Mr. ILSLEY:

It is not likely. The average 'ate is less than three per cent at present.

Mr. QUELCH:

Not from the people. I know that we are borrowing from the chartered banks for as low a rate as -78 per cent, less than one per cent, and when you average that rate with three per cent you get of course a lower rate than three per cent. But we are not borrowing from the people at a lower rate than three per cent.

Mr. ILSLEY:

Long-term bonds are at a premium. It would be possible to borrow long-term money at considerably less than three per cent. /

Mr. QUELCH:

On long-term public issues?

Mr. ILSLEY:

Oh, yes; and the shorter

ihe term the lower the rate.

Mr. QUELCH:

From the people of Canada?

Mr. ILSLEY:

Yes.

Mr. QUELCH:

Does the minister mean from the insurance companies?

Mr. ILSLEY:

What I mean is this. It would be possible now to borrow from the public of Canada, on long term, bonds at substantially less than three per cent. The price which victory bonds have reached shows that.

Mr. QUELCH:

I am glad to hear that, because it helps me to bring out the point I wish to make. I hope that the next victory loan will be sold at one and a half or two per cent. Under the agreement with Britain we are proposing to make a loan without any interest until the year 1951. I understand

Britain will not pay interest until 1951 and after that at the rate of two per cent. It is possible that we may float a victory loan at two per cent, so that our only loss would be on the first five years up to 1951. Now I have received a number of letters from people in my constituency saying: "Why is it that

we can lend to anybody, apparently, except Canadians, money at two per cent, or even money for a period of five years without interest at all, when we have to charge our own people a rate of three or four per cent?" I appreciate the reason given by the minister. He said this loan to England was based on ability to pay. We had to reduce the rate of interest to a level that would make it possible for England to repay the loan. I have nothing to criticize in that but if, in order to make certain goods available to people externally, we have to reduce the rate of interest so that those people can repay the loan we make, should not exactly the same principle apply to Canadians in this country? I would say it should apply to civilians, but certainly it should apply to the soldiers who fought the wTar. Yet what do we find at the present time? In respect of the Veterans Land Act we charge the soldiers three and a half per cent interest. Many applications by soldiers who wish to take advantage of the Veterans Land Act 'are being turned down on the ground that these veterans will not be able to pay off their loans at the rate of three and a half per cent interest. But if we can say to the British people, "You cannot meet your obligation at three or four per cent and so we will make an agreement with you whereby you can meet it", why can we not do the same thing with our soldiers? If they cannot repay their loan in ten or twenty years at a rate of three and a half per cent, why do we not change the agreement and finance it in such a way that the soldiers will be able to repay their loans? Instead of saying, "You cannot go under the Veterans Land Act because you will be unable to meet the financial conditions," let us adjust the conditions so as to enable the soldiers to meet them. Instead of imposing the present conditions, let us meet the soldiers and discuss the matter with them in order to find out at what rate of interest it would be possible for these boys to buy land and pay off their loans. We might give them the same kind of agreement that we are making with Britain. We might say to them, "We will not charge you any interest until 1951, so that you may have a chance to get on your feet, and from then on we will charge you two and a half per cent and later perhaps three per cent."

Loan to United Kingdom

There is an old saying that charity begins at home. I cannot see why we are more willing to give a decent agreement to people outside Canada than to our own people.

Mr. ILSLEY! Let me answer that at once. If the rate of interest charged on loans to Canadian citizens, whether they be returned soldiers or others, were made at a loss to the Canadian treasury, it would be an additional subsidy or veterans benefit as the case might be. The taxpayers would be assuming just that much greater burden for the benefit of that class of the community who might receive their money at less than market rates of interest.

Mr. QUELCH:

Or an expansion of the

internal debt.

Mr. ILSLEY:

Yes. But you cannot have an indefinite expansion of internal debt.

Mr. QUELCH:

Then I would ask this question

Mr. ILSLEY:

Let me finish, please. I have to connect the two thoughts together. In the case of the loan to Great Britain, the extent to which the taxpayer contributes there is a contribution to the people of the dominion of Canada to give them markets, and if you did the same thing over again domestically you would be giving the people of Canada a double benefit. It just depends on how high you want to have your taxes go, or how high you want the internal debt to go. The hon. gentleman perhaps holds the theory that this loan to Great Britain is not designed primarily for the benefit of the Canadian people.

Mr. QUELCH:

Hear, hear.

Mr. ILSLEY:

Well, I have dealt with that position. I believe the hon. gentleman took that position, and so did one other member of his group, the member for Maeleod (Mr. Hansell). But that position was not shared by the member for Lethbridge (Mr. Black-more) or by myself, and I do not think it is shared by the membership of the house as a whole. The object of this loan is to get Great Britain into the position where she can be a dependable, a steady and an expanding market for Canadian goods, and in that way confer benefits upon the constituents of the hon. gentleman, whether they be civilians or veterans. And that is certainly no argument for extending our gratuity policy or our reestablishment credit policy. There may be other reasons for extending it, but that is not a reason for doing so. It would be conferring a double benefit instead of a single benefit upon the constituents of the hon. gentleman and the citizens of Canada as a whole.

Before I sit down I wish to deal with one minor point raised by the hon. gentleman, though perhaps I should not take the time of the committee in discussing it. He deplored the fact that our securities are sold abroad, on the ground that that increases the external indebtedness of Canada or of the people of Canada. That is so. It increases the liability of Canadians to other countries. But as against that liability there is a corresponding asset, that asset being the currency of the foreign country, the American currency which we hold; and to the extent that our securities are sold in volume our reserves of American currency are built up. But the loss in the transaction is not an absolute loss; that is a loss to the extent of the additional liabilities incurred by Canadians. The loss is merely of interest, as I explained to the member for Calgary West yesterday. Dividends and interest on securities that are sold abroad are all a charge upon the productive capacity of the Dominion of Canada, while the currency we get for these cannot be employed in such a way as to earn the equivalent amount of interest. That is the loss, and the only loss, as far as loans are concerned. -

Mr. SMITH (Calgary West):

But industry operates and pays wages here.

Mr. ILSLEY:

Yes.

Mr. HACKETT:

It is a charge on

production.

Mr. ILSLEY:

The interest we pay abroad?