Mr. St. Laurent (Quebec East):

Mr. Speaker, that is a document which for other reasons it is not practicable to make public. All these documents dealing with individual transactions of commercial corporations are treated as confidential and are described as such in their form for purposes that are legitimately required by our industrialists who engage in competitive business.

A notice of motion, No. 24, was brought before the house on February 6, 1956 which reads as follows-

Mr. SI. Laurent (Quebec East):

The government found no alternative to that policy which as to principle is an eminently sound one; so sound, in fact, that the Minister of Finance took some time to assure the house and thereby to assure the country that there was going to be no interference at all with the equalization policy that was contained in that formula and that the present increase, interim though it was, was an indication that the government intended to maintain the equalization principle that was the foundation of the act adopted in 1956. I think Mr. Harris will take some satisfaction from the fact that this is a recognition that the policy he put forth is being used as it should be used.

When we come back we shall use whatever good things there are in the policies of the present government, because they are not provided for a party; they are provided for the good of the country at large, and when they are such as to operate for the good of the country at large it is quite proper and laudable that they be made use of by those who have the responsibility of furthering the welfare of the country. But this is an added reason for our being prepared not only to go along with and support those increases but to accommodate the government, as the other parties have done, in making it possible to deal with this resolution expeditiously, without requiring that the usual notice called for by the rules be observed.

I think there will be general satisfaction in the fact that the present circumstances have been recognized as such as to require that this addition be made. With respect to the special grants to the Atlantic provinces, they are matters that did receive serious consideration but which had not up to that time been expressly agreed to by the representatives of the other provinces. A letter from the premier of Manitoba dated December 18, 1957, which has been printed as an appendix to Hansard, seems to indicate that it must be a great surprise to him that this matter

Dominion-Provincial Relations is being finally dealt with before the general policy of the fiscal arrangements applicable to all the provinces has been determined or let alone approached.

As I recollect the terms of that letter, it was felt that although the situation in the Atlantic provinces migh be somewhat unique at this time, whatever was done there should be in accord with a formula that could, if and when circumstances made it applicable elsewhere, also be extended to such other provinces. But these are details. What is important at the present time is to make this amount available, which I hope will produce some of the benefits of relieving the unemployment situation at the present time to which the Minister of Finance alluded.

However, though the economy of the country has been operating in terms very much larger than any of the amounts that can be fitted into a dominion-provincial fiscal arrangement, I hope that these amounts will produce something toward the very much desired objective of getting the economy back to the condition under which it was operating less than a year ago.

Mr. Si. Laurent (Quebec East):

I recall that there was correspondence tabled at that time, but during the election campaign it was suggested by the Prime Minister that this matter would be settled to the satisfaction of the provincial governments if the hon. gentleman's party achieved office. There were some of these promises which those of us who knew how these things could be done would have discounted, but which do not appear to have been discounted to the same extent by the general public, and they apparently were not intended to be discounted to the same extent by the general public.

The conference was held, and the Minister of Finance says there was no take it or leave it proposal put before it. In fact there was no proposal at all suggested. It is a very convenient excuse to say there were going to be no take it or leave it suggestions. The conference adjourned to meet again early in the new year. Well, it has not met early in the new year, and the prospects at the present time do not seem to indicate that it is going to meet at any time that could be considered early in the new year, if it meets at all within the first half of the new year.

The government is now attempting some implementation of the objectives that had been suggested during the campaign. It has

decided that it would recommend these immediate increases. It is with some satisfaction that we note that when the government does thus propose to make increases, which would be a small part of what the premier of Ontario, for instance, was stating to be absolutely necessary for his province, it does so by modification of three points in the percentage rate of one of the factors of the equalization formula that was recommended to parliament by Mr. Harris in 1956, and which was adopted by parliament.

Mr. St. Laurent (Quebec East):

Mr. Chairman, I hope the rosy expectations of the Minister of Finance with respect to the effects of the increases proposed in this legislation will be justified because whether we sit on this or the other side of the house, we are all equally concerned with the economy of our country. I may say at once that it is the intention of the official opposition to support both the increase in the direct tax revenue sharing with all the provinces and the special grants to the Atlantic provinces.

I wish to make a few observations on the proposed increase of general application under the direct tax revenue sharing arrangements, but I will leave the subject of the Atlantic provinces grants to the hon. member for Bonavista-Twillingate and other members of the opposition.

Of course no one can deny that during the war and ever since the war it has been an unavoidable necessity for the government of Canada to derive a substantial portion of its revenues from taxes on personal incomes, corporate incomes and, to a lesser degree, in succession duties. It is, I think, also obvious, and has always been obvious to everyone, that the burden of provincial and municipal treasuries has been rising because of the rapid growth of our population which requires increased provincial and local services and because of the increased costs of maintaining and expanding those local services.

It will be remembered that at the close of the war under the wartime arrangements, when all the then nine provinces were included, the provincial revenues from the

direct tax fields were about $100 million. For the present fiscal year the provincial revenues from the same fields, including equalization payments, were estimated by Mr. Harris at approximately $630 million when the subject was before the house for consideration in 1956.

From the table which the Minister of Finance has now placed on record in Hansard I gather that the total standard taxes, equalization and stabilization payments for the present fiscal year without the increase would be $630,878,000. That is an increase of considerably more than six times what it was at the end of the war. The proposal made in 1956 was that there should be an increase of approximately $114 million in the payments for the present fiscal year, over and above what it would have been, calculated on the basis of the 1952 formula. That is considerably more than the total increases which are proposed in this resolution, a resolution we are prepared to support.

The purpose of the present government in its tax revenue sharing arrangements is the same as the purpose of the previous government. It has always been recognized that it was proper that there should be some portion of the revenues available from these direct tax sources available for provincial services, and more than once I had occasion to state what was the government's policy in this regard. One of those occasions took the form of a letter addressed to all of the provincial premiers on January 14, 1955, in which I expressed it in the following words:

The present government has no intention of abandoning the objective of the tax-rental agreement which is to make it financially possible for all provinces, whatever their tax base, to perform their constitutional functions themselves and to provide a reasonable Canadian level of provincial services without an abnormal burden of taxation. That is the foundation of the policy of the federal government.

In the arrangements we proposed in 1956 a genuine endeavour was made to go as far as the situation at that period allowed toward achieving that objective.

At the present time the government feels it is possible to go beyond what was done then. The amount of the increase proposed is less than what was approved by parliament in 1956 but it is, of course, in addition to what was then being provided. It is being done by modifying one of the percentage rates in the formula which is the basis of the 1956 legislation.

We considered that formula was a good formula; that it provided for bringing up for each province the theoretical yield from taxes in this field of direct taxation to the average that proved to be the yield for the

Dominion-Provincial Relations two provinces in which it was the largest. We note with satisfaction that the equalization principle is to be maintained, and is regarded as the proper basis for the arrangements to be made in regard to this tax revenue sharing proposal.

During this session we have not, of course, had a national budget, and we are not therefore in a position to see accurately just how this will fit into the whole budgetary situation of the country at this time. That is the responsibility of the government, and I assume that the government has been fully conscious of that responsibility and of the effect on the budget of this and all the other substantial increases in permanent charges which have been made.

Mr. Si. Laurent (Quebec East):

I appreciate that these provisions are designed to take effect in the case of the special grants for four years, beginning with the year 1958-59, and the other case for the fiscal year 1958-59 as an interim provision pending whatever other decisions may subsequently be made.

We do know, however, that the burdens of the provinces and local authorities have been increasing, and we do know that there have been changed conditions. When this formula was prepared it was regarded as a formula which should be adhered to, at least until something better could be found to deal with the situation; but it was understood that the percentage rates might very well be changed as conditions and needs changed. We do know that the needs of the local authorities are substantial, and we hope they can make good use of these additional funds in order to provide needed services and needed employment.

As I have said, we intend to support the measure, notwithstanding the procedure followed by the government in dealing with the provinces. With respect to that, I think it is well to remind ourselves of the contrast between the manner in which this has been dealt with at this time and the manner in which it was studied throughout 1955 and 1956 to bring about the tax revenue sharing arrangements which were incorporated in the statute of 1956. I shall merely point out what were the various steps taken in order to bring about an arrangement which, though it was not satisfactory in the amount it provided to the provinces, was on a basis which was declared by all the representatives of the provinces at the time to

Dominion-Provincial Relations be better and fairer than anything which had been devised up to that time in this regard.

The first move that was made in respect to the discussion of these federal-provincial fiscal arrangements was a letter I addressed to the premiers of all the provinces on January 14, 1955. It was on the lines that arrangements were being proposed for unemployment assistance to those who were not covered by the Unemployment Insurance Act, but at the same time it called attention to the fact that it was necessary that there should be a dominion-provincial conference before the end of 1955 in accordance with the terms of the agreements which had been in effect since 1952, and it contained the following paragraph:

It had always been understood that it would be necessary to hold a federal-provincial conference before the end of 1955 to discuss fiscal arrangements for the years which will follow the present tax rental agreements. In the light of recent developments it might be the desire of the provincial governments to have this conference held at an earlier date.

I shall accordingly communicate with you again shortly after my return from the commonwealth prime minister's meeting in London towards the middle of February with a view to working out arrangements for a conference at a time which will be satisfactory to all governments concerned.

I am referring to letters that were tabled at the time. I wrote suggesting that we might have this preliminary meeting for this purpose on April 21 and 22 if those dates were satisfactory to everybody. Further communications made it apparent that April 26 and 27 would be more convenient dates for this conference, and it did take place on those dates. It was then determined that there would be other conferences in the meantime to deal with the unemployment assistance problem, and that the formal conference to deal with federal-provincial fiscal matters would meet here on October 3. In the meantime there were meetings of officials to prepare the data for the conference. One of them, attended by provincial officials, met in July, 1955, in Ottawa and another was held in Halifax in September, 1955. The conference met and sat in open session on October 3, and then sat in committee for the three following days.

The matter of fiscal relations was carefully gone into at that conference. It is quite true that there were representations made by the premier of New Brunswick with respect to the advisability of there being a special grant for the Atlantic provinces. Similar representations were also made by Mr. Hicks, the then premier of Nova Scotia, and the matter was given careful consideration at that time.

On January 6 I wrote to all the premiers outlining the recommendations that the government would take the responsibility of making to parliament in that regard. This was

followed by further correspondence, as a result of which there were some modifications made in the proposals that were recommended to parliament. There was another meeting with the provincial premiers here in Ottawa on March 9, following which a revised outline of the proposals was addressed to each of the premiers on March 19, 1956. The legislation was introduced in July of 1956, and debated and adopted at that time.

The procedure adopted by the present government was much more summary than that. There was a two-day conference here, which I would imagine from the rosy expectations that had been raised by the declarations made by the Prime Minister during the election campaign it was felt would settle the fiscal relations between the federal government and the provinces.