May 15, 1947

SC

Victor Quelch

Social Credit

Mr. QUELCH:

I should also like to join with the hon. member for Restigouche-Madawaska in his reference to the various letters which have been sent out by Mr. Wilfrid E. Krug. I think he has been doing a great service to Canada.

I believe there has developed in the country widespread opposition to the high rate of taxation levied in part in order to provide the money to pay interest on bonds held by financial institutions. The question is often raised, would financing through the Bank of Canada cause inflation? My reply would be, not necessarily, if carried out wisely. People today have money in bonds for investment purposes, in order to get the interest. If the people who hold these bonds today wish to spend that money they can take the bonds to the chartered banks and cash them. The chartered banks create new money for that purpose. That is being done. It was done in the later stages of the war and it is being done today. If the people holding bonds want money for their bonds they get that money today. Therefore, if we finance the purchase of these bonds through the Bank of Canada it will not make any difference in that regard. The people who get the money for their bonds will immediately seek investment in other fields. We insist that the refunding of the debts as they mature should be done through the Bank of Canada. Then the holders of those bonds, upon receipt of the money, will immediately seek investment in the proper field of investment, namely, in private industry and commercial enterprise.

The former Minister of Finance defended using capital from United States residents on the ground that we lack venture capital in this country; that is to say, he defended borrow-83166-200

ing from the United States of America on the ground that we had to get a certain amount of capital from that country because we lacked venture capital. I would say that so long as investment in government bonds is encouraged, investment in industry will be discouraged. Refunding dominion bonds through the Bank of Canada would tend to force investment in industry and provide all the venture capital that we need. If the government still argues that the expansion of the chartered banks' cash reserves resulting from refunding would cause inflation, then it could very well amend the Bank Act to compel the chartered banks to maintain 100 per cent cash reserves behind their demand deposits; that would adequately prevent the danger of inflation.

I quite realize that the minister may say, "That would be too hard upon the profits of the chartered banks." But I do not consider it to be the responsibility or the duty of the government to provide investments for the financial institutions of this country and then tax the people to pay the interest on those investments. Let the financial institutions and corporations invest their money in industry instead of expecting the government to provide them with an investment backed by the resources of the country, and then use the Minister of National Revenue as a collector for it. That is really what the government is doing. It is making the Minister of National Revenue a collector for a most undesirable kind of racket.

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
Permalink
SC

Solon Earl Low

Social Credit

Mr. LOW:

Social security for the few.

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
Permalink
SC

Victor Quelch

Social Credit

Mr. QUELCH:

If the government insists on financing in the future as in the past, then I would say that depressions are inevitable, with expanding debt. From confederation up to this year we have had only fifteen balanced budgets, with a continuously rising public debt. Even in the years when we had a balanced budget in this country our public debt still expanded, because the provinces and municipalities were forced into debt. Of course the minister may say that it is different this year, that we have a surplus, that there is no increase in the debt, and that we are actually reducing the debt. But as I pointed out, that surplus is due to sale of capital which cannot be considered, or should not be considered, as current revenue. If, during the past eighty years, it has not been possible to halt the growth of public debt, what likelihood is there that in the future we shall be able to halt its growth? Are we going to suggest that the reason we could not prevent the growth of debt in the past was that our ministers of finance were incompetent or dishonest? If we are not prepared to admit that,

The Budget-Mr. Lockhart

then I think we must admit the problems which will face the present and future ministers of finance will be far greater, because we have expanded our debt many times over. We have today many far greater problems to meet than we had in days gone by.

The Minister of Finance, like former ministers, apparently still believes or hopes that we can tax ourselves into prosperity and borrow ourselves out of debt. Doctor Cyril James, when giving evidence before the reconstruction committee, emphasized the fact that we need a new budget philosophy in this country. He said that we should have two types of budget : one to balance current expenditures and revenue, and another, which would be a long-term budget, to finance capital expenditures. He said that in all probability under that system we shall see the national debt increased by several hundreds of millions of dollars in the next 100 years. I do not know why he stopped at 100 years because, if we go into debt steadily for the next 100 years, I should imagine that we shall have increased our debt to such a size that we shall have even greater difficulty in meeting our obligations as long as we continued under the present financial system. The only sound alternative would be to finance our national projects through the Bank of Canada and pay for them through taxation at the rate of depreciation of the capital asset, so that the capital asset is paid for during its lifetime instead of the debt being passed on for future generations. When we finance as we are doing today, the debt may run on for many years, so that, when the final payment is made, you have not only paid for the capital asset in the form of principal, but paid for it many times over in the form of interest.

In closing, I should just like to say that the budget should have embodied in it the following features:

1. It should provide the means for maintaining an optimum development of our resources.

2. It should provide for maintaining the purchasing power of the people at a level sufficiently high to create an effective demand or market for our production.

3. It should provide the means for a basic income to all citizens.

4. It should provide for meeting any deficiency in revenue by the use of national money, thereby making it possible to bring about a reduction in debt and taxation and at the same time maintain the income of the country at its highest level.

At six o'clock the house took recess.

After Recess

The house resumed at eight o'clock.

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
Permalink
PC

Norman James Macdonald Lockhart

Progressive Conservative

Mr. N. J. M. LOCKHART (Lincoln):

Mr. Speaker, my observations this evening will be fairly brief, and more of a general nature. It is my desire to avoid repetition as far as possible, and when the budget resolutions are before the house they will provide ample opportunity for perhaps more detailed discussion.

In presenting his budget-and I may add that, in my opinion, he presented it extremely well-the minister was optimistic in proclaiming a surplus of something over $300,000,000. I do not find myself in such an optimistic mood as that of the minister on the night he delivered his budget speech. However, as he proceeded we found him to be quite frank in admitting that the surplus of $300,000,000 odd was perhaps made up largely of the proceeds from the sale of war materials by War Assets Corporation. Two or three weeks ago, in conversation with two officials of that corporation, I asked their honest opinion about the disposal of commodities placed in their hands. One man was very frank in saying that he thought the organization had been started a year too late. He said it was already evident that markets were disappearing rapidly, because new commodities of many kinds were now appearing and this had a definite effect on the prices that could be realized from the sale of war assets. He expressed the fear that perhaps much of the materials which could have been salvaged to fair advantage might be headed for the scrap pile.

From my observations and investigations in connection with some of the airports in my own district, in regard to the machinery and other materials disposed of there, I am inclined to agree with him. I hope he is wrong, because, after all, these materials would have been of considerable value if they had been properly sold. In any event, time will tell that story. But it seems to me that the surplus of $300,000,000 might shrink rapidly as developments take place in the very near future, and I should like to give one instance to show why I make this statement. A veteran located some distance from my own city, though still in my own constituency, bought from War Assets Corporation a large quantity of material with which to build himself a small home. I believe those materials consisted of lumber, wallboard, plaster base, electrical equipment, plumbing supplies and so on. Most of it was used material; some had been taken off other buildings during the demolition of airport buildings and the like. He bought the material at open prices; he could not get it anywhere else and in his desperation, because he was in

The. Budget-Mr. Lockhart

a difficult position, lie bought these things expecting to be given fair treatment. A little later on, he claimed to me that he had been overcharged, and spoke of one item in particular, that of plaster base, for which he said he had been charged $42 per thousand. It had been taken off the walls of an air force building and had the usual nail holes and ragged edges which anyone who knows anything about such materials would' quite expect. He asked me about the price and I said, "Well, young man, there is something wrong, because the ceiling price on that commodity is $26 per thousand." I had occasion to inspect the materials, and I had to agree that it did appear as though he had been wrongly charged. So I took up the matter with War Assets Corporation here, asking that a competent inspector and valuator be sent to that job. This was done, and I want to thank the officials of the corporation for giving such prompt attention to this matter. They sent an appraiser, and I am told he was quite competent. He inspected the materials, and found that what had been stated was to a large extent actually true. Just two or three weeks ago I had a letter from this veteran expressing his deep gratitude for having received such favourable consideration. His account was reduced by a total of $600.

I say, Mr. Speaker, if an adjustment like that can be made in connection with one small lot of material our surplus of $300,000,000, which is largely accounted for by the sale of surplus war materials, might reasonably be expected to be considerably reduced. To me, this transaction smacks a little of inefficiency. I cannot understand why veterans in particular should be given that kind of treatment. This particular matter was straightened out and adjusted, but this sort of thing may have a definite effect on the actual results as far as our so-called surplus is concerned.

In his budget the minister provided some relief from income tax for those in lower income brackets, and the hon. member for Muskoka-Ontario (Mr. Macdonnell) in his able speech, and also again this afternoon the hon. member for Kamloops (Mr. Fulton), dealt with that phase of the matter in detail. I do not intend to deal with the statistics in this connection, because I believe that can be done more effectively in the discussion on the budget resolutions.

The war has now been over for two years, but the man on the street is far from satisfied when he sees his income tax and all other taxes continuing on a war basis. He states readily that production is rapidly falling off, a condition which he cannot understand. At 83166-200J

the same time he says that food prices are rising with equal rapidity. Many I have talked to say it is just as if the minister had handed them a crust of bread with one hand and taken it away with the other. One chap, speaking in a humorous vein, likened it to the father who paid his child one cent to go to bed, and then took it away from him after he had gone to sleep. That seems to be the general impression of the average man on the street, particularly those who struggled so hard during the years of war. It applies with marked effect in respect of the man who worked for a set salary during the war years, and did not receive any great benefit from war production.

If there is a surplus either in the amount mentioned by the minister, or in a lesser amount-and I am inclined to believe that the lesser amount is more accurate-there has been nothing set aside for those old age pensioners, who have been promised something. Neither was there anything for blind pensioners, or for aged civil servants, many of whom took it on the chin during the war years.

With the advance in the cost of living industrial workers received a cost of living bonus, and rightly so; but not the old age pensioner, the blind pensioners or aged civil servants on retirement. They had to struggle along as best they could.

Only a few days ago there was tabled in the house a return setting out the hundreds of thousands of dollars paid by way of war supplements to many types and classes; and X shall not say "all", because some seemed to be overlooked, mysteriously. For the most part those war supplements were paid to civil servants in this city and elsewhere. I am one who believes that a workman is worthy of his hire, and I do not object to that practice. If a man or woman is worth a certain amount, by all means pay it. But I would point out that certain classes of people have been totally overlooked. I feel, therefore, that perhaps if the government had been a little more fair in the matter there might not have been so much surplus in the minister's hands as he claims.

I turn now to another surplus, one which I cannot understand. The records show that in the past year there was a surplus of $11 million in the Post Office Department, and that since the outbreak of war a surplus of $42 million, approximately, is credited to that department. It is true that at one time the minister did authorize a slight reduction in parcel rates to Britain. I claim, however, that he

The Budget-Mr. Lockhart

could have done much more, and that at the present time he can, and should, do much more.

Orders in council were passed almost overnight, and this is still being done. Yesterday we had evidence which would seem to indicate that one minister passed an order in council which another minister seemed to know nothing about. Apparently it is quite easy to slide them through. How about passing an order in council cutting postal rates back to the pre-war basis. It is about time that consideration was given to that, and that we stopped talking about a false surplus. A reduction of the kind I have suggested would help everyone to meet the higher costs of living. No one would complain, because it would affect the purse of every man who has to pay ten cents more for a pound of butter.

Particularly let us make a real effort to cut in half postal rates on food parcels being sent to Britain. A surplus of $42 million has accumulated in a department which I always thought was supposed to be a non-profit branch of government; at least that has been my understanding of it in my years in the House of Commons. I may be wrong, but that has been my impression. If that $42 million is included in the 8300 million surplus, then I say it is time to hand out a portion of it to the people by way of a return to pre-war postage rates.

Hon. members have noted the effort being made by Ontario in connection with flood relief, one of the most worthy projects that could have been undertaken. I wonder if, [DOT] just for once, the federal government could not take a lead from Ontario. The province is doing a real job in this respect, and I suggest that the Minister of Finance (Mr. Abbott) confer with the Postmaster General (Mr. Bertrand) to see if something could not be done along the lines I have suggested. Let us share some of that $42 million of accumulated surplus with our friends in Britain who are starving themselves in an effort to feed starving humanity in Europe. If that effort were made, rve would certainly be doing nothing wrong, and at the same time we would help our own people by permitting them to return to a pre-war basis for postage.

I believe any effort on our part to allocate some of this accumulated money for the purpose of sending things at cheaper rates to the people in Britain would be commended by people throughout the country.

There is one further point I should like to discuss in some detail. Yesterday the Minister of Reconstruction and Supply (Mr. Howe) announced in the house that the government agency to provide housing for veterans has

largely failed. I would ask any lion, member this question: What is the poor veteran going to do? Speaking in a jocular fashion, the Minister of Veterans Affairs (Mr. Mackenzie) said he intended to subpoena someone to attend before the public accounts committee. I am going to hold a public meeting on the ground whore forty veterans homes have been constructed, and I am wondering whether I might subpoena the minister to come down to see what the actual situation is. Some hon. member suggests that perhaps we could take the public accounts committee there and have a meeting. That might be a good idea. However, we shall have a meeting there one of these week-ends and get to the bottom of this thing. I gave the details to the minister and I must say that he appears to be trying to do all that is fair. Today I received a communication that the matter will be followed through carefully.

If these government agencies have failed, what has the veteran left to turn to? Some of our hon. friends to my left here talk about free enterprise. If they had a chance to get behind free enterprise and free enterprise is given the proper opportunity to do the job, it should be given a chance to show what it can do.

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
Permalink
CCF

Alexander Malcolm Nicholson

Co-operative Commonwealth Federation (C.C.F.)

Mr. NICHOLSON:

Who is stopping them?

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
Permalink
PC

Norman James Macdonald Lockhart

Progressive Conservative

Mr. LOCKHART:

I am putting it up to the government. If the members of the C.C.F. had their way it would be certainly stopped. The veteran must have some help. The distribution of building materials is wrong. I want to say a word to the minister of reconstruction about the distribution of certain materials. The minister told us some weeks ago that the supply of nails in the country was about equal to the demand. I suppose he was referring to the nails being produced by Canadian manufacturers. I am sure the house will be astounded when I tell it that from October 1, 1946. to March 31, 1947, a total of 32.487 kegs of nails was imported into Canada from the United States. Those were in addition to the production which the minister stated was nearly equal to the demand. The value of those nails was $266,825. or approximately $8.20 per keg of 100 pounds.

I ask any hon. member to go back home and talk to his veteran friends who are trying to build homes for themselves through private contractors, perhaps doing some of the work themselves. He will find that these men are being handicapped because they cannot get lumber or nails. Last Saturday afternoon I visited an area where at least forty veterans who had saved their money were trying to

The Budget-Mr. Lockhart

build homes without any help from any government agency. I talked to twelve or filteen of these men; some of them, told me that they had their excavations in; a few had finished their foundations and some had part of the framework up. Some of these men told me that they had gone to Niagara Falls, New York, to buy five pounds of nails at ten cents a pound plus one cent a pound duty. That was all they could get. That is the story they told me. If there are the nails in the country that we have been hearing about, then there is something wrong with the distribution. I am going to see these men again on Saturday; I have written to several of them, and I want to have a group of them there so that I can tell them some of the things I have found out.

As I say, I learned about the 32,487 kegs of nails which have come into Canada in addition to what have been manufactured here. The hon. member for Frontenac-Addington (Mr. Aylesworth) had his car here and he was good enough to drive me to one or two jobs which are in progress in this city. I went to one very large job and I counted 247 kegs of nails being used. A workman told me that the original order had been for 1.000 kegs of nails. I was told the name of the local hardware man who had the order, as he supposed. I called on that local hardware man and I begged him to give me a keg each of two and a half inch and four-inch nails for a veteran who is in dire need. I will not relate the circumstances, but they would almost bring tears to your eyes, Mr. Speaker, I wanted just one keg of each size and I could not get them.

This hardware man admitted that he had tried to get the order for 1,000 kegs but someone else had got it. He told me he could not give me any nails. He admitted that that amount of nails had been concentrated on the one job. When I visited the job I found that the nails came from the Bethlehem Steel Company in the United States. I saw the nails myself. They were splendid nails and were doing a good job nailing together the hundreds of thousands of feet of lumber which were being cut up in short length for a particular purpose. Thousands of feet of lumber and tens of thousands of feet of wallboard and panel board are being used. I did not go over the entire job, but I suppose I could have found several hundred more kegs of nails.

What I maintain is that the distribution is wrong. That lumber which is being cut up will never reach veterans' homes. You cannot cut lumber up into one, two, three, four or five foot lengths and expect to use it in a veteran's home. I am appealing to someone

to try to find out whether this thing cannot be done in a more equitable way. I ask the government to try some way to channel lumber and nails into the hands of veterans or private contractors who are building homes for veterans. That is their only hope; there is nothing left. It is the last hope the veteran has. I appeal to the government not to permit the concentration of tremendous quantities of essential materials in the manner to which I have referred.

There certainly appears to be surpluses of materials in some places, and my point is that we should get behind the veteran, we should try through private enterprise to see that these goods, particularly lumber and nails, are channelled so that these homes can get under way. The veteran is up against an absolute stone wall today because he cannot get these materials.

I have no hesitation in criticizing this concentration of materials on large jobs which might just as well have not been proceeded with. I am pleading with the government to see that something be done at otace to remedy the situation. I believe there was a tinge of sadness in the minister's voice when he made his announcement; I really believe he intended to see the veteran taken care of. However, he has failed. My plea to the government is to give the veteran this last chance. Bring about the proper distribution of the essential materials and then I am sure that we shall have, through the veterans themselves, by their own resources and through the resources of private enterprise, far more homes and far better homes than we have ever had under these government housing schemes in the last two or three years.

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
Permalink
LIB

James Ewen Matthews

Liberal

Mr. J. E. MATTHEWS (Brandon):

Mr. Speaker. I have always admired the quality of the budget speeches and the tone of the budget debates in this house. I want to congratulate the hon. member who has just sat down (Mr. Lockhart) on the forcefulness of his speech. I have on several occasions had the pleasure of tendering my congratulations to that prince of finance ministers, the present Minister of Justice (Mr. Ilsley). I say without hesitation that our people are coming to realize more clearly every year our debt to the former finance minister for his able administration during the war years.

If we keep in mind that Canada's first parliament lasted only forty-three days and that the first budget speech in April, 1868, forecast an expenditure of $14 million, it is interesting to recall budget estimates for some later years. For instance, for the year ended March 31, 1915, Hon. Thomas White

The Budget-Mr. J. E. Matthews

budgeted for an expenditure of $190 million; in 1920 the same finance minister, then Sir Thomas White, budgeted for an expenditure *of $620 million; 1925, Mr. Robb, $342 million; 1930, Mr. Dunning, $360 million; 1935, Mr. Rhodes, $351 million; 1940, Mr. Dunning, $550 million; 1945, Hon. J. L. Ilsley, $5,152 million, or just ten times as much as the 1940 budget; 1946, Mr. Ilsley, $4,650 million, and in 1947, $2,750 million; and for the financial year ending March 31, 1948, our present Minister of Finance (Mr. Abbott) budgets for an expenditure of $2,450 million.

These figures give us some idea of the development of Canadian governmental finance since that first budget of $14 million. They also serve to make more clear the Right Hon. Mr. Ilsley's colossal task and his tremendous achievements. But time keeps rolling on, and the Ilsley mantle, so creditably worn by him, has now fallen unspotted and secure upon the capable shoulders of another man. I have seldom been as proud of any budget speech I have heard as that delivered by the present Minister of Finance in this parliament on the evening of April 29. At the very outset he struck a note of triumph, a note of confidence, a note of achievement, .yes, a note of mastery, if you will, and that mote he held right through to the finish. As ?I listened to his words of conviction and his ^acceptance of the challenge of the future; as 'I gleaned something of the growth and [DOT] expansion of this country's business as indi-[DOT]seatsed in the budget figures just quoted. I -realized1 once again how proud I ought to be, and how proud I am. of the privilege of calling myself a Canadian.

Major H. G. L. Strange, a widely known resident of western Canada, prominent in the grain trade and in research, recently returned from seven weeks spent in Great Britain, France, Belgium, Holland and Denmark. He has this to say:

The overwhelming impression comes over me that each one of us should utter a daily prayer of thankfulness that we are citizens of Canada with all that this great country has to offer to adults and to the future of our rising generation.

And then Major Strange, rightly or wrongly, goes on to say that hope for the future is almost disappearing in Britain and in the whole of Europe and is being replaced by a feeling of sadness and resignation. These are serious words made by a capable observer, a responsible man, and we may well pause to wonder as to the future.

We all realize that the years as they roll around bring some new experience; there is no doubt about that. During the course of my young life, I have listened to many budfMr. J. E. Matthews.!

gets, some federal, some provincial, some municipal. I have heard finance ministers roundly criticized for having ended the fiscal year with a deficit. But it is a new experience to me to hear a minister criticized for having closed the year with a substantial surplus.

I have heard shafts of ridicule showered upon a minister when he announced higher taxes, but again it is a new experience to hear him condemned when he announces lower taxes.

We all know that many a finance minister has had to run the gauntlet of opposition sniping, when he announced an increase in national or provincial debt, but again it is a novel experience to hear a minister roundly denounced when he has made a big reduction in the national debt.

I pause to ask, as I may well do, what is the score anyway? What is back of all this? What is in the minds of those who thus criticize the budget? Are we to assume, as we are compelled to do, that some opposition speakers are in reality saying to the finance minister: You should not have a surplus when we were all primed for you to announce a deficit? Are they saying to the finance minister: You have no right to lower the taxes in this country because we were confident you would have to increase them? And again, is their attitude not equivalent to saying to the finance minister: Why did you reduce the national debt? Why did you not increase the debt, thereby increasing our interest charges and thus compelling us to pay still higher taxes? Surely, Mr. Speaker, some of our opposition friends are beginning to realize the astounding absurdity of their criticisms, because the tone and calibre of many of their speeches do not lend themselves to any other interpretation than that I have just mentioned.

No one resents more than I do the fact that Hitler has compelled me to pay higher taxes. But I am thankful today to be living in a country and among people where we enjoy something-and greatest of all, our freedom- for the taxes we have to pay. It could have been different, for let us not forget that we are paying taxes to ourselves as Canadians and not to any foreign foe. It could have been different, yes, and it very nearly was different. Someone has well remarked how great civilizations of the past, such as Babylon, Crete, Egypt, Greece and Rome "went over the cliff." It is only as we get farther away from the suspense of the war days, only as more war secrets are being revealed, that we begin to realize how narrowly our own nation was saved from going over the cliff.

No, I do not like paying taxes; but when I realize that a large part of the taxes I paid last year was applied to reducing my indebtedness it takes away the sting. The Minister of

The Budget-Mr. J. E. Matthews

Finance (Mr. Abbott) collected-and this is some of the criticism-mostly from Canadian taxpayers, $352 million that he did not use. The question is, what did he do with it? Well, he did not start stepping out. He did not act the part of Canada's prodigal son and encourage this nation to spend that surplus in riotous living. No; he did with that surplus just what he should have done; he did with it what any man with ordinary horse sense should have done. He applied that surplus of $352 million to the reduction of our national debt. What does that reduction mean to the citizens of Canada? Assuming interest paid at three per cent-the government is paying that and more on an average on its victory bonds-they have in that one retirement saved the people of this country interest payments of $10,500,000 annually all down the coming years. I leave it to the Canadian people and I leave it to the good sense of my hon. friends across the way to say whether or not that was good business. Further, Canada's net indebtedness remains at $13,069 million, figures almost beyond our comprehension. Suppose we were to continue retiring the debt at the rate of $352 million a year; any school boy could tell you in thirty seconds that it would take just thirty^seven years to retire the national debt, not including interest.

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
Permalink
SC

Charles Edward Johnston

Social Credit

Mr. JOHNSTON:

Then, according to Mr. Towers, the country would be ruined.

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
Permalink
LIB

James Ewen Matthews

Liberal

Mr. MATTHEWS (Brandon):

Do hon.

members not think it is about time we got started? The war left us with a legacy of freedom, but it also left us with a legacy of debt. Canadians, old and young, rich and poor, may just as well face the facts. Some scoffing references were made to the Minister of Finance having received in the last fiscal year $372 million from the sale of war material by War Assets Corporation. These sales, our critics point out, cannot be repeated in any future year, and that only resulting from such sales was a surplus on this year's business possible. I suggest that that implication is unfair because, on the other side of the ledger, there are special war expenditures which will not have to be repeated another year. The Minister of Finance was frank enough to state both sides when delivering the budget, and I suggest that his critics should be equally frank. He pointed out that $320 million were paid out in war service gratuities. He pointed out that $70 million were spent in liquidation and termination of war contracts that had to be halted when peace was declared. That amount, too, was spent. These two items alone more than offset the $372 million

received from war assets. In addition to these, there were many other large items of expenditure that will not apply in future years. Therefore I say that the argument, when analysed, is completely and overwhelmingly in favour of the minister's position.

May I remark right here that I regard it as a most creditable performance on the part of War Assets Corporation, to have turned back to the government in one year the sum of $372 million, with a lot more still to come. I confess to having been among those who at one time felt that War Assets Corporation was desperately slow in getting the wheels of distribution started. But the completion of their organization was doubtless a much bigger undertaking than most of us realized. I now want to congratulate War Assets Corporation on doing what I regard as a very fine piece of work, and I believe it is everywhere conceded that they are doing that work in the disposal of war material not only efficiently but above board.

May I digress to say that, in my experience, deputy ministers of various departments, secretaries, senior officials and all officials with very few exceptions did everything that was humanly possible in cooperating to solve the perplexing problems that were constantly arising following the period of the war. I want to extend to them, one and all, my deep appre-preeiation and sincere gratitude.

Reverting to the budget, I accord the Minister of Finance every credit for collecting our taxes and reducing our debt when times are good. The great bulk of our citizens have more money than they ever had. It is true that the cost of living has risen; nevertheless over a million persons bought Canada savings bonds last fall at a coupon interest of 2| per cent. There is also this significant fact that interest bearing deposits in the chartered banks last year amounted to $3,476 million, an increase of S600 million over the previous year. The number of accounts represented was 6,063,000. This does not include the deposits in the provincial chartered banks or in the post office savings department. If we make due allowance for several accounts carried under one name such as trust accounts, it is still safe to say that over five million of our population have savings bank deposits to their credit.

May I here refer to the amendment moved by the hon. member for Muskoka-Ontario (Mr. Macdonnell), in which he deplores the fact that we have indirect and hidden taxes. I am not sure that that comes with very good

The Budget-Mr. J. E. Matthews

grace from some of those on the other side of the house. Part of the amendment reads as follows:

This house regrets that the proposals of the Minister of Finance

(a) offer no relief from the oppressive burden of indirect and hidden taxes on staple necessities that compose the family budget, all of which taxes directly increase the cost of living;

(b) offer no encouragement to those engaged in the development of our natural resources, especially mining and agriculture.

In that regard the Minister of Agriculture (Mr. Gardiner) made this pointed observation a few days ago. Many hon. members heard him. He said:

In my reading of the history of Canada, particularly its political history, I have always been under the impression that the members of the Conservative party were strong advocates of the indirect system of taxation and that the Liberal party over a long period of years had been a strong advocate of the direct system of taxation.

A big principle is introduced in the amendment, but let us see how it works out in practice. Much of the record, almost the whole record, of the Conservative party is manifest in their consistent raising of indirect or hidden taxes. We all know that. During the last Conservative regime, tariffs were raised to a startling degree. Sales taxes were raised. An excise tax of three per cent was placed on all imported goods. Taxes on lower incomes were raised; postage was raised; taxes on cheques were raised; nuisance taxes were levied and taxes on sugar were inaugurated.

Let us compare, say the fiscal year ended March 31, 1941, with that ended March 31, 1945. So far as the three chief hidden taxes are concerned, in 1941 customs duties made up 16-8 per cent of the national revenue; in 1945, only 5-37 per cent. Another hidden tax, the excise tax, represented 11-3 per cent of the national revenue in 1941. That was down to 7 per cent in 1945. Sales taxes represented twenty-three per cent in 1941 and were reduced to 9-7 per cent in 1945. The total of 51 per cent in 1941 was reduced to 22 per cent in 1945. That is the answer so far as hidden or indirect taxes are concerned. With regard to direct taxation

and I mean taxes that were not hidden-the present government came right out into the open. Income taxes and excess profit taxes, which five or six years ago formed only 28 per cent of our national revenue, now form about 60 per cent of it. There is nothing very much hidden about that; it is not nearly so hidden as is the implication in the amendment to which I have referred.

Paragraph (b) of that amendment expresses the criticism that the proposals of the budget: offer no encouragement to those engaged in the development of our natural resources, especially mining and agriculture.

This is another complaint which I am going to diagnose for a few moments. I do not pretend to know anything about mining conditions. Those were well discussed a few evenings ago by the hon. member for Cochrane (Mr. Bradette). But representing, as I do, Just about the best agricultural constituency in Canada-and I have seen most of them-I propose to make a few remarks along agricultural lines, keeping in mind the purport of paragraph (b) of the amendment, particularly as it applies to western Canada. I do this because I think we are all agreed that there is no more accurate measure of our financial progress than is afforded in the realm of agriculture. In the maritimes, reports from Nova Scotia indicate that the farmers of that province netted $5,000,000 more in the year ended November 30, 1946, than in the previous twelve months. The Dominion Mortgage Investment Association reports that farm mortgage debts in the three prairie provinces are now less than one-third of what they were at the end of 1937. The research department of the United Farmers of Canada, referring to Saskatchewan, announces that during the years of crop failure and low prices there was a farm debt increase in that province from an estimated $200 million in 1930 to over $600 million in 1939, despite debt, cancellations and adjustments. The research department now estimates that over two-thirds of that 1939 debt or, in other words, $400 million, was liquidated during the years 1942 to 1946. While the average debt per farm in Saskatchewan in 1939 was estimated at $4,398, the debt in 1946 was estimated at only $1,466, or less than one-third. That is certainly some accomplishment in seven years.

A statement appearing in the press a few days ago indicated that in 1946 alone Manitoba farm mortgage and agreements of sale debt was reduced by 23 per cent, and that since the end of 1937 this reduction amounts to no less than 76 per cent; certainly another great accomplishment. I am almost tempted, to remark that this accomplishment was achieved under the beneficent reign of a Liberal government. The farmers of Manitoba no longer depend entirely on the wheat crop. They are following diversified farming, largely and successfully.

I wonder if it was possibly the Ontario farmers whom the hon. member for Muskoka, Ontario had in mind when he suggested in his

The Budget-Mr. J. E. Matthews

amendment that they need encouragement. If that were his thought, then he may be right.

For instance, some Manitoba farmers came with live stock exhibits to the Toronto Royal a few months ago. The Toronto Royal is a wonderful institution and does credit in a large way to the people of Ontario. The Toronto Royal attracts to its show rings every year the cream of Canada's production from coast to coast. Notwithstanding the excellence of those dominion-wide exhibits, including, of course, many from Ontario farms, our friends from Manitoba carried off nineteen first prizes, sixteen second prizes, sixteen third prizes, fourteen fourth prizes and thirty-three others, or a total of ninety-eight prizes for live stock alone. But that is not all. Manitoba farmers at the Toronto Royal carried off also two grand championships, one reserve grand championship, one senior championship, two reserve senior championships, two junior championships, one reserve junior championship, one championship and one reserve championship. This means a total of eleven awards and ninety-eight prizes won by Manitoba exhibitors.

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
Permalink
PC

Gordon Knapman Fraser

Progressive Conservative

Mr. FRASER:

That shows that Manitoba must have had good management and good government there for years.

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
Permalink
?

An hon. MEMBER:

They cannot get any nails.

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
Permalink
LIB

James Ewen Matthews

Liberal

Mr. MATTHEWS (Brandon):

Perhaps the Ontario farmers or those in the Muskoka district do need some encouragement after having fared so badly in the show rings.

May I add to that, Mr. Speaker, that in the field of dairy products alone Manitoba has seventy butter factories whose product last year reached a total value of $26 million. Lots of quantity, someone will say, but what about quality? Well, I will give my answer. At that same Toronto Royal a silver cup is always awarded for the highest score in dairy products, and I am informed that Manitoba exhibitors have won that cup every year w'ithout a break for over twenty years. Then just to lend a touch of sweetness, as it were, to the whole Toronto Royal performance, out of nine prizes awarded for honey exhibits last fall, Manitoba exhibitors walked away with seven.

My natural modesty almost compels me to refrain from making this further observation, that by far the largest percentage of those prizes and awards were won either in the constituency, or close to the constituency, of Brandon which I have the honour to represent in this parliament.

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
Permalink
IND

John Lambert Gibson

Independent Liberal

Mr. GIBSON (Comox-Alberni):

All

Liberals?

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
Permalink
LIB

James Ewen Matthews

Liberal

Mr. MATTHEWS (Brandon):

Some of them. To be serious about the matter, there is a reason for these successes; in fact, there are several reasons. First of all, there are climatic conditions, those gifts of an over-ruling Providence. Then there is the thrift, the intelligence, the vision of the farmers, their wives and families in that part of Canada. Another reason is the wisdom and the readiness with which they adapt themselves to the suggestions of the agriculture departments, both federal and provincial, which suggestions are made only after a keener, more comprehensive study of world conditions has been conducted than could possibly be made by the individual farmer. Our dominion Minister of Agriculture (Mr. Gardiner) is a man wrho, from long and wide experience and from careful observation, desires to adhere strictly to the policy of stability rather than speculation. In that I thoroughly agree with him, because farming has sufficient speculation in it at any time without one asking for more. A third reason is the wise, educational and aggressive leadership given by the Brandon experimental farm, one of the best directed in Canada. A fourth reason is the contribution made and the incentive furnished, down through the years, by the summer and winter fairs held at Brandon under the auspices of the provincial exhibition of Manitoba. These Brandon fairs are among the best, and on a yearly average are probably the best, of any held west of Toronto. As a matter of fact, the name might well be changed from Brandon fair to Western Canada Royal.

So I suggest, Mr. Speaker, that paragraph (b) of the amendment deploring the fact that the budget proposals offer no encouragement to agriculture falls rather flat when reduced to its par value. The farming population of this country will judge a government by performances rather than by promises. They have done so repeatedly in the past and will continue to do so in the future.

I might go on to speak of other records made by Manitoba last year in regard to the production of raw furs, the production of paper, the production of hydro electric power, and receipts from tourist travel. I should like to add that Riding Mountain national park, located just sixty-seven miles north of Brandon, was visited in 1946 by 161,308 people, being second only to Banff and coming very close, in point of visitors, to leading every national park in Canada.

Arising from another observation made by the hon. member for Muskoka-Ontario in

The Budget-Mr. J. E. Matthews

moving his amendment to the budget-and let me remark here that I always greatly enjoy his speeches-I want to point out that seventy-two new industries were established in Manitoba in 1946. This is a credit to the industrial development board of that province, but the regrettable feature is that only comparatively few of these industries were established in rural centres. Manitoba might well follow the example set by Ontario and see to it that her manufacturing establishments are located in many different centres of the province, particularly now with the advent of rural electrification. This is essential if the ultimate blighting consequences of centralization are to be avoided.

I have emphasized the points discussed so far, not because of any local colouring, except by way of illustration, but because of my belief that it would have been inexcusable had the finance minister not seen to it that our national debt -was substantially reduced during the period of abounding prosperity in 1946. I trust that even with the levying of lower taxes there may be another drastic reduction in our debt in 1947. Why? Simply because that very fact will make possible still lower taxes each succeeding year. I am absolutely opposed to excessive taxation in any form, though I was always aware that the obligations of war would remain with us long after hostilities had ceased. I am also aware that taxation can become less only when the expenses of the state are curtailed. In this respect I am glad to note the tendency to reduce along many lines, including the number of so-called experts in some government departments. I am heartily in accord with an editorial which I recently read in a leading magazine, and which concluded as follows:

This is a time for governments to do less and individuals to do more-a time for more production and less regulation-a time for converting not only the sword but the filing cabinet into the plowshare.

Therefore I am sure that to every Canadian the minister's announcement of lower taxes will be welcome. I have no doubt whatever that to have continued the recent high rates of taxation would have meant a serious set-back to this country. There is a distinct limit to the taxation a country can bear without dulling initiative, lessening production, diminishing returns and creating economic chaos. It is a healthy augury when the taxpayers have the courage and intelligence in the matter of taxes to say to any government, "Hitherto shalt thou come, but no further". A Canadian economist recently expressed the case in these words:

Is it wise to discourage thrift, to put a high premium on spending? Should we rob posterity

to maintain the dance of today? Saving has a social value. The loss to society would be great if saving ceased to be a virtue. We have reached the stage where the emphasis is almost entirely on spending. Will this policy bring real gains? It is very doubtful.

I am not going to discuss controls except briefly, even though they have a direct bearing upon the financial situation of Canada. That controls played a tremendously advantageous part in this country during the war no one will dispute. I hope to see controls steadily discontinued, not all at once but one by one, as speedily as conditions will warrant. This might result in some temporary dislocation of prices, but it would be only temporary, because greater production resulting from the removal of price controls would prove the best remedy for inflated prices. Give us an abundance of commodities and prices will take care of themselves. Most of the control regulations were fair and well advised. In my judgment, a few were, and still are, grotesque in their stupidity, and I shall have something to say about them later on.

In the matter of rent control, I am aware of the ruthlessness with which some property owners would have soaked tenants during and since the war years had there been no controls. I am also aware of the callous treatment accorded by some tenants to owners. I have in mind particularly cases of men and women advanced in years who in the past had demonstrated their faith in Canada by investing their surplus-often a small one, it is true-in residential property. I need not rehearse cases, as I could by the score, of the raw deals handed to elderly people who in some instances were relying upon those rentals for their livelihood. In many cases their hands were tied, and securely tied, against any rent increases. No matter that taxes were raised, that costs of maintenance were raised, costs of labour raised, costs of food and clothing raised, everything else raised; those elderly people were compelled to struggle on as best they could, with no redress. I stand for the right of any owner to have access to his own property. I am glad to see that a start, though not a very great one, has been made in this direction. I want to see regulations adopted under which proved rental injustices on either side may not be permitted longer to exist.

In closing, Mr. Speaker, may I once again tender my sincere congratulations, this time not to the finance minister but to the Canadian people, on having such a strong man guiding our financial destiny. A well known writer has said:

There may be little doubt that we as a people are going through years of decision. Yet there are many signs to give confidence that

The Budget-Mr. Mayhew

after the troubled equilibrium of these later years there is a return to a greater soundness and balance of outlook. There appears to be a deepening recognition of the fact that the government cannot create wealth, but that anything it promises in the form of a gift must be taken away in the form of a tax.

There are signs that people and government alike may be returning to the realization of the fundamental economic truth that whatever regulations may be found desirable in the public interest, the most natural and the most fruitful role of government comes from what it may be able to do to reduce all that restricts and discourages, and to assist all that may release the immeasurable potentialities that lie in free individual effort and responsibility.

With the opinions of that writer, I am in full accord.

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
Permalink
LIB

Robert Wellington Mayhew (Parliamentary Assistant to the Minister of Finance)

Liberal

Mr. R. W. MAYHEW (Victoria, B.C.):

Mr. Speaker, evidently there is one champion from Manitoba who did not get a prize, but I am sure if it were left to this house he would be handed one right away. I rise to take part in this debate mainly for the purpose of endorsing the proposals contained in the budget speech delivered in this house on the evening of April 29 by the Minister of Finance (Mr. Abbott). I want to congratulate him upon the manner of presenting his budget. Nearly every lion, member who has spoken has extended his congratulations, but I believe one point, which perhaps affords him the greatest compliment, has not been mentioned. When he began his speech all the seats in the house were filled, as well as those in the galleries, and they remained so until the end of the address. Many times people can find excuses for leaving the house after speeches have gone along for an hour or so. It was quite evident, however, that on this occasion people were interested in the manner in which the address was delivered, and were anxious also to find out exactly what would be contained therein.

This debate has now been in progress for over two weeks. About fifty members have taken part in it. All the heavy artillery of the three opposition groups have been firing their shells and bombs at the budget speech, but thus far they have failed to dent any of the structure or supports. In fact, it has not suffered blemish in any respect, and still retains the appeal it had when first delivered.

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
Permalink
PC

Gordon Knapman Fraser

Progressive Conservative

Mr. FRASER:

Watch out; there might be some delayed bombs.

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
Permalink
LIB

Robert Wellington Mayhew (Parliamentary Assistant to the Minister of Finance)

Liberal

Mr. MAYHEW:

Perhaps, but that would not do much harm. From the fall of 1939 up to the present time Canadians have been diverted from their ordinary course of peace and progress, and have been operating under the uncertain conditions of war. Every bit

of strength they had was directed to one purpose, and until the bringing down of this budget we had not been able to see clearly the path ahead of us.

It remained for the Minister of Finance to give to the country an indication of where we are going, and what our responsibilties are. I have said that the people of Canada, because of war clouds and the clouds of rehabilitation, had not been able to see clearly what they had to do. But in his budget speech the minister has brought great encouragement to them. How has he done it? The first encouragement contained in his speech was the fact that there was a surplus in the last year of S360 million. Another encouraging factor was that he was able to indicate and, I believe, on a sound basis, that our national income will be increased this year by another billion dollars. I know that is an estimate, but I believe it is on fairly conservative grounds.

Let me tell the house why I say that. One reason is that the industries of Canada are now ready to spend in this year $1,700 million in new industries, new plants, the renovation of old ones and other methods to bring in greater production. Who can estimate what $1,700 million in new industries will mean to Canada? One can state safely that this will go a long way toward making effective the increase of the billion dollars.

I wonder if the labouring people in Canada do not take great comfort from the fact that there are prospects of that increase in our national revenue. Surely it should mean to them that there will be more employment in 1947 than we had in 1946. During the greater part of 1946 we were short of man-power. So that I think the minister's statement would give definite encouragement to labouring people.

I have had some opportunity of investigating what is taking place in the first quarter of this year, and I say that if the other three quarters measure up to the turn-over in the first one, the minister's estimate of an increase of a billion dollars will be too modest. In other words, I think it will be more than that amount.

I know hon. members in the opposition have attempted on various occasions to say that there was no optimism and no encouragement in the budget speech. I cannot see from what source they derive their pessimism.

There is another point I should like to mention, and that is in connection with the forecast made by the minister respecting the construction industry, one which I am sure will be greatly increased this year. The Minister of Reconstruction and Supply (Mr. The Budget-Mr. Mayhem

Howe) claims that it will be possible to build

80.000 houses in the present year, but 75.000 will be required annually to take care of our increased population.

Some seem to think Canada has been a static country. Let me point out that when I was born there were only 4,000,000 people in this dominion, whereas today there are

12.000. 000. I say that, only to show that in the lifetime of one man, in a period of sixty years, our population has increased threefold. During those sixty years there have been seventeen or eighteen when we have had no immigration. In that time three wars have taken place, although we do not take much account of the South African war. It is known, however, that there was no immigration during either world war one or world war two; in fact, there has been none to speak of since 1931. On top of that we lost

100.000 of our male population in those two wars, but in spite of it all we have gone on and we now have a population of 12,000,000 people. I maintain that in the life of our own grandsons Canada will have a population in the neighbourhood of 35.000.000 to

36.000. 000 people. We have every reason to be hopeful.

The minister was criticized for pointing out our difficulties, but he also pointed out the way we might go. We have our national debt and we know that the world around us is disturbed and unsettled. It is hard to fight against those difficulties, but the minister pointed out how we might go. I remember as a small boy learning to ride my first bicycle. I was going along a small path between two puddles. I failed to look at the path and kept my eye on the puddles, and I finally landed in the puddle. People who today are looking at our troubles-I do not mean that you should not know they are there-should know that if they keep on looking, that is where they will land up. That is where those people are trying to drive us at the present time.

I want to say a word or two about this surplus of $367,000,000 in connection with which there has been so much talk. Some hon. members have charged that the surplus last year was somewhat of a phony surplus because it was revenue which included a yield from the sale of war assets. It is apparently considered that it would have been sound accounting for the government to have set up its purchases of shells, bullets, ships, tanks and guns and other supplies of war as investments in capital assets rather than as supplies of short-lived duration which could1 only sensibly be regarded as the current inventories of war. In this more sensible light the gov-

ernment's accounts showed at the time of purchasing these supplies the total amount of their cost as an outright expenditure, and it is, therefore, in accordance with sound accounting that the revenue received from the sale of this war inventory should be treated as current revenue. I believe the hon. member for Peterborough West (Mr. Fraser) even went so far as to say that he regretted that this money had not been used to reduce the debt. May I assure the hon. member that this is exactly the result of including this item in our revenue. The surplus on the last year's operation, as he will find stated in the budget speech, resulted in a reduction in our net debt of the same magnitude. There are some hon. members who seem to think the whole surplus was obtained from the sale of war assets, but if they will turn to the bottom part of page 14 of the appendix to the budget they will find a break-down of this surplus. It will be noted that the amount received from sales by War Assets Corporation was $182,400,000, and that the remainder was made up in various ways.

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
Permalink
PC

John Thomas Hackett

Progressive Conservative

Mr. HACKETT:

Will the hon. member state whether that surplus was used to purchase bonds in the hands of the Bank of Canada or bonds in the hands of the chartered or private banks?

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
Permalink
LIB

Robert Wellington Mayhew (Parliamentary Assistant to the Minister of Finance)

Liberal

Mr. MAYHEW:

I do not get the meaning of the hon. member's question. It was used to reduce our debt.

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
Permalink
PC

John Thomas Hackett

Progressive Conservative

Mr. HACKETT:

My question was whether it was used to purchase bonds in the hands of the Bank of Canada or bonds in the hands of the chartered banks?

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
Permalink

May 15, 1947