of urgent needs in the present situation, when the saving of time may mean the saving of lives. The war supply board will be so constituted as to function speedily and effectively in the matter of purchases. But this problem is no longer confined to the purchase of day to day requirements on a comparatively limited scale. The problem is now broadened to include planning not only for months but perhaps for years ahead. Further than that, it includes the whole question of the supply of materials of all kinds directly or indirectly necessary for the prosecution of the struggle. It involves the investigation of sources of supply of many commodities, not only those produced in Canada but those which must be obtained abroad; also the working out of measures to conserve essential supplies here which otherwise might be exported, and the ascertaining of capacities and capabilities of plants and businesses for producing or supplying essential needs. Equally important is the endeavour which must be made to ascertain and forecast not only present but prospective needs, and to take steps to see that supplies will be conserved or obtained to fill these needs from time to time. The experience of the last war revealed clearly that staying power, the effective use of economic resources, was the decisive factor. It is but a commonplace to say that in modern war economic defence is as vital as military defence. Canada's geographical situation especially fits her to make a tremendous material and technical contribution to the joint effort. This joint effort raises another problem, namely the distribution of available materials as between us and our allies. Now that purchases on a large scale by the British government, and probably by other governments associated with Great Britain in the struggle, are likely to be made in Canada it is advisable that there should be an authority with power to act not only for Canada but as agents for other governments if they should desire it, and in any case to coordinate the purchases of the Canadian government with those made for other governments. Furthermore the experience of the last war has clearly shown that the problem of securing armaments and munitions cannot be separated from the general economic organization of the country. For example, if too much energy and material is thown into the manufacture of munitions, some other industry equally essential to the national effort may be crippled. In order to prevent such a situation arising, the governmental body must have power, not merely over the production of munitions themselves, but over production of related supplies, if a proper balance is to be maintained, and the most effective use made of our varied resources. Not only will it be necessary to coordinate the industrial production of the country in a way which would not be desirable in peace time, but it may be necessary to determine priorities in the case of certain essential materials. A Canadian supply authority must be able to divert production from one field to another as the changing circumstances of war may demand. It is essential that an organization be created which will view the problem of supply as a whole and which will have the capacity to act in whatever direction action is most urgently needed. While the legislation which the government has introduced provides for the creation of a department of munitions and supply, it is not the intention of the government to set up a full-fledged department immediately. We are anxious to avoid unnecessary duplication of departments, and to have the benefit which will be gained from actual experience in operation of a fully authorized and competent board working to achieve the best methods of handling the complex and far reaching problems involved in respect of war supplies. We feel that the reasons for having made the defence purchasing board responsible to the Minister of Finance apply even more strongly in the case of a war supply board during the period in which an organization is being built up. The problem of finance is a vital element in the general problem of supply, and the Department of Munitions and Supply Minister of Finance must necessarily be in close contact with whatever organization is entrusted with the responsibility of securing munitions and supplies. No one can foretell what demands this war will make upon the country. We must be prepared to meet unexpected demands quickly. This legislation gives us the power to act quickly and effectively if the need should develop for another department with a full time minister in charge. In the earlier stages, however, it is considered that surveys, investigations, organization and administrative methods can be initiated and worked out by a board in close touch with business and practical conditions, these activities to be later continued under the board or merged in a ministry as the occasion and circumstances demand, and as the experience gained may warrant.
Mr. LAWSON:
It may not be strictly in order, but "perhaps the Prime Minister would permit me a question. Is it the thought that this war supply board to which the right hon. gentleman has referred is to supplant what has been previously set up as the defence purchasing board?
Mr. MACKENZIE KING:
Yes.
Hon. C. H. CAHAN (St. Lawrence-St. George):
Mr. Speaker, when I read this bill and attempted to consider it in all its ramifications and complexities, I felt I need not discuss its provisions in detail, either on second reading or in committee. It is an elaborate effort to provide for a Department of Munitions and Supply under a minister who will have the most extensive powers ever given to a minister of the crown in Canada.
Section 6 of the bill provides that the minister shall examine into and organize the resources of Canada, the sources of supply and the agencies available for the supply of munitions of war, and supply for the execution and carrying out of defence projects, and the needs present and prospective of the government and of the community in respect thereto; and may make use of the services of any board, agency or association in carrying out the provisions of this section.
Then in the definitions section it is provided that "munitions of war" shall mean:
Arms, ammunition, implements of war, military, naval or air stores, or any articles deemed capable of being converted thereinto, or made useful in the production thereof.
And the term "supplies" is defined in this
way:
"Supplies" includes materials, goods, stores and articles or commodities of every kind including, but not restricting the generality of the foregoing: (i) articles which in the opinion of the minister, would be essential for the needs
of the government or of the community in the event of war; and (ii) anything which, in the opinion of the minister, is, or is likely to be, necessary for, or in connection with, the production, storage or supply of any such article as aforesaid.
Therefore the scope of the work of the department is very extensive indeed, and I might almost say unrestricted. It occurred to me, therefore, in reading the bill that it was to be brought into operation at an early date by order in council, and that it was to continue for a period of three years, with a possible extension of one year for certain of its provisions. I had thought therefore that it would be advisable to refrain from any criticism of these provisions for the present, in view of the fact that at a later date-perhaps at the ensuing session of parliament-the bill would have been in operation for several months, and that we would then know something of the success and efficiency of the measure.
I now find, however, that this bill will be held in abeyance for the time being, while the new war supplies board, which is to be created and which is to function under the War Measures Act, is to make the necessary investigations and examinations of the economic conditions and industrial life of the country, preliminary to setting up the Department of Munitions and Supply as provided in the bill.
Under those circumstances I think criticism is vain and premature. I trust, when the war supplies board is constituted, that the order in council, by which it will be constituted, will be made known to the public, so that during the recess we may thoroughly examine into its provisions and watch with great care the manner in which it functions.
I should have thought it might be advisable to start at once with the Department of Munitions and Supply because that department, if it is to be created, should be under the administration of a minister of the crown. The war supplies board will not be under the direct administration of a minister of the crown, whose time can be given exclusively to the efficient operation of the board. Perhaps any further comment from me is unnecessary.
I notice that under section 20 the governor in council may from time to time make such regulations as may be necessary to carry into effect the provisions of the bill. No provision is made for the publication of those regulations, or to provide that they shall have the force of law after they are once made.
Section 14 provides-and I believe very properly-that subject to the order of the minister any person carrying on business, which comes within the scope of this enact-
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Department of Munitions and Supply
ment, shall not be bound, in respect of such matters as may be specified in the order made by the minister, by any obligation or limitation imposed on that person by or by virtue of any other act, order, rule, regulation or by-law. That is a provision whereby the minister administering this department may exempt all persons and all companies, with which he may deal, from the provisions of any act existing on the statute books of Canada, which would otherwise restrict their operations in furnishing munitions of war and supplies.
For instance, had this bill been drafted after the remarks I made the other night respecting the Combines Investigation Act, I would have suggested that the draftsman had carried out the suggestions I then made, namely, that if industry is to be mobilized for the efficient production of munitions of war and supplies for carrying on the war, it must not be subjected strictly to a number of statutes, such as the Combines Investigation Act, and one or two others which I might mention.
I regret to have taken any considerable time, but the Prime Minister's statement that the bill is to be held in abeyance and is not to be put into operation at an early date, came without notice. Otherwise I would discuss certain of its provisions more at length.
Mr. T. L. CHURCH (Broadview):
I understand the purpose of the bill now before the house is that of establishing a Department of Munitions and Supply. I would suppose that the bill of last session limiting to five per cent profits on munitions, and imposing certain other restrictions, would have to be read into this measure. We have wasted most of this year. As late as August business men came to Ottawa and could find no one who could deal with the matter or advise them. I moved a resolution in the house at the last session and also in 1938 asking for a survey of industry in this country similar to that carried out by the British munitions board. My motion called for a census or registry to be taken of the industrial and economic power, food supplies and so on of the country. On February 2 the minister replied that 1,300 industrial firms had been surveyed. Letters were sent out. That was all very well so far as it went, but it was not followed up. Many firms tell me that they were not inspected or surveyed at all. On April 26 the minister said in reply:
During the past two years this committee has made a thorough survey of industrial firms and plants, with a view to ascertaining, tabulating and indexing the available industrial resources of the country for the production of military requirements at a time of emergency.
In April, two months after his reply in February, he stated that 1,500 firms had been surveyed. The result of that survey has been practically nothing. During the past eleven months there have been three major crises in Europe, but we have not profited from any one of them or started to get ready. We misjudged the European situation. Immediately after Munich we should have started mobilizing the industry of this country and putting it on a war basis. The industry of Great Britain has been on a war basis for two years, but nothing was done here as a result of the survey, or any preparation made. At the opening of the last session or a month later, a petition was presented to parliament by the Ontario legislature along the same lines as my earlier motions.
All this is gone and perhaps there is no use in talking about it now. We should not forget that Germany has great striking power. She has 100 divisions ready to put into the field, and she has the largest and most up-to-date fleet of aeroplanes in Europe. She has 4,200 first-line machines and 2,500 modern bombers capable of bombing London or Paris, or perhaps even coming here to Canada. It is almost impossible to have quick action in the production of munitions. We should have had the equipment available with a reserve of materials; we should have set up reservoirs of food and provided protection against this dreadful submarine menace to transportation.
Another idea is that the most attention should be given to home defence. Home defence in Canada is not as vital as it is in Great Britain. Great Britain is one of the most vulnerable of the European nations. She must provide means of protecting her people because she is only twenty or thirty miles away from her enemies. She must provide protection for her people from air raids, and she must ensure a sufficient supply of munitions and food. Home protection is of vital importance to Great Britain, and this matter is not receiving the attention it should in Canada. The main program passed this session seems to be for the defence of Canada. I contend that our first line of defence is in France and Great Britain. If they fail, all is gone and the whole world will' enter into outer darkness. All the money we are spending on the home defence of Canada will be wasted; it will not contribute one iota to winning a victory. Our duty should be early to supply Great Britain with all our munitions to the exclusion of the home defence of Canada. The passive defence of Canada will not assist Great Britain in meeting her enemies on the German border. Our home defence is useless.
Department oj Munitions and Supply
I should like to say a word about the action of the United States in connection with its Neutrality Act. For the last three or four years our friends in the Cooperative Commonwealth Federation and others have been arguing that we did not need an army or air force, that we could rely on Pan-America. As a result of similar arguments Great Britain, to please the pacifists, scrapped the finest navy, the finest army and the finest air force the world ever had. You cannot get such forces back in a day or a generation, and this is one of the main reasons for the present trouble.
I think Canada should seek some revision of her last trade treaty with the United States -which she has now power to do-in view of the action of that country in connection with its Neutrality Act. They are not going to give us any munitions, aeroplanes and all that kind of thing. After Munich, New Zealand, by preparation, got ready, and she has now 1,300 trained pilots who are immediately available to go to England to take part in the fighting at the German front. We should have taken the same action. The board of education of Toronto came down here and stated they were ready to offer the equipment of their technical schools to train men, and asked federal aid. Many men from Canada were trained, and some have since gone overseas to receive further training in England. Some of those men took part in the recent attack on the Kiel canal. In view of the action of our friends to the south, I think we should seek some revision of our trade treaty. We should make every effort to conserve the economic and industrial life of Canada in view of this great disaster which has come to the world.
We have been supplying materials to Germany when we should have been building up our own country. I was surprised to learn that we have been supplying Germany with pig iron. The figures show that the following exports of pig iron were made during the six months, September, 1938, to February, 1939:
From
Tons
Belgium and Luxemburg 131,754
France 204,506
United Kingdom 39,203
And a large tonnage from Canada. That is a deplorable condition. I regret to learn that for the past three years Canada has not been supervising her trade with Germany and has permitted the shipment of iron and other raw materials to that country for the manufacture of munitions.
This munitions board should not be faced with the same disaster which faced the British board in 1917 when there was a great scarcity of power for munitions plants. At one time
the hydro system supplied power to manufacture 52 per cent of all the shells being sent to the allies. A book published by Mr. Carnegie, one of the heads of the British munitions board, shows that there was a great scarcity of power during the war and the record the hydro made. The government would have been well advised after Munich to take some definite action. This board cannot come along now and get munitions in the twinkling of an eye. It is going to take a long time to get into production.
The United States are back to where they were in the days of George Washington and Andrew Jackson. They want complete isolation. The United States always speaks with two voices, one is the voice of the president, who has been most friendly to us, but the other is the voice of the house of representatives and the senate, who are for neutrality and isolation. We all know what action was taken by congress during last July and August in connection with the Neutrality Act. I ask hon. members to read some of the speeches delivered in the senate and the house of representatives. The United States are treating the dictatorships the same as they treat the democracies. They are treating people who are attacked the same as they treat the attackers.
Then we may not be able to get the plants which we hoped to get, even assuming that this board will take over certain private plants.
It is essential that munitions plants should have protection and that they should have a cheap power, light and water supply. These industrial plants will be working on two or three shifts a day, and any board appointed should seek the utmost cooperation between labour and industry and should prevent sabotage. It has been a puzzle to me why all these raw materials, scrap metal, pig iron, nickel, lead, copper and manganese, have been allowed to go out of the country and get over to Germany during the past year or two.
The return which has been brought down gives no indication at all of where these plants are. A few of them have been inspected, but I should like to know if any new factories have been approved, and in what state of preparation they are. What progress has been made in that respect? Will consideration be given to all these matters under this legislation? During the war of 1914 to 1918 it was found necessary, in order to give full support to these industries under the munitions board, to place section 98 in the criminal code for the protection of munitions plants. I am not prepared to say
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Department of Munitions and Supply
what should be done here, but it is a fact that Attorney General Conant of Ontario has written to the Minister of Justice (Mr. Lapointe) and to the department asking for an amendment to the criminal code to protect not only munitions plants but public utilities in the event of war. I do not know wl ether that should be done, but certainly the government should look into it. I do not wish to delay the committee or to say much more, but I do think it is deplorable that with war staring us in the face Canada should have been asleep at the switch in making preparations to supply munitions.
I believe that Canada will give as good an account of itself in this war as in 1918, when we bad a munitions board. I believe that industry and labour will work well together and that there will be no strikes. I think everybody will make a great effort to supply Britain with the munitions she needs, and that should be our first consideration, and home defence second.
Hon. R. J. MANION (Leader of the Opposition) :
Mr. Speaker, looking over this bill
since it was distributed, I have been struck, as was the hon. member for St. Lawrence-St. George (Mr. Cahan), by the extraordinary powers that it gives to the minister if and when he is appointed. I listened to the Prime Minister (Mr. Mackenzie King) with interest, and I noticed that he mentioned the work of Mr. Lloyd George in England. I should like to ask him, if I might without interrupting the few remarks I wish to make, whether the powers conferred by this bill are more extensive than those that Mr. Lloyd George took for the same purpose in England. Are they more extensive than his?