June 21, 1950

SC

John Horne Blackmore

Social Credit

Mr. Blackmore:

I have a responsibility to discharge, and so has the hon. member. I suggest he get up and deliver a speech of his own, and that he ought not to interrupt mine -and the same applies to the hon. member for Cariboo.

As I have said, much could be done to enable the Indians on reservations to be selfsufficient. I would point out that in the same area where this reservation is located there is a group of Hutterites, some 150 strong. They are able to live together, almost completely self-sufficiently, on land no better than that on which Indians are living. But those people know how to work the land, they have the equipment with which to work it, and they have the knowledge. I do not know why something like that could not be done on our Indian reservations. We should make an attempt to rehabilitate our Indians.

With regard to old age pensions, I have said several times that in my opinion it is nothing less than a scandal that we pay old age pensions to white people and refuse them to the Indians who are much more needy. Old age pensions should be paid to the Indian at a much lower age. Why? Because the Indians have greater difficulty under ordinary circumstances to get work than the white people. They go out of the economic market at least five years earlier than the white man. If the white man needs an old age pension at 70 years, surely it is the barest of justice to give the Indian his pension at 65 years. It must be borne in mind also that from the cradle to the grave the Indian is faced with poor nourishment; malnutrition besets him all that time. The result is that deterioration from old age comes far earlier in his case than it does with the white man. There should be a larger old age pension for the Indian and he should be eligible at least five years earlier.

There should be larger family allowances for the Indian. Surely if the white man requires family allowances of the size given, the Indian needs at least half as much again in order to have anything like a chance.

Special assistance in buying should be provided for our Indians by this legislation. My experience has been that in buying housing, food and clothing and all the other necessities of life the ordinary Indian is in direct

Indian Act

competition with the white man who is far more skilled and shrewd than he is. The result is he is beaten every time. From the time I was a little boy I can remember seeing white men buy good Indian ponies for $5 when they were worth at least $30. We should provide co-operative selling and buying facilities for the Indians, using the government's credit.

Topic:   CONSOLIDATION AND CLARIFICATION
Subtopic:   FUNDS AND EXPENDITURES, ETC.
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?

Some hon. Members:

Carried.

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SC

John Horne Blackmore

Social Credit

Mr. Blaclcmore:

The Liberals are certainly interested in the Indians, are they not? They are so much interested that they cannot even bear to hear a little discussion about them! The government's credit should be provided so that the Indian can obtain his food, clothing and shelter far more cheaply than he can get these things in the open market. Today the Indian must go into the open market and frequently has to pay higher prices than the white man would ordinarily pay. Co-operative selling facilities for his goods should be provided under government supervision, but I shall not go into that. I have often been heartsick to see how difficult it is for the average Indian to sell his products at reasonable prices.

There is no reason why the government should not help the Indian establish himself in industry. All these things can be provided for in the act as a means of rehabilitating the Indian.

In dealing with the need for an Indian claims commission I will keep my eye only on the reservation with which I am thoroughly familiar. The wood on that reservation is not as plentiful by any means as it was when I first knew the reservation. The water supply is not nearly as great. The fish have completely disappeared. There are no game animals from one end of the reservation to the other where once there used to be an abundance of game. There is hardly any fruit on the hills or in the valleys and grazing has been almost ruined by over-grazing by the white man. The Indian reservation is nothing like what it was in 1877 when the Indians signed a treaty and were given the reservation. The deterioration of the reserve is due in large measure to the activities of the white man. An Indian claims commission would be able to establish the amount of deterioration that has taken place in this heritage of the Indians and set the proper reimbursement for the Indians for their losses. That is the only fair way I can see of approaching this matter.

Provision should be made for self-government by the Indians. The hon. member for Calgary East (Mr. Harkness) indicated that he was not quite sure whether one of the

sections of this bill would prevent the organization of the Indians so that they could train themselves in self-government and express more effectively their desires to the white man's government. I am afraid that there actually is provision in this bill against the further development of even the loose and meagre organization the Indian now has. In my judgment the government should be doing everything in its power to enable the Indian to become thoroughly organized and should be ready to work with the Indian organizations.

Then a few more words about education. The education which the Indian child receives should be specially adapted to his need when he returns to live in the teepee on the reservation. As far as I have been able to see we have been trying to give the Indian child an education to fit him for life in the city. Such an education ordinarily is almost useless to him after he is through. If we want to educate an Indian child for life in the city we should educate him for that kind of thing, but if he is going to live on the reservation then his education should be adapted to that sort of life.

As I said a minute ago, Indian education should be completely non-sectarian. Up to the present time one of the difficulties encountered in educating young Indians is truancy. Sometimes the parents will not come in so the children can go to school. I think the only thing we can do about that problem is to establish non-sectarian residential schools, state-owned and state-controlled, similar to our universities, at which the Indian boys and girls could be taken into residence and be subject only to non-sectarian influence. It should be good, wholesome influence but not that of any particular religious denomination. That is the only way I can see of guaranteeing the Indian religious freedom and good education in any real sense of the term.

Everything should be done to preserve the racial identity of the Indian so that the Indian child one hundred years from now will still be an Indian if its parents feel that that should be the case. We must bear in mind that the Indians are a great race. Those who have gone back into the history of the race have been astonished at what they have found there as the probable racial origin of these dark people who have roamed our plains. They are a great race; they have a great history and they can have a great future. If they do not have that great future, in large measure it will be our fault. Provision, should be made in the act to enable the Indian to maintain his racial

identity. The act appears to me to be designed to destroy the racial identity of the Indian and submerge it out of sight.

After having said all this I do not think I need tell the minister that I am going to be among those who will support him by demanding that he withdraw this act and give us a year in which to study it and give him a year in which to find out what kind of act he needs in order to help him in his onerous duties of managing the Indians of this great dominion.

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LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Mr. Abbott:

I would ask the leave of the house to allow me to move the adjournment of this debate until later this day. It would be a great convenience to me if I could proceed with my estimates this afternoon, but they would not be continued this evening. This debate could lbe resumed at eight o'clock.

Motion agreed to and debate adjourned.

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LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Hon. Douglas Abboll (Minister of Finance) moved

that the house go into committee of supply.

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COMPLETION OF BIG BEAVER-MINTON RAILWAY GAP

CCF

Hazen Robert Argue

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

Mr. H. R. Argue (Assiniboia):

Mr. Speaker, before the m.otion is put I should like to take a few moments of the time of the house in discussing an important matter which has recently been brought to my attention. I wish to raise a matter which was brought to my attention through representations from a number of people in southern Saskatchewan. I will not have any other opportunity to bring it to the attention of the government at this session, and therefore I should like to do so now. I refer to the completion of the railway gap between Big Beaver and Minton. The people concerned are holding meetings throughout the area to press for completion of the railway line from Minton to Big Beaver. They point out that the need to fill the gap is very great. The people in that part of the province are isolated for a great part of the year. Completion of the line would improve railway service tremendously and would prevent a long and costly back haul. Since the gap is only some twenty-five miles it is the hope of the people in that area that construction may be undertaken at an early date.

I urge the Minister of Transport to use his influence to see that this is done. I have a resolution which expresses the need a lot better than I can, and I should like to read it to the house. It is as follows:

Whereas the original intention of Canadian Pacific Railway was no doubt to connect up the railway lines between Minton and Big Beaver;

Big Beaver-Minton Railway Gap

And whereas over twenty years have passed by since these two lines were constructed;

And whereas by connecting up these two lines better service could be given to the residents in the area;

And whereas each year of delay in connecting up these two lines is costing the farmers a considerable amount of back haul;

Therefore be it resolved that we urge the linking up of the branch lines between Minton and Big Beaver.

That resolution was passed by the municipal council of the rural municipality of Souris valley. Substantially the same resolution was endorsed by many municipalities throughout that area. As the government has not seen fit to postpone the coming into effect of the recent increase in freight rates, which I had hoped it would, it is essential when the railway companies are given increasingly higher freight rates that they give better railway service. In that part of Saskatchewan there are innumerable lines that have not been completed, and for that reason the railway service generally is poor. Railway lines should be completed between Mankota and Valmarie, Neidpath and Swift Current, Willow Bunch and Assiniboia, and Neptune to Webster to connect with the C.N.R. line running to Radville, a distance of only a few miles. I hope the Minister of Transport will take my words into consideration and use his great influence and good offices to see that these gaps are filled and that the people of the area are given more adequate railway service.

Motion agreed to and the house went into committee, Mr. Dion in the chair.

DEPARTMENT OF FINANCE General administration-

85. Departmental administration, $1,392,488.

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LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Mr. Abbott:

Mr. Chairman, it is not my intention to make any extended remarks on the item for departmental administration. I had the opportunity particularly on the budget address to give a fairly complete review of the financial position of the country and the administration of my department. Therefore I shall not attempt to do so on this item. I want to say in a word or two how gratified I have been at the work that has been done this year by the standing committee on public accounts. It has had a great many sittings, and I understand has gone into the method of presenting the estimates in a great deal of detail. I have not had an opportunity to consider carefully the reports which have been presented so far, but I want to congratulate all members of that committee of all parties on the careful and painstaking work which they have been doing.

I am sure the recommendations they have made will prove of the greatest assistance in

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considering what improvements can be made in the method of presenting the estimates to the house. In addition I welcome, as I have said before, the care and attention which has been given by the committee to the examination of specific items of expenditure. I shall not delay the house longer at this time, but I am quite sincere when I say that I am delighted at the way in which the public accounts committee has functioned this year. Instead of being a committee which meets infrequently, I hope it will be a committee which will meet during each session of parliament.

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PC

James MacKerras Macdonnell

Progressive Conservative

Mr. Macdonnell (Greenwood):

Mr. Chairman, on this item I should like to make a few general observations. First of all I should like to say something about what the minister has just said with reference to the public accounts committee. I was a member of it, although not as regular an attendant as I would have liked to be. I think what the minster has said is justified, and I am pleased that he has said it. I think we can assure him there will be no difficulty about having it meet every year because that is certainly the desire of our party. We had the good fortune to have before that committee notably the Auditor General. I say notably because he has a particular relationship to this house. We also had other civil servants whose help we appreciated and whose capacities we admired.

Finance enters very deeply into our lives, and I should like to make a few remarks this afternoon concerning a matter which has been brought up in the house before, and which I am afraid will have to be raised again until we get away from some of the difficulties which perplex us. I want to say something about controls, what one might call the use of arbitrary power, what someone very well described as delegated power which almost in spite of ourselves seems in some ways to be becoming almost paramount. I am not going to dwell on the matter at any length, and I hope not to be controversial. Sometimes it seems as if the house is not much interested in arbitrary power. One must assume that the house takes a light attitude towards it, if I am right in saying that they do, because they feel that is also the attitude of the country generally towards it. Therefore one is glad to find occasionally people outside the house who seem to share the feelings of some of those inside the house.

I should like to read a short extract from a letter written the other day to the Senate committee on human rights and fundamental freedoms by a professor at Queen's university. I think he is quite innocent of any connection,

however remote, with the party to which I belong. He refers to the developments which have come upon us, not because anybody planned them but which nevertheless I think we should try to look at in a realistic manner and not pretend that they do not exist. Let me also say that if they do exist, as some of us think they do, it is not a peculiarity of this house. It is something which is characteristic of the relations between governments and democratic assemblies practically everywhere they exist. The quotation I wish to read is as follows:

The cabinet is the modern crown. And it is rapidly assuming a more powerful place than the Stuarts ever had, and also a more intrinsically irresponsible one.

I put that on Hansard because I think it is a matter of interest and one which should concern us, but I do not propose to dwell further on it. I want to say, as I have said before- and having said it before I shall try to be very brief-that these delegated powers and controls that we accepted first of all as war measures and that we confirmed four years ago as what we hoped would be a rather shortlived peace measure; these things that came to us and were accepted first as temporary and abnormal now I think are in great danger of becoming perhaps not permanent, because nothing is really permanent, but at any rate of indefinite duration as far as we can see, and considered perfectly normal. It is the fact that they are regarded as perfectly normal that often disturbs me more than anything else. That is true not only of those who operate them but, I regret to say, of a very large number of the public as well.

With regard to those who operate them- and I say here, as I shall probably say again, that as to their individual capacity there is no question and that I have the highest regard for them-the only objection I have to them is that I think they have been set to perform tasks which no one should be asked to do, because I think they are beyond individual competence. I was going on to say, however, that with regard to a good many of those who have been responsible for the administration of these controls I think they would feel that the end of the world was coming if we told them we could get along without controls. I think they have come to feel, perhaps inescapably and probably quite naturally, that what they are doing is necessary, that there is no sign of any end to it, and that they have been doing a very good job indeed. I do not propose to mention names, but the other day when we were voting on what some of us thought was the institution of arbitrary power, I was struck by the fact that some people

who constantly speak about free institutions do not seem to bat an eyelash when what we thought was such arbitrary power is extended.

Now I want to say a few words in particular reference to foreign exchange control. During the war we permitted the institution of control over a very wide range of prices. We did that because we thought it was an emergency; and of course we included the fixing of the price of money. I must give credit to the government for the fact that since then a great many of those controls have been thrown overboard, but what I regard as the most important of all, the one that enters into all other things, has been retained. I refer to the power to fix the price of our money in terms of the money of other countries. I invite hon. members to think in very plain, rather simple and, if you like, naive terms of what it really means when we have foreign exchange control. It means that thirteen million people have handed over to the minister and his advisers the power to fix the value of our money in terms of other moneys, and of course directly and indirectly that affects a very large number of other prices. Perhaps if you use the word "indirectly" only it affects all other prices. So we have this extraordinary measure of control.

Let me say again that in my remarks I am not questioning the capacity or the sense of public service of those administering this control. My objection is far different. In passing I would remind hon. members that for decades, I suppose I might say for generations, the value of our money in terms of other money was fixed as all other values were fixed; that is, by buying and selling. You then had a price which was realistic and which, contrary to what we are sometimes told, on the whole was pretty steady. Now that price, which as I say was arrived at by the acid test of the judgment of tens of thousands of buyers and sellers, is fixed by the judgment of a few men sitting here in Ottawa.

As I mentioned earlier, a few years ago, when this legislation was passed; it was hoped that it would be of rather short duration. We felt then that after the upheaval of the war we were in what I suppose might be termed the almost equal upheaval of peace, so we agreed to the legislation and it started on what I might term its peacetime career. At that time, of course, it was in the minds of most of those who were discussing it that the whole question of foreign control had a bad background; that it was invented by the notorious Schacht. There was a feeling that it was perhaps necessary but that it was an evil, a necessary evil if you will. What disturbs me most of all is that I find very little

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sign now of its being regarded as an evil at all. Not only does it seem to have become normal, but it is regarded, I think, as a good thing. It is considered to have produced far more benefits than evils; and on that I shall have a word to say later. To put it differently, the abnormal has become the normal, and this is now almost regarded as an ordinary instrument of policy.

If you reflect upon it, Mr. Chairman, it is strange that this should have happened in a democratic country, because after all it is a most undemocratic thing. I believe the Prime Minister said that socialists were Liberals in a hurry. Sometimes one wonders if the Liberals are not fast catching up with them, judging by some of the measures they are now putting forward. Indeed, I could go further and say that the other day the hon. member for Rosetown-Biggar, in referring to arguments advanced against a certain type of control we were criticizing, said that he agreed with the general line taken by the leader of the opposition. He will not agree with me today-

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CCF

Major James William Coldwell

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

Mr. Coldwell:

Just wait a minute; you can't teH.

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PC

James MacKerras Macdonnell

Progressive Conservative

Mr. Macdonnell (Greenwood):

I thought the hon. member was going to contradict me. I fear he will not agree with me today, because I am going to argue that whether we like it or not these measures are definitely hurrying us toward the collective state which a good many of us in this house do not want. I say that because surely anyone who reflects upon the origin and use of this control system as it appeared and was used will realize that it was one of the great instruments of Hitlerism. What is more, it was one of the chief instruments he used in bending the surrounding countries to his will. In other words it was the very nub of national socialism,

Some will say: even supposing that is

true, even supposing there are what you consider to be objections in principle, is that not a little theoretical, and after all should we not be very thankful to the foreign exchange control board for what it has done during these years? I think I have said before, and if not I will say now, that I believe there was a case for it during the war, and there was even some case for it in the immediate post-war period. But I come now to consider the argument advanced, and the view which I think is very largely accepted, that there has been a kind of almost divine wisdom in what has been done by the foreign exchange control board; that their proceedings have been wise, and that even if it offends against some of the theoretical principles on which old-fashioned people

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were brought up, nevertheless the benefits are so great that we should overlook any objections.

I want to make this point. When people come along and advise the scrapping of old, tested methods, when they say that things which have worked for decades or centuries must be abandoned and we must accept their new system, then I think it is perfectly fair for us to say that if they are going to take that line they must be right. If they are going to pretend to have powers that none of the rest of us think we have; if they are going to assume responsibilities and powers never assumed before, they must be right. If the family doctor tells us that we are not to use a remedy that has always worked in the past, that he has something new which is going to be better in the future, I think he has to be right. If it turns out that we do not get the benefit we expect, then I think we are perfectly entitled to criticize. Someone may say: oh, this is all wisdom after the event. I admit quite frankly it is partly wisdom after the event. But I repeat that when these powers are assumed, when people purport to exercise these great powers which I say should not be in the hands of any individuals but should be left to the tens of thousands of people matching their transactions against each other, when we come to examine what they have done then they have to be right.

Let us see what has really happened. I pass over the war period and come to 1946, when our dollar was put back at par with the United States dollar. First of all on reading the statement made at the time by Mr. Ilsley and still more perhaps on reading the annual report of the Bank of Canada of the following year, it is perfectly clear that that was done on what proved to be an absolutely unsound hypothesis. It was done really as a price control measure. It was done because it was expected that United States prices, after a short rise, were going to start coming down; and it was thought that we, by increasing the value of our dollar, would keep our prices down and that we would avoid this hump; that by taking the low road and letting the Americans take the high road, we would so to speak meet with them later and we would have avoided this rise in prices. Of course that all proved to be wrong. I am not criticizing them for not being able to predict. I am criticizing them for attempting to predict at all.

What happened? We all remember what happened. American investment in Canada shrank rapidly. Canadian purchases in the United States of course were stimulated, and to make matters worse the government,

I Mr. Macdonnell (Greenwood).]

during the early months of 1947, rather warned people that they might be doing something later on and as a result they practically created a run on American dollars. We all remember that. That went on and on until in the autumn of 1947 we had lost something like 1,150 million, if my memory serves me rightly, of American dollars. Then of course we remember what was done. The government then in rather a hurry announced certain measures by radio. I will not dispute with the minister-because we have done it often before and there is really no dividend in it-as to whether or not that was legislation. I will compromise by saying that I think everyone except the minister and his group thought it was legislation, and the minister said it was not. At any rate, it had a great effect on people's lives and it looked a great deal like legislation to them.

That was the end of 1947. As I say, the fixing of the dollar at par undoubtedly had these results which I have just indicated. Of course one artificial control will produce other controls. Controls are like rabbits; they breed. As a result, we had the various controls we remember so well. We remember the wretched importers who had no warning, of course, of this kind of thing happening. The importer found he was not up against a law, that he was not up against a tariff but that he was up against the edict of a man. He just could not import. I am sure the minister was sorry about that. Indeed I remember a moving communication sent on the minister's behalf to some poor fellow in this plight; and I do not doubt the minister's sincerity at all. What I am pointing out is that one arbitrary measure produces others, and that we have these controls which operated and continue to operate. I often picture the minister as really holding a tap and he turns on and off the lettuce and tomatoes and other things just as one would turn a tap on and off. Incidentally, some of us have had letters just in the last day or two from a gentleman who is complaining because he cannot import a school bus. Apparently he cannot get any foreign exchange in order to import a school bus. I do not know anything about the details of his complaint, but I sympathize with him in running into one of these man-made controls. As I say, if it was a tariff, he could make up his mind whether or not he could pay the tariff price. But here he has no option at all. He is just told: No foreign

exchange for you.

I need not take much more of the time of the committee on this matter. I should just like to follow through the intervening months. We all remember how controls

flourished during the year 1948; sometimes you have more and sometimes you have less. The minister sits there with his advisers and they survey the scene; and we have more controls or less controls, in their wisdom. Then you come to 1949 and you have the use of that fine, expansive word, "chaos" by the Prime Minister. If I remember rightly the Prime Minister said that any tampering with the rate of exchange-and this was during the election-would bring chaos; and he was extremely critical of anyone who suggested that there was any possibility of changing the rate of exchange.

Then we come to September. And of course I sympathize with the minister just as I sympathize with Sir Stafford Cripps, that great model of-what shall I say- verbal accuracy and intellectual accuracy- I am referring now to Sir Stafford Cripps- who over the course of many months was forced to say that the British pound would never be devalued; never, never, never. Then of course he finally had to say: Hardly ever. Some people are extremely critical of him for that. I do not see what else he could say. Even so fine a man as the minister, I am perfectly sure if I were unwise enough to ask him,-and I would not be unwise enough to ask him-on the day before he had determined to alter the rate of exchange-I am sure he would have to resort to some kind of evasion, if I may use that word in this committee. I hope the minister will not take the slightest offence from it.

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LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Mr. Abbott:

Not the slightest.

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PC

James MacKerras Macdonnell

Progressive Conservative

Mr. Macdonnell (Greenwood):

It is a word that is sometimes not received in good part; but the minister does not seem to mind. What I am saying is that last September we came to another devaluation. The minister of course will say, and with some force, that he had to join in with the rest of the boys; that when Cripps was devaluing and the others, he had to devalue.

We now come 'down to the present stage. The other day there happened an incident which I think people would do well to bear in mind. I am sorry the Minister of Trade and Commerce is not here, and I am sorry we have to refer to him so often. But the Minister of Finance is here, and I know he will not disagree with me in this. After we weave our way through the tangled labyrinth of division of duties among the cabinet, when we come out we nearly always meet the Minister of Trade and Commerce. There therefore must be no complaint if I refer to him at this time. The other day the Minister of Trade and Commerce made a statement. The Minister of Trade and Commerce after all deals with wheat, national research and

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other things. This day, if I remember rightly, he was dealing with wheat. The Minister of Trade and Commerce never likes to confine himself within narrow limitations. This day he took a little fling in the realm of finance, and he made some cryptic reference to the course of exchange. He said it might be longer or shorter. It was really a good deal like the old nursery rhyme: This year, next year, sometimes, never. He was extremely vague. But the point is that by reason of those particular words I know that he caused a great deal of mental uneasiness in the business world. I know of cases where importers and exporters met to consider their exchange position and what they should do by reason of what the Minister of Trade and Commerce had said. I suggest that that just shows the absurdity, the abnormality and the utter artificiality of this situation which we allow to continue and which to my great regret I see no sign of any disposition even to begin to lessen.

At the moment there is, as I said, a considerable amount of jitters as to whether something is going to happen to the rate again. Yet the benefit which is supposed to come to us, and of which we have been told so often, is that we ought to be thankful because of the steadiness which the exchange control produces for us.

Now I want to spend just a moment in referring to what we on this side have advocated in the past. We have not advocated any sudden or violent step. We have not advocated a disregard of the fact that we have obligations under the Bretton Woods agreement. But what we have advocated is an approach to realism. Incidentally we believe -as I am sure the minister does also-that the course of events has put us in a strong position; our dollar is in a strong position, we believe, and could warrant the minister in stepping much further forward on the course of freedom than he ever has. Just in passing let me say that we all got a tremendous shot in the arm from the extravagant American boom. Certain of our industries here are booming because of the tremendous development in the states. The same is true in the United Kingdom; the same is true in western Europe; but nevertheless the great problem of many-sided trade and of convertibility of exchanges remains unsolved. If this extravagant boom should subside we would find ourselves facing difficulties again. Our farmers would know it without being told, and other poeple would know it too.

At the present time we seem to be facing both ways. We are trying to make the best of both worlds. We have a little control, but not too much, and we have a little freedom but not too much. That seems to be the sort of line we are following. I do not believe

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we can remain there. I think we have to go in one direction or the other. Therefore I leave this by expressing the hope that even today the minister may be able to say something to indicate at least a desire. While I say "a desire" I do not mean just a vague desire. I should say a desire plus some kind of indication that we will not rest where we are; that we feel that this is something that should be proceeded with; that we feel that we have a strong position and could do something to give a lead to others.

There is one other point I wish to make before I take my seat. The minister has already referred to it briefly in his opening remarks. He said that he was not going to review our position again, as he had done it during the budget speech. I would say this to the minister: Things have happened

since the budget speech. I think it is perfectly clear that the small surplus which the minister disclosed at that time is all gobbled up by now, and that we will face something of a deficit when the supplementaries come down. I am not going to spend a moment at this stage of debate in offering any comments on that. I just want to ask the minister whether it is not possible that while we are on these estimates and before the house prorogues he might be able to say something to us as to our position; that he might do something in the way of stocktaking, having regard to what has happened in the last few months. Are we going to have a substantial deficit? If so, what are we going to do about it? Are we faced with higher taxation in the near future, or are we going to be content with the deficit financing which the minister assured us years ago we certainly should not have in good times.

Now, Mr. Chairman, other points will arise when we reach the other items but I need not cover them now.

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CCF

Wilbert Ross Thatcher

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

Mr. Thatcher:

I have only a few comments to make on these estimates. I think I can agree with the hon. member who has just taken his seat, when he says that our budget now is bordering upon a deficit. I suppose any change in our economic climate could put the country "in the red". For that reason I think it is of great importance that hon. members should be examining public expenditures with greater care.

I was particularly interested in the opening remarks of the minister when he said that he was delighted with the job which the public accounts committee had done this year. As a member of that committee I think they may have done some valuable work, but I do not think they have done the job that was expected of them. I do not

think that they have done the job which the minister told us in the last budget speech that we could expect.

In his 1949 speech, I remember that the Minister of Finance said that the government was practising-and I am going to quote his own words-"the most careful economy and efficiency in all departments". Then he went on to say that the government had decided "on the general policy of limiting expenditures". Many Canadians wish that the minister would tell parliament exactly where these economies have been practised, because a lot of people think there has not been any real economy practised in Canada for about ten years. I do not ask the minister to take my own word for that. In an editorial on May 23, the Winnipeg Free Press said:

There has been no real attempt at economy in Ottawa since the beginning of the war more than ten years ago.

That may be a broad statement but, as I say, many people are inclined to agree with it. What worries me is this: By some kind

of twisted reasoning some Liberal members, and particularly the Minister of Finance, are trying to throw the blame for this fact upon opposition members. For instance at page 1992 of Hansard the minister said:

I believe that the public of Canada have the right to expect parliament itself, the members of parliament itself, to exercise a constant and vigilant scrutiny over the conduct of administration, to search for waste and duplication. I think that the members of the opposition have fallen down on that job.

The Minister of Finance has repeatedly, in parliament and out of parliament, challenged opposition members to show where substantial savings could be made. Speaking again about the opposition he said this very disdainfully, as reported at page 1992 of Hansard:

They have not got down to brass tacks in the public accounts committee, or in this house, to scrutinize the details of expenditures in any single government department.

On April 28 the leader of the opposition moved that a royal commission be appointed to make recommendations for the reducing of public expenditures. The Minister of Finance turned down the request, and his reason for doing so was this, as found at page 1991 of Hansard:

The primary reason why the government feels that we would not be justified in accepting the suggestion ... is that . . . we have a good many existing vehicles on hand.

He proceeded:

We talk about failure to be able to examine officials of the department directly. Let me point out to the house that the public accounts committee is a standing committee of this house . . .

There is opportunity in the public accounts committee for any member, and in particular for hon. members of the opposition, to ask that any deputy

minister, or any official of any department, be brought before that committee, and to examine him to their heart's content as to the details of the particular services of the department.

Well, Mr. Speaker, I want to say that this year hon. members did "ask" in the public accounts committee. They asked for specific departments. They asked for witnesses; they asked for information; but above all, they asked for the public accounts. They asked for a good many things, but they did not get very much satisfaction. As far as I am concerned as an opposition member I say this advisedly. I do not think that on the public accounts committee this year the opposition members received the co-operation to which they were entitled. That lack of co-operation makes some of the statements which the minister used a few months ago appear a little hollow. Repeatedly we were overruled in seeking information. Time and again we were refused witnesses, and consistently we were refused public accounts in the committee. Here we have a committee which has sat for almost three months, a public accounts committee, yet the public accounts have never been before it. It was just like a railroad committee examining the flag question, or a banking committee examining civil liberties. The public accounts committee examined a lot of things, but it did not examine public accounts.

Why was that committee called? It was called at the request of the hon. member for Winnipeg North, specifically to examine defence expenditures. But in the whole of the three months, the defence expenditures were not brought up despite repeated requests.

The committee first met on April 25. I ask hon. members to note the terms of reference. They were these:

That the standing committee on public accounts be empowered to examine and inquire into all such matters and things as may be referred to them by the house:

That the public accounts of Canada and the report of the Auditor General for the fiscal year ended March 31, 1949, which were tabled in the house on October 31, 1949, be referred to the said committee.

I ask you to note that, Mr. Chairman:

That the public accounts of Canada ... be referred to the said committee.

Obviously the main duty of the committee was to examine public expenditures and to see if there were ways in which savings could be made, and to show it from these public accounts. Therefore I say when the minister challenged the opposition members of the house to use this public accounts committee as a vehicle for showing where savings could be made, he must have forgotten to tell the chairman of the committee

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and the Liberal members on it, because certainly they did not carry out what he suggested. We spent weeks examining the form of estimates. Probably that was needed. Probably it was a valuable service, but it was not the job that we were given to do.

Next year, if the minister is sincere in wanting opposition members to show where savings can be made, let that committee be called early, let that committee examine public accounts and public expenditures.

I understand that over in England the chairman is a member of the opposition. I think that would be advantageous in this country, because if the chairman were a member of the opposition then perhaps the opposition parties would be permitted to inquire into these expenditures in more detail than they can at the present time.

Year after year when this committee is called, the report of the Auditor General has come up. That report is important, but I hope that next year, first of all, the public accounts will be brought in. Let every department-let each one of the twenty departments, or whatever number there are -know that they may be called in front of that committee to explain their expenditures.

It is conceivable that the committee could consider only one or two of the departments in one year. But we could devise some method-perhaps pick them out of a hat, as one member has suggested-whereby departments would be examined and required to explain every five cent piece they have spent. I think if that were done economies might be effected.

I have not much more to say, except that I as an opposition member not only charge the government with apathy and disinterest in seeing that public expenditures were examined, but say it has been guilty of using its overwhelming majority deliberately to obstruct opposition members from obtaining pertinent information in the public accounts committee.

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SC

Victor Quelch

Social Credit

Mr. Quelch:

Mr. Chairman, I regret the

Minister of Finance was not able to bring his estimates down earlier in the session. I recall that last year he did say he would attempt this year to bring them down at an early stage. On the other hand I am not going to be overcritical, because I do realize that the government has had a great deal of difficulty in getting into supply during the session.

I cannot agree with the hon. member for Greenwood in asking or suggesting that the foreign exchange control board be done away with. Because I feel that in a country such

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as Canada, situated between the sterling and the dollar blocs, it is essential that we have fairly rigid control of foreign exchange, especially when one realizes that we have always had difficulty in meeting our payments in the United States.

It would appear to me that if we had not had control of foreign exchange in this country we might have had chaotic conditions in the post-war years. Whenever the Minister of Trade and Commerce has spoken in the house he has invariably exuded optimism. I am not going to criticize him for that, because I like a man who is optimistic if he has good grounds for his optimism. I am not going to say that at this time he has not those grounds. I think at times however the basis of his optimism has been questionable.

I would say however that the Minister of Finance is in an entirely different category. The only time he really exudes optimism is in a year just prior to an election. At other times he invariably sounds a pessimistic note -or, if he does not like that term, let us say a note of extreme caution. Since he has been Minister of Finance he has continually warned the country and the House of Commons that we cannot expect the present high level of production, employment and income to continue indefinitely.

I believe this has had an adverse effect upon the people of this country. They have reached a frame of mind where they look upon a depression as inevitable, as just a question of time-next year, the year after or some time later. They have reached the point where they think that a depression or recession is bound to come, because they know the Minister of Finance has been warning them for the last four years. For that reason they have been busily engaged in tucking away their savings for a rainy day which, they feel, is bound to come.

Not only that, but in view of the fact that they feel a recession is certain, they are hesitant about investing money in the development of the country. They feel that if they do so they may very well lose their investments. I cannot feel that there are any grounds for that pessimism. Is it because our resources are becoming depleted? Surely no one would argue that for one moment. Is it because we are running short of skilled labour? There, again, there is no question of a shortage of skilled labour. Is it because our production has reached such a high level that it may be greater than is necessary to meet the needs of the people of Canada or the people in other parts of the world? Well, certainly that cannot be argued so far as Canada is concerned, because in Canada

we have a large number of low income groups including old age pensioners, incurables, recipients of war veterans allowances and may other low-wage groups which, in themselves. constitute a large potential market for increased production in this country.

In addition there are today a large number of national projects which should be executed at the earliest possible date. They are national projects for the purpose of conserving the resources of this country-water conservation, flood control, irrigation, reforestation. Those are things which may be regarded as self-liquidating projects, and projects which will help to increase the production of the country and the general standard of living of the people.

Someone may ask: What about wheat? I was interested in a statement made by the chairman of the wheat board when he was before the committee on agriculture and stated that even in regard to wheat he did not feel that, so far as the world was concerned, there was any real surplus. That is to say, he agreed that if the people of the world were able to buy the wheat they required there would not be enough to go round. We have a surplus only in so far as the people's ability to buy that wheat is concerned, and after considering the mpans of payment which we in this country are willing to accept.

I do not think any of those are the reasons why the Minister of Finance feels there is a danger of recession in the not far distant future. I think the minister fears a recession because of a lack of effective demand. Effective demand means money in the hands of those people requiring goods. I should say that problem is the responsibility of the Minister of Finance and his department, because it is that department which advises the government in matters of financial policy, and which is largely responsible for adjusting the supply of money as well as its distribution among the people.

So when the Minister of Finance expresses fear regarding the future he actually expresses a lack of confidence in the policy of his own department.

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LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Mr. Abbott:

I do not recall that I have ever expressed any fear as to the future. I do not want the hon. member to overstate it. I am not a pessimist.

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SC

Victor Quelch

Social Credit

Mr. Quelch:

The minister's memory must be short because in every budget speech he has made he has warned that we cannot expect the present high level to continue. Let me refresh his memory. He is reported, at page 2553 of Hansard for 1947, as follows.

We must expect, I believe, that at times when our employment, production and incomes are below

satisfactory levels, our revenues will fall short of our expenditures.

And then as reported at page 4063 of Hansard for 1948:

We must bear in mind that times are exceptionally good at present, economically and financially, and it would not be prudent to rely on such conditions continuing indefinitely. We should now be preparing for times when markets and employment are not so favourable . . . We should, therefore, be putting away what we can for a rainy day.

That is what all the people of Canada are trying to do.

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LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Mr. Abboii:

But that is not expressing fear or pessimism.

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SC

Victor Quelch

Social Credit

Mr. Quelch:

Then, in October, 1949, as reported at page 972 of Hansard:

Nevertheless some declines in' our overseas export markets have already occurred and some further declines can hardly be avoided ... It is with these possibilities in mind that the government is actively reviewing measures to counteract any serious downturn that might develop in our export markets and in the economic activity at home.

In every speech he warned as to the danger in connection with our present high level of income, and that it may not continue in the future. The people, listening to that, have felt that it is their duty to start tucking away a certain amount of their savings to meet that rainy day the minister has talked about in his budget speeches. Not only is there no justification to consider a future recession as inevitable; I believe the people of this country have a right to expect that there shall be registered an annual increase in the amount of the production of the nation, apart of course from any serious calamity that might befall the country such as severe drought or flood. Surely with an expanding population, with expanding efficiency of production and with great undeveloped resources such as we have in Canada, our people have a right to expect a steadily expanding economy, that is, an expansion of production with a corresponding increase in the standard of living. In his budget speech this year the minister said, as reported on page 1210 of Hansard, that during 1950 we might not reach a position where our resources would be fully developed and that employment might not catch up with the growth in total labour supply.

I think the minister will agree that the increased production that could be made available as a result of full employment is urgently needed both in Canada and in the world at large. I should like to say a few words about the domestic market because that is our most important market; as a matter of fact we might say that it is the only market we have because international trade is simply the exchanging of our surplus

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goods for the surplus goods of other nations which must be consumed in the domestic market.

The last time I spoke on the motion to go into supply, and the amendment moved by the leader of the opposition (Mr. Drew), I referred to a speech that had been made by the Minister of Resources and Development (Mr. Winters). I quoted at some length from that speech so I shall not take up time to deal with the matter today. However, the substance of that speech was that today people were putting a large amount of their income in savings and that consequently demand was falling off, or might fall off, with consequent falling off of production and increase in unemployment which might well lead us into a depression. The minister advised the people to spend more freely. I wonder whether the Minister of Finance agreed with that speech, because I think he will admit that it is a complete reversal of the propaganda that has been put out by governments and officials of the 'Department of Finance in the past. In the past people have always been urged to be more thrifty and put away their money in savings to take care of the future.

We in this group have always pointed out that while the practice of saving was necessary from the point of view of the individual, nevertheless the effect of large-scale saving by the people would be detrimental to the economy of the country. In view of the speech made by the Minister of Resources and Development I should like to know what the government is going to do if the situation he outlined should develop; that is, if as a result of large-scale saving on the part of the people a recession should develop will the government be prepared to step in and take up the slack created as a result of that over-saving, or is it the intention of the government to just sit by and let the depression develop?

The minister will recall that back in 1943 the governor of the Bank of Canada made a broadcast in which he pointed out that if such a situation developed after the war where the people were not spending freely and unemployment increased the government would be justified in going ahead with national projects and not meet the full cost from taxation or by borrowing the savings of the people but by credit expansion. I am wondering whether the government will be prepared to take that action if necessary.

The minister himself admits that employment may not catch up with the growth in the labour supply. I should like to ask the minister, if that situation develops, whether he will proceed with sound projects financed

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in part by credit expansion as suggested by Graham Towers in his speech in 1943, or is he prepared to allow a situation to develop such as was envisaged by the Minister of Resources and Development?

I can recall that when the committee on reconstruction met it drew up a long list of what it considered were worth-while national projects for forest conservation, soil conservation, water conservation and so on. It was understood that those would be held as a shelf of projects to be used by the government to take care of unemployment or a falling off in demand. If credit expansion is used to finance the national projects in part, would the minister be prepared to finance in part by using money from the Bank of Canada rather than from the chartered banks, or does he consider himself obliged to take such action as will still further swell the profits of the chartered banks and increase the interestbearing debt of Canada?

I know it will be argued that action of that kind would penalize the chartered banks, but when you consider the recorded profits of the chartered banks since the war you realize that they have increased every year and are quite substantial today. If a certain amount of money were issued through the Bank of Canada which the chartered banks would have to service without any payment, I do not think that that would impose any undue burden upon them.

It is also often argued that to finance through the Bank of Canada rather than borrow from the chartered banks would be more inflationary. I know that in the past ministers of finance have argued that the reason it would be more inflationary would be the fact that the chartered banks would be in a position to expand their credit facilities by ten to one on the basis of their increased cash reserve. I am not sure whether the present Minister of Finance has ever taken that stand, but it has been taken by his predecessors.

I do not think the minister will find that the officials of the Bank of Canada take that attitude. The attitude of the Bank of Canada has been that there is the closest cooperation between the chartered banks and the Bank of Canada and that, if money were issued in that way, under the advice of the Bank of Canada the chartered banks would not expand their loans if the Bank of Canada considered it detrimental. As a matter of fact, anyone who has read the reports of the Bank of Canada of recent years will find that time and again advice has been given to the chartered banks regarding their loan policy and invariably the chartered banks

[Mr. Quelch.l

have acted upon it without any further pressure. On the other hand, if the chartered banks were not prepared to co-operate with the Bank of Canada it would be a simple matter to amend the Bank Act to increase the reserve requirements of the chartered banks so as to offset any tendency toward inflation. Apparently there is a good deal of concern being felt today regarding the lack of Canadian venture capital. I read a press report of a speech delivered by the deputy governor of the Bank of Canada, Mr. Coyne, to the Quebec branch of the Canadian Life Insurance Officers' Association. He is reported as saying that thrifty Canadians have saved over $3 billion over the last four years, that they are increasing their savings at the rate of $400 million a year, and that while these savings would be sufficient to meet Canadian investment needs, Canada is still getting much of her investment requirements from foreign sources. He is also reported as saying that the trouble is that Canadians are not eager to get into the risky field of developing resources, and that one-half of all dividends of all Canadian corporations are paid to nonresidents.

Another speech, in many ways similar, was made by the president of the Canadian Bankers Association recently in which he also emphasized the fact that people were placing a large amount of their income in savings. Both Mr. Coyne and the president of the Canadian Bankers Association emphasized the need for venture capital in Canada, and that Canadians are hesitant to take the risk. Consequently the United States is stepping into the picture and now 50 per cent of all dividends of all Canadian corporations are paid to non-residents. In other words, we may say that we are fast becoming a nation of hewers of wood and dlrawers of water for other nations.

We in this group have always deplored1 the large-scale utilization of foreign capital to develop our Canadian resources. We have emphasized, the fact that during the war we tripled our production without the utilization of foreign capital, and that therefore it should be possible today to carry on the development of Canadian resources without using capital from other nations. As a result of the utilization of foreign capital our foreign obligations are greatly increased, and while I quite realize that the utilization of foreign capital may facilitate the balancing of our payments with the United States at the present time, nevertheless it is bound to aggravate the situation in later years.

We hear a lot of discussion as to what might be done to encourage the people of

Canada to invest more freely in the development of their resources. I think it is well to remember that for many years, and especially during the war-and I am not criticizing the action-we encouraged people in every way possible to invest as much money as they possibly could in dominion bonds. There is no doubt that the people of the country have become very bond conscious. It is also well to remember that if people who are not accustomed to investing money, and are therefore hesitant about taking the chance of losing what little capital they have, go to the banks the only advice they can get from the manager of a chartered bank is to invest their money in dominion bonds. The chartered banks will not advise people to invest their money in industry. Mind you, I am not criticizing the chartered banks for the position they take because I realize that it probably would not be a safe position for any bank manager to act as an adviser to an individual who was asking how he should invest his capital. The situation is that they will only advise people to invest their money in dominion bonds.

It seems only natural that as long as people can buy gilt-edged securities in the form of dominion bonds at a rate of interest of 3 per cent as in the past, and with a slightly reduced rate today, they will probably continue to do so and will not enter the industrial development field. On the other hand, if people could not so readily buy dominion bonds they would be more apt to purchase industrial securities. Therefore I suggest to the government that they might give consideration to refunding maturing government bonds in part through the Bank of Canada instead of by public subscription. That would accomplish two things. It would provide additional investment funds, and at the same time it would reduce the national debt owed to the public. Consequently it would provide for reduction in taxation by reducing the debt charges and thereby encouraging investment.

Of course the question will be asked whether a policy of that kind would not be inflationary. I think the answer to that is definitely no. People who hold bonds today hold them voluntarily because they want them as an investment. If the people who hold these bonds wanted to spend the money they have tied up in them they could take the bonds to a bank tomorrow and sell them at a premium. The very fact that people are not selling bonds proves that they would sooner hold their money in them than spend it on goods. Therefore if the government would refund a certain portion of the bonds upon maturity through the Bank of Canada the people receiving payment would immediately seek other sources of investment.

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I think there is another step that might be taken by the government to encourage people to invest their money in the development of the country. I think the government could very well give consideration to the setting up of a securities commission or advisory investment board operating on a voluntary basis. Companies seeking capital from the public could voluntarily make application to the commission for a licence, and reports on such companies could be made available to the people. It would at least help to give the small investor an idea of the soundness of the proposition and would guard against what might be called fly-by-night concerns. I believe there are many people in the country who would like to make investments in its development if they could be assured that they would have an even break. They do not mind taking a normal risk, but so many people have passed through the painful experience of losing their capital, especially in>

the early days of oil development in the west, that they are not prepared to take a second chance. If we set up an advisory board on investment with representation possibly from the Bank of Canada, industry and agriculture, for the purpose of making a thorough investigation, of industrial enterprises upon applications by companies, then I think the statements they would issue would help to assure people as to the soundness of the propositions.

I want to say a few words in closing about our external trade situation. I think it is quite clear from recent speeches that have been made by a number of ministers of the government and other prominent officials that they feel a good deal of concern regarding the effects that government financial policies are having upon Canada's international trade. For example, in the speech to which we listened a few weeks ago the Minister of Fisheries certainly implied that things were not as they should be. I recall he said that international trade was not a financial problem. I believe he should have said that international trade should not be a financial problem; but no one who has listened to the Minister of Agriculture deploring the situation with respect to our food products can escape the conclusion that today our international trade problem is very definitely and primarily a financial problem. Time and again the Minister of Finance himself has said that our trade problem with respect to Britain is a monetary question. On June 13 the Minister of Agriculture stated, at page 3552 of Hansard:

I do not think there is any dollar-sterling question in the world or any dollar-sterling problem as

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between Canada and Great Britain that is more important than the maintenance of good relationships between those two areas.

The statement was made as a result of the loss of our markets in Britain, and I recall that the minister was very critical of Britain for having reduced her purchases of food from Canada. I do not think we are being fair when we criticize Britain for having reduced her purchases in this country. Let us not forget that when Britain and the countries of Europe reduced their purchases from Canada and the United States they were doing the very thing they were advised to do by the international monetary fund. Last year I quoted from the report of that fund in which European nations had been advised that, in order to establish a better balance in their trade, they cut down their purchases from the dollar area and increase them from the sterling area. That is the very thing Britain and the European countries are doing today. Therefore it does not come with very good grace on our part when we criticize them for doing the very things they have been advised to do by the institutions we helped set up.

Even if we were able to increase our imports from Britain over a period of time to the point where they would be able to pay for our exports, and the same thing in regard to the United States, I do not think we could hope to solve the dollar-sterling difficulty, owing to the fact that today Britain has very large obligations in the form of sterling balances held by India, Pakistan, Egypt and other countries. I believe it is the obligation of Canada and the United States to help Britain meet those obligations, because those sterling balances originated as the result of meeting the costs of war. Britain's war effort, of course, was put forth on behalf of all the allies. Last year I complimented the Minister of Finance on the stand he had taken at the Washington conference, when he urged that action should be taken by Canada and the United States to relieve the strain on Britain caused by these large sterling balances. So during this discussion of his estimates I would like the minister to give us a report on what progress has been made in dealing with the matter of the large sterling balances held by India, Pakistan and Egypt.

Item stands.

Progress reported.

At six o'clock the house took recess.

IMr. Quelch.]

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AFTER RECESS The house resumed at eight o'clock.


June 21, 1950