March 2, 1936

RURAL TELEPHONE COMPANIES

PROPOSED EXEMPTION FROM FEDERAL INCOME TAX

CON

Thomas Alfred Thompson

Conservative (1867-1942)

Mr. T. A. THOMPSON (Lanark) moved:

That, in the opinion of this house, all rural telephone companies should be exempt from federal income tax.

Hon. CHARLES A. DUNNING (Minister of Finance): Mr. Speaker, I would ask your ruling as to whether this resolution is in order.

Topic:   RURAL TELEPHONE COMPANIES
Subtopic:   PROPOSED EXEMPTION FROM FEDERAL INCOME TAX
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LIB

Walter Edward Foster (Speaker of the Senate)

Liberal

Mr. SPEAKER:

I had anticipated that there might be some objection in connection with this matter. If any hon. members wish to speak on the point of order raised, I am ready to listen to them, and I will then render a decision.

Topic:   RURAL TELEPHONE COMPANIES
Subtopic:   PROPOSED EXEMPTION FROM FEDERAL INCOME TAX
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CON

Thomas Alfred Thompson

Conservative (1867-1942)

Mr. THOMPSON:

I have no intention whatever-

Topic:   RURAL TELEPHONE COMPANIES
Subtopic:   PROPOSED EXEMPTION FROM FEDERAL INCOME TAX
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LIB

Walter Edward Foster (Speaker of the Senate)

Liberal

Mr. SPEAKER:

Does the hon. member want to speak on the point of order raised by the Minister of Finance in connection with the resolution? If anybody wishes to speak on the point of order I am ready to listen.

Topic:   RURAL TELEPHONE COMPANIES
Subtopic:   PROPOSED EXEMPTION FROM FEDERAL INCOME TAX
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LIB

Charles Avery Dunning (Minister of Finance and Receiver General)

Liberal

Mr. DUNNING:

The point of order is that, if this resolution carries, it constitutes a definite instruction to the government to exempt a certain class of companies from a certain tax. As such it is a matter which cannot 'be introduced into this bouse except preceded by a message from His Excellency the Governor General.

Topic:   RURAL TELEPHONE COMPANIES
Subtopic:   PROPOSED EXEMPTION FROM FEDERAL INCOME TAX
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LIB

Walter Edward Foster (Speaker of the Senate)

Liberal

Mr. SPEAKER:

On the point of order raised by the bon. Minister of Finance, I have looked into this matter, and I find that this resolution is not in order. The hon. member's motion is out of order because it is not framed in such abstract or general terms that it can be entertained by the house. The proposal made therein is for a special reduction in the public revenue. The item to be struck out is mentioned, namely, the income tax levied on rural telephone companies. Such a proposal can be entertained only in committee of ways and mean, and, as May says, at page 544:

These proposals must be grafted upon the financial scheme submitted by the government and it must not affect the balance of ways and means voted for the service of the year.

True, the motion says that the exemption of the tax "should" and not "shall" be made, but even at that I think the proposal ought to be considered in the committee and not by the house, for it is essentially a ways and means resolution.

Topic:   RURAL TELEPHONE COMPANIES
Subtopic:   PROPOSED EXEMPTION FROM FEDERAL INCOME TAX
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CON

Thomas Alfred Thompson

Conservative (1867-1942)

Mr. THOMPSON:

I abide by your decision.

Wheat, Oats and Barley-Mr. Quelch

Topic:   RURAL TELEPHONE COMPANIES
Subtopic:   PROPOSED EXEMPTION FROM FEDERAL INCOME TAX
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WHEAT, OATS AND BARLEY PROPOSAL THAT GOVERNMENT SUBMIT LEGISLATION GUARANTEEING MINIMUM PRICES

SC

Victor Quelch

Social Credit

Mr. VICTOR QUELCH (Acadia) moved:

That, in the opinion of this house, the government should submit for consideration of this house such legislation as may be necessary in order to guarantee a minimum price, based upon cost of production, plus a fair remuneration to the producer, on wheat, oats and barley, as a permanent measure.

He said: Mr. Speaker, I realize that this resolution deals with a difficult problem, and no doubt it will be asked how can we guarantee a price based upon cost of production when we have a variety of grades and costs of production vary throughout the country. Of course I realize that it would be impossible to set a minimum price that would cover the cost of production and be equitable to all farmers, but on the other hand we must remember that by harvest time the bureau of statistics is in a position to make a fairly accurate estimate of the yields of various grains throughout the country and to arrive at an approximate cost of production based upon averages. If this minimum price were to apply in the first place, say to No. 1 grade, and if the spreads on other grades were shortened to the extent considered advisable, I believe that would be as satisfactory a method as any.

Eastern interests and some hon. members from time to time have criticized legislation introduced to give financial assistance to agriculture and to relieve the distress in agriculture, especially in western Canada. But we must realize that the success of agriculture Ss not of interest to farmers alone, but of vital interest to the whole of Canada. In order to stress this point I should like to quote a few figures mentioned by the Alberta wheat pool in a broadcast on November 27, 1935. In the course of that broadcast it was stated that Canadian agriculture is a five billion dollar industry which supports nearly five million of our population directly and many more indirectly. Canadian agriculture supplies practically half the domestic market for factory products. Nine thousand factories are engaged in the processing of agricultural products. They report a total capital value of close to $700,000,000; they employ 125,000 people; they pay out annually in wages $125,000,000, and they produce products annually to the value of $750,000,000. In themselves I think those figures are sufficient to indicate the tremendous importance of agriculture in Canada, and to justify the statement that until

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Wheat, Oats and Barley-Mr. Quelch

agriculture is put upon a sound business basis there can be no permanent prosperity in this country.

I do not believe anyone would be so foolhardy as to claim that to-day agriculture is on a sound business basis. How can any industry be said to be on a sound basis when it is forced to produce below cost of production, and that has been the case in the past in connection with agriculture? To substantiate that statement I should like to quote a few figures taken from the Canada Year Book, 1934-35. We find the total value of field crops, live stock and dairy products in 1926 represented by the figure of S2,078,760,079. Six years later, in 1932, we find that the value of these agricultural products fell to $986,600,033, or a decrease of over a billion dollars. We might well say that if we could restore that billion dollars of lost purchasing power to the farmers we would be well on the road out of the depression. At page 862 we read that between August, 1929, and February, 1933, Canadian farm products fell 60-7 per cent, while fully and chiefly manufactured goods fell only 29-3 per cent. Again, at page 866, taking the 1926 index figure as 100, the index figure for grains in 1932 was 41-1, while the index figure for manufactured goods of mineral origin, such as farm machinery, stood at 84-8. In other words, while the index figure for grains fell by 58'9 per cent the index figure for manufactures of mineral origin fell only by 15-2 per cent. This means that a farmer in 1933, paying a debt incurred in 1929, would find his purchasing power reduced from $1 to 39-3 cents, while the price of manufactured goods had increased by 31-4 per cent and the price of machinery to the farmer had increased by 43-7 per cent.

In dealing with the question of the cost of production, according to bulletin No. 159 of the Department of Agriculture, published in 1932, a survey was made of a number of farms in order to arrive at the cost of producing wheat. It was found that the average cost of producing w'heat on summer fallow was seventy-eight cents per bushel and on stubble $1.12 per bushel. The lowest recorded cost was fifty-three cents; the highest recorded cost was $1.46. According to reports from the experimental farm, taken over a period of ten years, the average cost of producing wheat was sixty-nine cents a bushel, yet from 1930 to 1933 the average price of wheat in Canada, according to the Canada Year Book, 1934, page 257, was forty-three cents a bushel. In 1932, during threshing operations, No. 1 wheat fell to the low figure of twenty cents in the Calgary district. Therefore it is obvious that from 1930 to 1933 farm products were being

produced very considerably below cost of production. At the same time taxation increased. Costs, as represented by wages, of course fell, but on the other hand it must be remembered that according to the 1931 census only 38-6 per cent of the farmers employ help, so in view of this fact the saving in labour costs was very slight.

It is useless, therefore, to talk of permanent prosperity in agriculture until steps have . been taken to guarantee prices for farm products commensurate with prices of other commodities. We are only too familiar with the statements of many prominent business men to the effect that we cannot guarantee prices for agricultural commodities above world market levels. On the other hand, however, when you take into consideration the fact that all real wealth comes out of the soil I think it is absurd to make the statement that you can guarantee minimum wages in industry; you can guarantee the wages of civil servants and you can guarantee the wages of politicians but you cannot guarantee the prices of the very commodities that have made all these services possible.

By guaranteed prices of course I do not mean prices sufficiently high to include large profits, as that would be a direct incentive to the increased production of agricultural products.

I refer to a just price, a price sufficient to return to the producer the cost of production and at the same time be commensurate with prices of other- commodities. In addition to low prices farmers have had to fight drought, grasshoppers, hail, frost and soil drifting, -with the inevitable results that agriculture to-day is in a precarious position. Farmers who by 1929 had built up a fair reserve have seen it vanish; they have not been in a position to replace their machinery; farm buildings have become dilapidated and the inside of the homes in many cases is in dire need of refurnishing. And what of the families? Living in a climate of extremes of heat and cold, the children often have to travel three or four miles to school, undernourished and insufficiently clothed. Yet in spite of that we hear such statements as that of the senator from Rougemont, Hon. Rodolphe Lemieux: "Surely the farmers throughout Canada are not so wholly ruined as to have the right to claim that they should not pay."

We find at the present time a determined effort being made to do away with the existing debt legislation throughout the provinces. In that regard we should remember the statement of Major Douglas, "Show me any concern that does not recover cost out of prices, and I will show a concern headed right for

Wheat, Oats and Barley-Mr. Queleh

bankruptcy." That is why to-day the farming industry is fast becoming bankrupt, because it has not been in a position .to recover costs out of prices. And so before we can hope to put agriculture on its feet by such measures as debt legislation it will first of all be necessary to remove the cause of these debts. When one considers the actions of the majority of the great nations in spending many millions of dollars in maintaining high internal prices for agricultural products, then I think we can fairly say that Canada has not been overconsiderate or over-generous in her treatment of agriculture. The action of the government last year in establishing a wheat board and a minimum price for wheat to a very large extent restored the confidence of the grain farmer. It is to be earnestly hoped that the board will be kept in operation as a permanent institution.

I referred to the fact that the nations of the world have spent many millions of dollars in maintaining high prices for agricultural products in their own countries. In support of this statement I should like to quote from a speech made by John I. McFarland at a luncheon at the Palliser hotel, Calgary, on February 14 of this year. Dealing with this subject, he said:

I have shown you there is no world price, professional and non-professional speculation has been down close to zero in almost every line where there is a risk which must be carried. It is no longer considered sound business ethics for our business men to assume speculative risks. Governments in other countries have been expending and' diverting enormous sums of money to producers Australia paid over 60 millions of dollars in direct payments and indirectly 25 per cent in depreciated currency. The United States have paid about 200 million dollars in stabilization of wheat alone, and hundreds of millions in processing taxes have been levied on consumers to provide benefit payments to wheat farmers. Argentine contributed indirectly 25 per cent through depreciated currency, while controlled' foreign exchange has added to consumers' burdens of that country for the benefit of their producers. England, a country which produces only about 60 million bushels per year, has collected from consumers for the benefit of their wheat farmers about $100,000,000, while other importing countries of Europe and elsewhere have imposed high tariffs against wheat, which have maintained fantastically high prices in various importing countries, thus exacting from consumers enormous sums of money for the benefit of home production.

Now I think we are agreed that the producers should recover cost of production out of prices. But on the other hand I am very much opposed to many of the measures referred to by Mr. McFarland, because they ignore the very root of our present economic evils, namely, that owing to certain practices

under the present system industry fails to distribute sufficient purchasing power to buy back its own production. The last time I spoke in this chamber I dealt with this subject somewhat fully; therefore I shall not take the time of the house to deal with it again, but in view of this fact it is obvious that if you tax the consumer in order to raise the price level of any commodity you are placing a very heavy burden upon the consumer and are merely transferring the burden from one part of the community to another. Therefore I take the stand that in the event of world market prices of grains falling below the cost of production the dominion government should create the necessary financial credit in order to stabilize the price of these commodities at a level that would at least cover the cost of production to the Canadian producer. The futility of attempting to accomplish this by borrowing money from the banks is well emphasized by a statement from one of the greatest commercial organizations in the world, namely, the London Chamber of Commerce. The article was in reference to financing a government expenditure and read in part as follows:

It is quite evident that this cannot be done by the old method of asking the banks to create new money by the not very arduous activity of writing figures in a ledger, the state then borrowing the result from them at interest. In order to repay the capital and' interest more money must be recovered from the community by taxation than has been issued to it. since the banks did not lend the interest, so that the last state of that community is far worse than the first. The entry of figures in a ledger, by means of' which the banks create new money "out of the blue" under the present system, cannot be held to justify the claim to repayment, with interest by the community. The sacrifice on the part of the banks to create this new money involves but a few seconds of a clerk's time.

The justification for this argument of course rests upon the fact that the banks create this credit not out of anything they possess, but against the real credit of the borrower. This action by the government would become necessary only in the event of grain prices becoming deflated below cost of production, and therefore this action instead of causing inflation would cause reflation, a process that would be very necessary if Canada is to be saved from the disastrous results of the low prices of 1930 to 1934. This issue of financed credit would be cancelled automatically by the farmers meeting cost of production plus living expenses, and in the event of any part of this credit becoming redundant it could be recalled by an income tax.

We still hear a good deal of talk about over-production, but in the majority of cases it is in reality a matter of under-consumption

Wheat, Oats and Barley-Mr. Fair

rather than over-production. If the purchasing power of the people were increased up to the full capacity of industry to produce and deliver goods the bogey of over-production would to a large extent disappear. At the present time we hear a good deal about increased immigration, and placing more people on the land. The hon. member for Champlain (Mr. Brunelle) advocated the conscription of the unemployed and placing them on farms. But would not this cause greater production of agricultural products and so tend to bring about lower prices unless the government is prepared to guarantee a minimum price?

In the drought area we have many farmers w'ho are very anxious to move to better districts. In many instances these men moved into the areas with a little capital, good health and plenty ambition. To-day they have lost their capital; in many cases their health has suffered and they are fast losing their ambition. Surely before helping to settle foreigners on the land in Canada we should help these Canadian farmers to become reestablished. To-day it is costing thousands of dollars to ship in feed and seed to these families and to keep them on relief. In the long run would it not be cheaper to finance them to a new start in a good district? Then, provided prices of grain were maintained at a just level they would soon become self-supporting.

The main principle behind the resolution is that farmers should be guaranteed a fair price for wheat, oats and barley, or a price sufficient at least to cover cost of production and a fair profit. Even if this means a slight increase in the price level of commodities to the people of Canada I would ask this question: Have Canadians any right to expect

that a large body of the Canadian people should produce below cost of production in order that they may be in a position to buy more cheaply the goods they require. Personally I would say that that should not be the case.

If the resolution were agreed to it would possibly involve an amendment of the act establishing the wheat board, so that paragraph (a) of section 8 would read as follows:

To fix a price, based upon cost of production plus a fair remuneration to the producer, to be paid to the producer for wheat delivered to the board as by this act provided, subject to the approval of the governor in council.

Then the act would be made to apply to oats and barley in the same way that it applies to wheat. It applies only to grain produced in Saskatchewan, Manitoba, Alberta and British Columbia because grains produced in other parts of Canada to a great extent are used for feed.

In offering the resolution I wish to stress the principle that the price of an article should be based upon cost of production, a condition which does not obtain at the present time. To-day the price of an article is governed by what it will bring, and then, after deducting certain fixed charges and commissions, the primary producer gets what is left. In some cases that means he receives nothing, and in many others it means an amount altogether inadequate to meet costs incurred in the production of the article. In closing may I observe that I hope hon. members, instead of being too critical of the resolution, will be prepared to admit the justness of the principle expressed therein.

Topic:   WHEAT, OATS AND BARLEY PROPOSAL THAT GOVERNMENT SUBMIT LEGISLATION GUARANTEEING MINIMUM PRICES
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SC

Robert Fair

Social Credit

Mr. ROBERT FAIR (Battle River):

Mr. Speaker, in rising to second the resolution I wish heartily to endorse the views placed before hon. members by the hon. member for Acadia (Mr. Quelch). It is not my intention to speak at length because I believe enough has been said this evening to show the necessity for what is indicated in the resolution. It is my belief that if civilization is to continue this chamber has a great task to perform. For the disposal of our chief grains I believe a just price, as suggested by the previous speaker, offers about the only way we can succeed. For a number of years we have been producing grain below cost. I may be challenged with respect to the 1936 crop, but I believe I can substantiate by figures my statement about crops marketed in the past year. During the past season there has been a great deal of rust and hail and, in some cases, frost. In the constituency from which I come we were about three weeks late getting on the land in the spring and, in addition, we had early frosts which cut down the grade from the top, No. 1 northern, to No. 6 and feed. In addition, the yield has been cut by at least fifty per cent.

The price of feed wheat on a twenty-four cent freight rate was thirty cents per bushel and the average yield would not be above fifteen bushels. Hon. members can readily understand what profits are being made on that basis. As hon. members are aware, in the past the farmer has been in the habit of taking his grain to the elevator. He would ask the agent what grade it was, what dockage there would be, and how much per bushel he might receive. If he did not like the answers he got he had to lump it. This has been the condition particularly since 1930, in which year we had to lump it practically all the time. In that year there was a heavy crop of straw and grain in several districts, but in my particular district the grade was from No. 4 tough, down. Those of us who sold through

Wheat, Oats and Barley-Mr. Fair

the pool that year, on a twenty-four cent freight rate basis, got twelve and one-half cents per bushel although it cost us ten cents per bushel to thresh the crop. Perhaps hon. members will see why we are asking for a set price on the grains mentioned.

When the implement manufacturer has his implements ready for market he does not go to the farmer and ask him how much he will pay. The manufacturer sets his price, one which is not by any means below cost of production, and if the farmer does not like the price he must do without the implement. He cannot go to another implement company and obtain a machine to do the same work for less money. I believe that has been proven many times. One can picture an automobile manufacturer taking his product to a customer and asking what he will pay for it, and in most cases taking what is offered. That, however, is what the farmer has to do. When we have grain to sell we take it to the elevator and learn from the agent what he will pay. In nine cases out of ten we take what we are offered and say nothing.

I believe farmers have done everything in their power to cut production costs. When a machine which cuts cost of production is put on the market we find farmers rushing to purchase it, and paying good high prices for it. Abut thirty years ago farmers began making improvements for themselves. As they were denied improvements by the grain companies-I believe some of those pioneers are still opposite in this chamber-step by step conditions were improved until in 1923 we reached the point at which we organized the wheat pools. Since that year the pools of the west have continued to build up and to develop the greatest grain handling organization in the world. To-day on account of conditions over which we have no control we are not able to derive the benefits to which we are entitled. It has become necessary therefore to have a wheat board.

The wheat board is not a true representative of the producers. We have nothing whatever to do with what our grain will bring or for what it will be sold. It has simply been taken to the market place and whatever is offered is accepted. This seems rather foolish, but it is the condition that exists. If farmers cannot get the costs of production I think all hon. members realize what will happen. Factories will have to close down as the farmers will not be able to pay the price for the products turned out. When factories are closed down this means unemployment, and I think we have had enough of taking care of the unemployed. Unemployment is one of the greatest and most demoralizing questions

facing us to-day. The other day the hon. member for Brant (Mr. Wood) said that if he wanted to take a bath, he had to take it in a wash basin.. It seems too bad to think that the people who produce the wealth of this country have to take a 'bath in a wash basin or go without. This is what is taking place when other people handling our products can live under the most luxurious conditions.

The farmer should be able to buy a bathtub and the other up to date conveniences found in the city. If he could, things would be helped all round. The plumbers and the manufacturers of bathtubs and other appliances would toe busy. I think it would be in the interests of the agriculturists and Canada as a whole to pass this resolution and give the farmers of the east and the west, and the other interests in this country a chance to get on the road to recovery. We are told that prosperity is just around the corner, but that corner seems to be one that we cannot get around.

Topic:   WHEAT, OATS AND BARLEY PROPOSAL THAT GOVERNMENT SUBMIT LEGISLATION GUARANTEEING MINIMUM PRICES
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LIB

James Garfield Gardiner (Minister of Agriculture)

Liberal

Hon. J. G. GARDINER (Minister of Agriculture):

Mr. Speaker, in rising to

address the house on this resolution I must say that I am sorry the hour is so late. To discuss this resolution properly would require more time than is now available. The resolution appears on the order paper in the following words:

That, in the opinion of this house, the government should' submit for consideration of this house such legislation as may be necessary in order to guarantee a minimum price, based upon cost of production, plus a fair remuneration to the producer, on wheat, oats and barley, as a permanent measure.

There has been a great deal of discussion during recent years as to the advisability of having minimum prices permanently established for certain farm products. In western Canada this discussion has centred largely round prices of grain while in other parts of Canada it has centred largely round prices of other products of the farm. I am sure hon. members realize that there would be considerable difficulty in setting and maintaining permanent prices upon the basis set forth in the resolution. In the first place, there would be some difficulty in determining costs of production in the different parts of Canada. I can conceive of a price being set based upon production costs on the Regina plains, while in other parts of the country, particularly in the southeastern part of Saskatchewan and the central and eastern parts of Alberta, costs of production might be considerably different. A different basis would be found if we were going to take costs of production in the northern and eastern parts

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Wheat, Oats and Barley-Mr. Gardiner

of Saskatchewan and Manitoba. The reasons for these differences would be many in number. First, there would be the difference in climatic conditions; second, there would be the difference in the fertility of the soil and, third, there would be the difference in methods of agriculture followed.

For example, in the northeastern part of the province it is possible to carry on mixed farming. Saskatchewan is divided into nine wheat districts. During the past eighteen years in district No. 1 the average farm has produced annually wheat to a value of about $1,200. In grain district No. 2, which takes in the Regina plains, the average farm has produced wheat to the value of over $2,000. In grain district No. 3 the value of the average annual production of wheat has been about the same as in district No. 1. In looking at the production yields we find that in the eighteen years the average yield in district No. 1 has been about 12-9 bushels per acre. In district No. 2 it has been about 13-8 bushels; in district No. 3, about 12-4 bushels, and in district No. 4, about 12-8 bushels per acre. In other words, during an eighteen year period the difference in yields per acre in the different areas has not been so great while the difference in yields per farm has been considerable.

Topic:   WHEAT, OATS AND BARLEY PROPOSAL THAT GOVERNMENT SUBMIT LEGISLATION GUARANTEEING MINIMUM PRICES
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At eleven o'clock the house adjourned, without question put, pursuant to standing order. Tuesday, March 3, 1936


March 2, 1936