February 22, 1928

PRO

William Russell Fansher

Progressive

Mr. FANSHER (Lambton):

He may be a little leery about putting his pliers into it. Why should the country not expect that in this second budget the Libera! party would come forward and fulfil its pledges? The country is looking for that and member after member from Ontario was returned on the strength of the Robb budget. The government were taken at their word and the country expects them to fulfil their pledge. It is because I believe in the principles enunciated in my party's platform and because I want to see them brought into effect that I speak as I do to-day. I desire to place myself unmistakably on record in this matter. I desire, therefore, to move as a sub-amendment, seconded by the hon. member for Rosetown (Mr. Evans):

That all the words after the word "regrets" m the amendment be struck out and the following substituted therefor:

"That the government proposes further reductions in the income tax, thus making a serious departure from the principle of direct taxation: that the proposed revision of the customs tariff is inadequate to bring effective relief to the consuming public; and that the sales tax on the necessaries of life has not been eliminated."

Topic:   THE BUDGET
Subtopic:   DEBATE ON ANNUAL FINANCIAL STATEMENT OF MINISTER OF FINANCE
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CON

Alexander James Anderson

Conservative (1867-1942)

Mr. A. J. ANDERSON (Toronto-High Park):

Mr. Speaker, in rising to address the

house I wish to refer first to this sub-amendment. I do not agree with the" mover and the seconder of it in regard to the first paragraph thereof and I will refer to it at greater length in the remarks that I have to make. The second paragraph states:

That the proposed revision of the customs tariff is inadequate to bring effective relief to the consuming public.

That is a debatable question and in the remarks that I have to make I shall probably

The Budget[DOT]-Mr. Anderson (Toronto)

cover that matter. The last paragraph is practically the last clause of the amendment moved by the hon. member for St. Lawrence-St. George (Mr. Cahan).

A good deal has been said, not only by members of this house but by many people who are supporters of this government and by the press, regarding prosperity; and this was referred to also this afternoon by the hon. member for South Perth (Mr. Sanderson). Evidently the hon. member for South Perth felt the effect and influence of the arguments that were advanced yesterday by the hon. member for Fort William (Mr. Manion), as he spent the whole of his time in endeavouring to refute them, or, if he could, to ridicule that hon. member. That class of argument does not carry us anywhere. The hon. member did not attempt to answer, either in detail or in reality, the arguments set forth by the hon. member for Fort William.

The hon. member for South Perth referred to prosperity. I do not know exactly what conditions are in the constituency which he represents. It may be one of the constituencies in Ontario in which prosperity may be shown to exist to a considerable extent. The constituency which I represent, which is part of the city of Toronto, is largely industrial. As I said once before in this house, I think seventy per cent of our people, although they may not all be directly interested in industry, depend upon industry for their living. One can judge better as to whether there is real prosperity in this country by looking at the question from the immediate standpoint of the home. True it is that many of our citizens are enjoying a great deal of comfort and some of the benefits of the accumulated wealth of the country, but there are many who are not enjoying that measure of comfort which the wealth of our country should give to them. The Minister of Finance (Mr. Robb) referred in his budget address to the leaders of finance and industry and to the reports that they had made at various times during the year as being good evidence of the prosperity of the country. I do not know to whom he was actually referring when he spoke of leaders of finance and industry, but by leaders of finance I assume he meant the men in charge of our banks, trust companies, investment trusts, and probably insurance companies, because they have control of the greater part of our moneys that are on deposit with them as trustees for the people. Now, with all due respect to the bright statements that are sometimes made by these financial institutions in their annual reports, it is necessary I think for us to scan them with care.

In this country we have several banks all competing for business. These banks are doing business, it may be said, for the benefit of the public generally, but in reality they are doing business for their shareholders. The banks are privately owned; the shareholders own the bank, and the managers of these banks are anxious to make the best showing they possibly can. Competition is rife among the banks themselves, and they are always endeavouring to put forward the brightest statements they can. That is also true of our trust companies and our insurance companies. But when we come to look at what they are doing with the money that is entrusted to them in the form of deposits, what do we find that they are doing with a large part of it? When we begin to look at it from that standpoint, we notice that the stock exchanges of our country use a great deal of that money. The amount of money that is advanced by these various institutions to the stock brokers throughout the country, and the same is true of the United States, is something enormous; it represents a large proportion of the deposits that are entrusted to their care. Now if that money were used on the stock exchange for the buying of stocks, treasury stocks, the proceeds of which would go into the treasuries of these industrial companies, then I would say that that money was going in a direction in which it might help industry in this country and might help to make times better. If that money were invested in the bonds of these companies and were used for the extension of their business, I would also say that that would be for the benefit of industry, and probably of the country as well. But, Mr. Speaker, you know as well as I know, and every hon. member of this house knows, that the bulk of the money that is used on the stock exchanges of this country and of the United States is used in what are practically gambling operations. We may not call it gambling; we may say it is an investment, but whatever you call it the element of chance is there, and we find that our banks, our trust companies, our insurance companies and some of our investment trusts are using their moneys for this purpose. A striking instance of that came to my attention not long ago when one of our largest insurance companies in Canada published, and in rather a boastful way, the fact that it had bought a very large block of stock of another industrial concern in this country-International Nickel. The manager of that insurance company made the statement that they had bought that stock as a permanent investment. Now that stock

706 COMMONS

The Budget-Mr. Anderson (Toronto)

was not bought from the treasury of the International Nickel Company. Had it been bought from that source it would have gone into the industry and helped business generally. But no; it was bought on the stock exchange. It may be that it was all paid for in cash, but the money went not into the industry, but into the hands of other men who put it into their private purse or into their bank account, and it did not help the industry at all.

Now where does this insurance company hope to make profits if it is not that they are going to gamble or take a chance on that stock advancing in price on the market? That does not help the industry in this country. If we are to depend on the statement by that insurance company that everything is prosperous, you and I, Mr. Speaker, being probably insured in that company, have to conclude that the profits likely to come to its treasury are to depend upon chance; and that chance is not at all unreal. It may not be out of place for me to say that International Nickel was quoted on the stock exchanges of Montreal, Toronto and New York less than two weeks ago at 100, and to-day it is quoted at 80. Now that is a very great chance. I do not think that International Nickel is a concern that has any fear for the future. I believe it is good, but when we look at it we find that that stock is to-day paying two dollars per share of S25 par value, and yet it is selling on the stock exchange for from 80 to 100. At the price of 80 it pays only per cent, and it is clear that the insurance company is not looking at it from the standpoint of an investment paying them 2| per cent; but they have bought that stock on the possibility that it will enhance in value and the profits go into the treasury of the company. If that is an evidence of prosperity- and the same thing applies to other companies as well-it is not a fair and just evidence of prosperity. These companies, as a matter of fact, very frequently refer to reports prepared by the government on public matters, so that the one refers to the other; they are working in a circle, but when we come to find out what is behind it all we have good reason for believing that the greatest care is not exercised in the reports which these institutions put out to the country.

Investment trusts have come into being in Canada during the last two years. They have been in the United States for a number of years. They buy stock of companies, the same as insurance companies are doing, until they gradually accumulate a large holding, and their profits are dependent solely upon the future advance of the market. Is it fair

to say that the country is prosperous because these companies happen to make a profit on chance transactions of this kind? I say not. I think the information which is given to the country in general by the two great railroads of this country is probably a great deal better. The annual reports of the Canadian Pacific Railway Company and the Canadian National Railways both show decreased earnings and increased expenditures. These companies are working on the capital that is actually invested in them. True, the Canadian National Railways stock is not on the market, being held by the government; but the Canadian Pacific stock is on the market. The latter company pays a dividend of 10 per cent. Were it dependent upon freight and passenger earnings it might not be able to maintain that dividend, but by wise investments outside its regular railway business it has been able to do so, with the result that the stock to-day is quoted on the market at a high premium. But these railroads both say that the business of the past year is not as satisfactory as it might have been, and not in keeping with the development of the country.

I submit, Mr. Speaker, that the true prosperity of the Dominion can better be judged by the individual, by yourself in your constituency, by myself in my constituency, and similarly by other members of this house. In my opinion, wherever there is an element of unemployment not in keeping with the amount of wealth in our respective constituencies, then economically there is something wrong. The unemployment that is rampant throughout the urban portions of Canada, and also to a lesser extent in the rural districts, is the best evidence that prosperity does not exist to the degree that it should in view of the declarations that we have heard respecting the general prosperity of the country.

One is led to consider why our industrial development is not more active and prosperous. I do not suppose my friends to my left will agree with me, but I thought the other day we had from the hon. member for Red Deer (Mr. Speakman) something suggestive of a change of heart. He gave voice to a sentiment which, it seems to me, might form the basis of cooperation with the view of securing a better industrial development over the whole country. I refer to the statement that his party were not free traders, but were in favour-not necessarily because they like it, but because of existing conditions-of a tariff system, and that it was necessary and advisable that the various parties should get together on the question.

The Budget-Mr. Anderson (Toronto)

The government has always proclaimed itself a low tariff party. My hon. friends to my left have made it quite clear that they are free traders. The party to which I belong is wedded to a policy of protection. That does not necessarily mean protection to such a degree as to be harmful to our proper national development; it means protection which is constructive in its nature. In brief, it involves the development of all our resources from the raw product through the various stages up to the finished article that goes on the shelves of the retailer and thence into the hands of the consumer. The government by this budget and by its recent legislation is trying to show that it is a low tariff party. But unfortunately for that argument, the government is leaving the manufacturer in practically the same position as before. I do not object to this except as to the degree in which it interferes with the processes of manufacture in the earlier stages.

There can be no doubt that the low tariff legislation of last session injured the earlier stages of domestic manufacture, fabrication or conversion of our natural products, and this budget will be equally harmful in its effects. Let me cite the automobile industry as an example of what happened last year. A large number of the parts that enter into the construction of automobiles are manufactured outside of Canada, and under the budget of last session, they are being admitted free or at such low rates of duty as to interfere with the parts industry in Canada. True, it does help to some extent the secondary stage of manufacture in this country, but it has changed our automobile industry altogether, and to-day it has become to a great extent an assembling industry, with the result, as has been pointed out by other members, that a lesser number of Canadians are now being employed in our automobile industry. The importer of these automobile parts-the automobile manufacturer or assembler-probably is not losing. He handles as many automobiles, probably more than he did under the conditions that prevailed before the introduction of last year's budget; that is, he has become simply an assembler and a sales agent, and in that way he is making his profit. In fact many of the automobile industries are making big profits. But what about this industry in Canada? We are getting to be manufacturers of a partial product only, and if anything should happen in the future to interrupt the entry of those automobile parts, we would be in a very difficult position.

Now, this budget is proposing to do this year in regard to the woollen industry what 56103-45J

the budget of last year did to the automobile industry. I can only refer to this in a general way. A part of the woollen product is admitted free in order to assist the secondary process of manufacture, that is, the weaving industry in this country. It is going to have the effect of reducing the number of our sheep, and it will reduce, if not obliterate, that portion of the industry which deals with the raw product up to the time it is fit to put into the loom for the purpose of weaving. And further, it will result in the scrapping of a large amount of machinery and a large number of plants in which has been invested a great deal of good Canadian capital. That, it seems to me, is a very unfair way to deal with the Canadian who is courageous enough to invest his money in a real home industry. Of course, what will happen is hard to predict. My own opinion is that the woollen industry will be affected in the same way as the automobile industry, that is, the secondary part of our woollen manufacturing will be dependent wholly upon the United States and other countries for the primary products. It will also result in eliminating to a great extent our sheep industry. In short, the whole woollen industry of the Dominion will be very materially injured.

Topic:   THE BUDGET
Subtopic:   DEBATE ON ANNUAL FINANCIAL STATEMENT OF MINISTER OF FINANCE
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LIB-PRO

Robert Forke (Minister of Immigration and Colonization)

Liberal Progressive

Mr. FORKE:

Sheep are the best thing

going.

Topic:   THE BUDGET
Subtopic:   DEBATE ON ANNUAL FINANCIAL STATEMENT OF MINISTER OF FINANCE
Permalink
CON

Richard Bedford Bennett (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BENNETT:

We have lost only about thirty per cent.

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

Robert Forke (Minister of Immigration and Colonization)

Liberal Progressive

Mr. FORKE:

We have received the best

price for wools this year, and during the last five years.

Topic:   THE BUDGET
Subtopic:   DEBATE ON ANNUAL FINANCIAL STATEMENT OF MINISTER OF FINANCE
Permalink
CON

Peter McGibbon

Conservative (1867-1942)

Mr. McGIBBON:

Not due to the government's policy.

Topic:   THE BUDGET
Subtopic:   DEBATE ON ANNUAL FINANCIAL STATEMENT OF MINISTER OF FINANCE
Permalink
CON

Alexander James Anderson

Conservative (1867-1942)

Mr. ANDERSON (Toronto):

I have before me some statements concerning the iron and steel industry and a reference to them will show, by analogy, how the woollen industry is likely to be affected in the future. As a result of a highly improper method of dealing with the iron and steel industry in Canada, we find this enterprise to-day in a most unsatisfactory condition. This matter was referred to by the hon. member for St. Lawrence-St. George (Mr. Cahan) and I will not go over the same ground. But supple menting what he said I may quote from a paper on Iron Smelting and Steel Making in Canada, by F. W. Gray, taken from the publication Iron and Steel of Canada of January, 1928. This writer points out the effect upon different sections of the iron and steel industry of allowing a certain percentage of the manufactures in iron and steel,

708 COMMONS

The Budget-Mr. Anderson (Toronto)

in their earlier stages, to come into this country either free or under a low tariff. In 1920 the number of persons employed in the blast furnaces and steel mills of Canada totalled 13,874, who were receiving wages and salaries aggregating $22,824,530. These blast furnaces and steel mills are the parts of the factories that handle iron and steel in their earlier stages of manufacture. In 1926 the number of persons employed had dropped to 6,014, while the total wages and salaries paid out amounted to only $8,934,536. It will be seen that the number of employees was reduced by half while the wages and [DOT] salaries paid out were more than cut in two. This meant a direct loss to the labour element of the country, both as regards the number of workmen employed and in the matter of wages paid. The secondary plants do not show so disastrous an effect. In 1920 the number of persons employed in secondary plants was 101,887 and the salaries and wages paid them amounted to $135,860,417. In 1926 the number of employees in these plants had declined to 75,400 while the aggregate of wages and salaries paid was $125,229,867.

What has happened in connection with iron and steel will also take place in the woollen industry. We shall find that the primary plants will dwindle if indeed they are not eliminated altogether, while the secondary plants will be face to face with serious competition from outside; and the only way I can see in which we shall be able to stave off disaster is to provide a reasonable and fair protective tariff which will give the home manufacturer a chance to cope with foreign competition. Something might occur some day whereby we should not be able to get from outside those parts of iron and steel construction that enter into secondary manufacture, and the same prospect faces the woollen industry. Let me quote from Mr. Gray:

It is also fairly well established that the importation of these raw or semi-finished materials has been aided by lowering or complete omission of import duties in the most important instances of usage; but it is not true, as has been stated, that this favouring of importations from outside-so far as the products of blast furnaces and rolling mills are concerned-is required because of the inability of Canadian plants to furnish them. The record of idle blast furnaces, of unemployed men, and of declining production of primary products within Canada is sufficient proof to the contrary.

So far as I can see, this is the condition to which the woollen industry and possibly cottons will be reduced. Mr. Gray says further:

The point now reached, and the question that the secondary steel industries in Canada

must answer from their own viewpoint of supply, is whether the primary plants are to be further pressed into decline and eventual extinction, or whether, for the protection of the secondary industries per se, the remnant of the native blast furnace industry shall be kept alive. It is possible, of course, that a steel industry of sorts-

And this will be said of the woollen industry also-"a woollen industry of sorts."

-can be built up in Canada entirely on imported materials. But such an industry will not be a Canadian industry, and it will cease to exist the day that importations of the primary products from outside cease. It

would be a reflection upon the intelligence of iron and steel men in Canada to attempt further to emphasize the elementary necessity of blast furnaces, and rolling mills connected therewith, to any civilized country that essays to possess an iron and steel industry, and that desires to have a national status above that of a helot nation, or to be more than an appanage and vassal of nations that have realized the importance of iron and steel, and in doing so have achieved an independence in industrial affairs that is actual and not merely an unreality.

That is the condition to which the woollen industry and others will be reduced under this new proposal.

Something has been said in the subamendment in regard to the reduction in the income tax. This is-a matter in regard to which I wholly disagree with my friends to the left. The income tax is levied only upon a very small part of our population. I took the trouble to-day to inquire of the income tax office as to the number of persons in Canada who have paid income tax in the last year. We have a population of 9,300,000 and the number of persons who paid income tax was 116,029, while the corporations that contributed numbered 5,777. In other words, a total of 121,806 individuals and corporations paid income tax. Now, the reason the number of taxpayers in this class is so small is the fact that only this number of persons and corporations in Canada receive incomes that exceed the amount of exemption-$3,500 and upwards, or whatever the figure is. Those who receive an income may fairly be asked to pay a tax to the country, in view of the benefits they derive from the general industry. When I say that, without making it unnecessarily personal I may also say that I happen to be one of those who pay income tax, and I am quite prepared to continue paying it. But when we consider that the reduction of the income tax affects only 121,806 entities in this country, individuals and corporations, and that the other 9,000,000 people do not have to contribute in any way, you can imagine to what extent a reduction in the income tax will benefit the people of Canada.

The Budget-Mr. Anderson (Toronto)

For my part I think the government are simply making a gesture of a political nature. Some people have described it as a tricky affair, and have said that it is being done for the purposes of propaganda, in order to secure votes in the future. At all events it is not helping the people generally at all. If the government had gone the whole distance in regard to the sales tax I would have quite agreed with them, although I believe on the whole the sales tax has been very fair because it affects everyone according to the amount purchased. It has been a very annoying tax, however, almost as much so as the stamp tax, which has since disappeared. The sales tax should be wiped out altogether if the government really have any disposition to assist the consumer. We hear a great deal about the government trying to do that. They say, "We are trying to help the consumer; we are reducing taxes of every character with that end in view." The tariff board have been asked to do work in this connection, but we have no report of what has been accomplished by that board. We do know, however, that an individual has been appearing before that board calling himself counsel for the consumers of the country. I do not know by whom he is engaged; he may be doing the work voluntarily out of the kindness of his heart, although I doubt it. He claims to represent the consumers, and that includes every person in the country, because we are all consumers. If the government are particularly desirous of doing so much for the consumer, why do they not start right in and cut off the sales tax which is imposed against our own manufacturers, and thus bring home their good intentions to every individual in the country? The amendment moved by the hon. member for St. Lawrence-St. George (Mr. Cahan) asks that that tax be cancelled as of January 1, 1929. I believe the government might well agree to this, and if they did so they would be entitled to the credit of doing something for the Whole of the people rather than helping only an infinitesimal number of them.

Referring back to the question of income tax, I find some interesting figures appearing in the Toronto Telegram of recent date. I do not refer to this paper very often, but immediately after the budget speech was delivered the Toronto Telegram published a compilation showing how the reduction in the income tax would affect the city of Toronto. And according to that statement I find that in the Toronto district there are about 25,000 individuals who pay income tax. That is interesting, as compared with the 116,000 who pay income tax throughout the whole

Dominion; it would appear that Toronto is bearing its share of the burden. In addition to that, in that city there are about 2,000 corporations paying taxes. Sixty per cent of those who pay income tax in Toronto are in the class taxable on an income of $5,000 or under, and at the most their saving is only $3. Twenty per cent of the total includes those with incomes from $5,000 to $15,000, and the man with the latter income will save about $75. Ten per cent of that total represents incomes from $15,000 to $30,000, and at the latter figure the saving is about $350. Only ten per cent of this total have incomes in excess of $30,000. Then, at another place, it is shown that 30,000 people of those reporting have an income of less than $1,000;

5.500 people have incomes up to $2,000, and

2.500 people have incomes up to $3,000. That means that 38,000 people have incomes of $3,000 or less. The remainder of those reporting, numbering 5,570, have incomes ranging from $4,000 to $50,000. These figures are on the basis of the most recently available figures of the assessment department of the city of Toronto.

Topic:   THE BUDGET
Subtopic:   DEBATE ON ANNUAL FINANCIAL STATEMENT OF MINISTER OF FINANCE
Permalink
LIB

John Frederick Johnston (Deputy Speaker and Chair of Committees of the Whole of the House of Commons)

Liberal

Mr. DEPUTY SPEAKER:

I am sorry,

but the hon. member's time has expired.

Topic:   THE BUDGET
Subtopic:   DEBATE ON ANNUAL FINANCIAL STATEMENT OF MINISTER OF FINANCE
Permalink
CON

Alexander James Anderson

Conservative (1867-1942)

Mr. ANDERSON (Toronto):

I regret that, my time is up; I should have liked to make some remarks in regard to the public debt and the necessity of a sinking fund to meet it, but that is now impossible.

On motion of Mr. McMillan the debate was adjourned.

Topic:   THE BUDGET
Subtopic:   DEBATE ON ANNUAL FINANCIAL STATEMENT OF MINISTER OF FINANCE
Permalink

At six o'clock the house adjourned, without-question put, pursuant to standing order. Thursday, February 23, 1928


February 22, 1928