Mr. RALSTON:

My hon. friend would

no doubt expect me to say that at the moment one cannot lay down or formulate a definite line of policy with regard to the terms of issues which may be made in the future. With regard to maturity, one of the major factors-[DOT] I cannot give them all

is obviously to endeavour to find a maturity which is at such a date that it will not involve too great a burden of refunding in any particular year. That is one factor.

Another factor which must be considered is the length of term of the bonds which are being refunded and where they are held. Rate of interest will of course depend on the length of term for which the money is asked, and on what the market may be for bonds of a comparable maturity which are outstanding at the time of the refunding operation.

Obviously a third factor in connection with rates of interest on issues being made at this time is the readiness of Canadians to help. While we want to be sure that the issue is taken, at the same time we want to be sure that the money shall be secured at the cheapest possible rate. We believe we can depend on the Canadian people to see to it that the issues made by the government at reasonable terms will be taken up.

With regard to the callable feature, we took advantage of a feature of that kind in connection with the 48-52's which were issued in January last. One always has to consider the price and coupon rate so that the call feature will not mean that you are paying a long-term rate of interest for a short-term bond. I agree fully with my hon. friend when he suggests that, in so far as it does not interfere with the salability of the bond or make the money too expensive, it is most desirable that there should be a call feature in a bond. That is perhaps somewhat more applicable in respect of bonds bearing a high rate of interest, such as those to which my hon. friend has referred. But generally speaking I think the government's being able to

Government Loan Bill

call bonds on such terms as they may see fit, after leaving a reasonable time for the bond to run, is a proper precaution to take.

Mr. ROSS (St. Paul's):

Is this the only authority for the renewing of the $230,000,000 of treasury bill's? Is there any other authority for their renewal?

Mr. RALSTON:

I have not looked into that matter thoroughly, but I anticipate that the supply bill, that is the general appropriation act which we will pass, based on the estimates, will contain the usual provision which allows the government to borrow up to $200,000,000. I think that is broad enough to cover the issue of treasury bills. This bill and that provision in the appropriation act would, I think, be the only ones-with the exception, of course, of the $700,000,000 authorization received yesterday or the day before, which would authorize the issue of treasury bills.

Mr. CHURCH:

During the last great war, for war purposes, a much larger sum was charged to income and not so much was received by way of borrowing. I hope the minister will not be unmindful of the fact that during the last great war 550,000 men were in the army, many being young business men from the industrial provinces of Ontario and Quebec, from the maritimes and British Columbia. To-day many of these business men are paying income and sales tax on what they must buy for their families; the men who fought in the last war have had to pay a great part of the taxes made necessary by that war. I am sorry to see this clamour and demand for increased income taxes, especially when income is not available. The main recruiting provinces were the industrial provinces and the maritimes and British Columbia. Ontario and Quebec pay about eighty per cent of the cash taxes, according to a return made in 1924 to the then hon. member for Sherbrooke. Many of the men enlisting for this war have given up all their income, and if additional taxes are imposed their families will have to pay them.

There has been a great change in our financial structure. During the last war real estate did not have to bear the federal and provincial burdens it bears to-day. The federal and provincial authorities have taken over the right to levy many taxes which were previously the exclusive right of the municipalities. Prom confederation to 1917 the income tax was exclusively the right of the municipality, but at that time the federal authorities took it over. Then the provinces came along with a duplicate tax, and in British 95826-264

Columbia there are three. Our municipalities are carrying relief burdens which were never contemplated by the fathers of confederation.

We all realize the minister is carrying a tremendous burden and he deserves and will get the support of all the country. Many of the men enlisting to-day are professional men. I know of a doctor in Toronto, one of the best eye and ear specialists in Canada, whose income was $19,000 a year. He has gone to the war and has had to give up all his income. His wife is doing war work, but still these taxes have to be paid. It is a great mistake to attempt to charge too much to income. Other countries are not doing it. No doubt there will be some demand from the prairie provinces that this should be done, but we should not forget who pays the taxes. I appreciate the difficult problem the minister must solve to raise this money, but we must not forget that those who are going to pay the taxes will be those who have always paid the taxes. The minister has had more experience than I in many spheres of activity and I have no doubt he realizes the heavy burden being borne to-day by real estate.

A proper proportion of these taxes should be levied on bonds and securities. A previous minister said that he could borrow money for two-thirds of one per cent, but there was no war on at that time. There will be very little salvage after the war, and the bonds and securities of the country should pay a proper share of these taxes. Our men are going overseas to fight to protect these bonds and securities owned by the insurance companies and other financial institutions. They are risking their lives for this country, and that is not being done by those who stay home and do not pay taxes.

Mr. RALSTON:

My hon. friend will understand that the subject with which he has been dealing will be given the most careful attention and study in connection with the budget. After all, that is when such a matter would be considered.

Mr. HANSON (York-Sunbury):

The Bank of Canada, I believe, is the fiscal agent of the government and I suppose the governor and the directors of the bank are the financial advisers of the government. As I understand it, the Bank of Canada as the fiscal agent of the government puts out an issue which is allocated to the banks and the investment bankers-if that term is in order; I believe at one time a ban was placed upon the use of that term. These institutions are paid something for selling the bonds, which is quite proper; but I should like to know the cost, in percentage if it can be given that way, to the treasury of selling the bonds. I should

Government Loan Bill

like to know also what is paid by the treasury to the chartered banks for servicing the loan after it has been placed in the hands of the investors, that is, cashing coupons. Is that service paid for by the first cost, or not?

Mr. RALSTON:

I cannot give my hon. friend the over-all cost of loans. He will understand that in a number of cases the loans were simply refunding issues, and there was practically no commission cost. As I understand it, what my hon. friend is referring to particularly are loans similar to the one issued in January. That loan was sold to the public and the commission allowed was three-quarters of one per cent. However the individual who happened to procure the subscription of an insurance company or other institution making a large subscription would not receive this three-quarters of one per cent on that transaction. What was done was this. A large number of what we called national subscribers were put in one group and all amounts arising from commissions on their subscriptions were pooled and distributed among the banks and those who sold bonds to individuals in proportion to those sales. That was one factor in the distribution. The share in the pool was based on the amount sold by that individual house to what I would term private subscribers. That provided an inducement to sell as many as possible to those outside the national group. There was another factor in arriving at the distribution, namely the record in previous government issues. That system was found to work quite effectively, and I think I can add that it was satisfactory from the point of view of the country.

Mr. HANSON (York-Sunbury):

The cost to the country was three-quarters of one per cent.

Mr. RALSTON:

Plus expenses.

Mr. HANSON (York-Sunbury):

That would be the cost of preparing the bonds and advertising.

Mr. RALSTON:

I am sorry I cannot answer at the moment the other question with regard to the charge made by banks for cashing coupons.

Mr. HANSON (York-Sunbury):

As I recall it, in previous war loans the first commission to the bank covered the cost of cashing coupons during the lifetime of the issue. The arrangement was a good one, and I was wondering whether it was being perpetuated. I understand that the coupons are payable at par at any branch of a chartered bank in Canada, no charge being made to the investor.

As far as he is concerned, that is all to the good. The point is not of great importance. I was merely asking for information, but if the minister cannot give it, all right.

Mr. RALSTON:

I can give my hon. friend the information now. I knew there was some difference having regard to when the issue was made. The chartered banks receive one-eighth of one per cent of the face amount of the coupons cashed from all issues sold since 1923. In the case of the war loans 1916-1919 the charge for cashing coupons was included in the issue commission.

Mr. HANSON (York-Sunbury):

Now they are paid by the government.

Mr. HANSON (York-Sunbury):

I suppose this section is necessary. I regret that we cannot write the regulations into the legislation itself, but it is impossible to foresee every contingency and orders or regulations may be necessary to suit conditions as they arise.

Mr. GREEN:

I understand that this bill merely ratifies an agreement between the Great Northern and the Canadian National Railways. Is the city of Vancouver interested at all? And if so, has the city approved the terms of the bill?