February 16, 1937

RAILWAYS AND SHIPPING

FIRST REPORT OF STANDING COMMITTEE CONCURRED IN


Sir EUGENE FISET (Rimouski) presented the first report of the standing committee on railways and shipping owned, operated and controlled by the government, and moved that the report be concurred in. Motion agreed to.


BANK OF CANADA


Report made by the Bank of Canada on the financial position of the province of Manitoba.-Mr. Dunning.


BUSINESS OF THE HOUSE

DEBATE ON DEFENCE ESTIMATES-SUSPENSION OF STANDING ORDER 28

LIB

William Lyon Mackenzie King (Prime Minister; Secretary of State for External Affairs; President of the Privy Council)

Liberal

Right Hon. W. L. MACKENZIE KING (Prime Minister):

Mr. Speaker, if the house is to be free to continue the debate on the defence estimates on Thursday, it will be necessary to suspend the rule under which the Speaker leaves the chair without question put. I move, therefore, with the consent of the house:

That the provision of standing order 28 respecting the committee of supply be suspended for the sittings of Thursday, 18th February, and Friday, 19th February, 1937.

Topic:   BUSINESS OF THE HOUSE
Subtopic:   DEBATE ON DEFENCE ESTIMATES-SUSPENSION OF STANDING ORDER 28
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Motion agreed to.


DOMINION-PROVINCIAL RELATIONS ROYAL COMMISSION TO STUDY TAXATION AND DIVISION OF FINANCIAL POWERS AND RESPONSIBILITIES

LIB

William Lyon Mackenzie King (Prime Minister; Secretary of State for External Affairs; President of the Privy Council)

Liberal

Right Hon. W. L. MACKENZIE KING (Prime Minister):

Mr. Speaker, I have already had occasion to intimate to this house that the government has been giving a great deal of thought to the desirability of appointing a commission to study certain aspects of the relationship between the dominion and the provinces. The aspects to which I refer are primarily financial. They include the allocation of sources of revenue, and the financial capacity of the provinces to discharge their responsibilities.

The problem we have had in mind has become acute in the case of the provinces of Manitoba and Saskatchewan. The depression, intensified by drought, has drastically reduced the income of the people of these two provinces and consequently the revenue-raising capacity of their governments, while at the same time it has given rise to steadily mounting relief costs and fixed charges. These two provinces have thus far met their obligations, but we have been advised that it is impossible for them to continue to meet their present burdens with the sources of income available to them. Representations to this effect were made at the financial conference held in Ottawa in December, and the matter was again discussed by the premiers of the respective provinces with the Minister of Finance (Mr. Dunning) in January.

As an outcome of the discussions between the premiers of Manitoba and Saskatchewan and the Minister of Finance, the Bank of Canada was invited by all concerned to make an independent study of the financial position of Manitoba and Saskatchewan, and was asked to present its views at the earliest possible date. The bank's report on Manitoba is now in the hands of the government. The report has been tabled to-day. It expresses the view that Manitoba has imposed taxation on a scale at least as high as that of any other province in Canada, and has restricted expenditures as far as it was possible to go without curtailing the services to an extent which would not have been in the public interest. Certain additional expenditures are now believed to be essential, but the bank is not prepared to say that it is practical to secure the necessary funds by means of further taxation, and there is no nearby prospect of securing revenues to cover the provincial share of relief costs. The report on Saskatchewan

Do minion-Provincial R elations

is not yet available, but it is probable that it will disclose difficulties at least as serious as those of Manitoba.

In giving consideration to the situation, as a whole, we have thought it unwise to consider the ability to borrow as the only test which should be applied. If provincial governments find it difficult to discharge the responsibilities which have been placed upon them, and, at the same time, in spite of genuine efforts at economy, to make both ends meet, there will eventually be an end to their ability to finance deficits by additional borrowing. The difficulties of the prairie provinces have been greatly intensified by drought, and the earning power of their people has been affected accordingly. But other sections of the country are not free from problems of a similar character, although they may not be so acute. We have, in short, ample indication of certain fundamental strains and weaknesses arising out of our present allocation of financial powers and governmental responsibilities, and if no attempt is made to remove them, the ill effects will not be confined to the sections where they now appear.

In these circumstances, we propose to appoint a royal commission of inquiry to investigate the whole system of taxation in the dominion; to study the division of financial powers and financial responsibilities between the dominion and the provinces; and to make recommendations as to what should be done to secure a more equitable and practical division of the burden to enable all governments to function more effectively-and, I may add, more independently-within the spheres of their respective jurisdictions.

The commission will be faced with a great volume of work, and will require some time to formulate its recommendations. Its appointment, therefore, cannot represent an immediate solution of the pressing financial problems of Manitoba and Saskatchewan. If these provinces are to continue to discharge their present responsibilities, some immediate financial assistance is necessary. In the circumstances, we believe that the dominion government would be justified in extending temporary aid to them pending the report of the royal commission. A recommendation to that effect will be made to the house when the supplementary estimates are brought down.

Topic:   DOMINION-PROVINCIAL RELATIONS ROYAL COMMISSION TO STUDY TAXATION AND DIVISION OF FINANCIAL POWERS AND RESPONSIBILITIES
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CON

Richard Bedford Bennett (Leader of the Official Opposition)

Conservative (1867-1942)

Right Hon. R. B. BENNETT (Leader of the Opposition):

It is obvious that this is not the moment for a discussion of the intima-ation given by the Prime Minister (Mr. Mackenzie King), but as a citizen of Alberta I protest with all my might against this

discrimination. I protest that the Minister of Finance (Mr. Dunning) permitted that province to default and did not advance it the necessary money shortly after the present provincial administration came into office, whereas he now accords Manitoba and Saskatchewan that assistance which will save them from the course which it was necessary for the province of Alberta to follow.

Hon. CHARLES A. DUNNING (Minister of Finance): I assume, Mr. Speaker, the

rules will not permit me to reply.

Topic:   DOMINION-PROVINCIAL RELATIONS ROYAL COMMISSION TO STUDY TAXATION AND DIVISION OF FINANCIAL POWERS AND RESPONSIBILITIES
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CON

Richard Bedford Bennett (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BENNETT:

Reply as much as you like; it is the fact.

Topic:   DOMINION-PROVINCIAL RELATIONS ROYAL COMMISSION TO STUDY TAXATION AND DIVISION OF FINANCIAL POWERS AND RESPONSIBILITIES
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LIB

Charles Avery Dunning (Minister of Finance and Receiver General)

Liberal

Mr. DUNNING:

The charge of discrimination just uttered by the leader of the opposition is a complete surprise to me. The condition to which he refers and which is the occasion of his protest was the condition of one year ago. I shall not now discuss the merits of the situation which then existed; they were discussed in this house under the conditions which then prevailed. May I point out, Mr. Speaker, that another year has passed and that year has seen more widespread drought than western Canada has ever experienced, more especially in the two provinces to which reference was made by the Prime Minister to-day. Further, may I say that the provinces concerned have made and are making every effort to discharge all their responsibilities. On no occasion has there been any effort to coerce the dominion government. There has been at all times a frank and straightforward presentation of their problems. Secondly, the provinces requested the Bank of Canada to look into and verify their statements of their financial position. That report is in the hands of the government at the present time and was tabled to-day. It is not a report containing recommendations but a report dealing with the facts of the situation. It is with that situation that we are attempting to deal to-day. No mention was made in the statement of the Prime Minister regarding Alberta; no approach has been made by the province of Alberta along similar lines. I can say, however, that the province of Alberta has been treated by this government absolutely without discrimination in so far as financial assistance is concerned since this government came into power; and I can go further and say that the government has no intention whatsoever of discriminating against any province in this dominion and is prepared to sit down with any province and discuss its problems and bring forward such solutions as the circumstances may appear to warrant.

National Defence-Mr. Thorson

I am having to speak thus extemporaneously because it was a great surprise to me that the leader of the opposition should make such an accusation of discrimination under circumstances which are well known to all members of the house and throughout the country.

Topic:   DOMINION-PROVINCIAL RELATIONS ROYAL COMMISSION TO STUDY TAXATION AND DIVISION OF FINANCIAL POWERS AND RESPONSIBILITIES
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CCF

James Shaver Woodsworth

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

Mr. J. S. WOODSWORTH (Winnipeg North Centre):

According to the Prime Minister, the commission to be appointed is to study the present allocation of the powers of the provinces and the dominion especially as they relate to taxation and generally to financial problems. I should like to ask him whether it is not possible to include in the duties of the commission a study of the responsibility for unemployment and other matters of the kind which are perhaps equally important, if not more so, and which have to a certain extent at least led to the present difficulties of the western provinces. Is it not possible that the scope of the commission might be extended?

Topic:   DOMINION-PROVINCIAL RELATIONS ROYAL COMMISSION TO STUDY TAXATION AND DIVISION OF FINANCIAL POWERS AND RESPONSIBILITIES
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LIB

William Lyon Mackenzie King (Prime Minister; Secretary of State for External Affairs; President of the Privy Council)

Liberal

Mr. MACKENZIE KING:

I believe that on a reading of the statement I have made my hon. friend will find that the scope of the commission with respect to all financial matters is very wide and, I imagine, will be found to embrace to a certain extent at least what he has in mind.

Topic:   DOMINION-PROVINCIAL RELATIONS ROYAL COMMISSION TO STUDY TAXATION AND DIVISION OF FINANCIAL POWERS AND RESPONSIBILITIES
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CON

Richard Bedford Bennett (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BENNETT:

I assume that a copy of the order in council appointing the commission will be laid on the table when the commission is appointed.

Topic:   DOMINION-PROVINCIAL RELATIONS ROYAL COMMISSION TO STUDY TAXATION AND DIVISION OF FINANCIAL POWERS AND RESPONSIBILITIES
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FARMERS' CREDITORS ARRANGEMENT ACT

REDUCTION OP DEBTS BY BOARD OF REVIEW IN SASKATCHEWAN


On the orders of the day:


February 16, 1937