February 25, 1937

LIB

Mr. POULIOT:

Liberal

1. What was the total expenditure for the National Research Council since June, 1935?

2. Did that council make any scientific discovery during that period?

3. If so, what member or employee of that council made it, what was it, and when was it made?

Topic:   QUESTIONS
Subtopic:   QUESTION PASSED AS ORDER FOR RETURN
Sub-subtopic:   NATIONAL RESEARCH COUNCIL
Permalink
LIB

Norman McLeod Rogers (Minister of Labour)

Liberal

Mr. ROGERS:

Return tabled herewith.

Topic:   QUESTIONS
Subtopic:   QUESTION PASSED AS ORDER FOR RETURN
Sub-subtopic:   NATIONAL RESEARCH COUNCIL
Permalink

THE BUDGET


Hon. CHARLES A. DUNNING (Minister of Finance) moved: That Mr. Speaker do now leave the chair for the house to go into committee of ways and means. He said: Mr. Speaker, among my New Year's resolutions was a secret undertaking that my budget speech this year should be brief. I must confess, however, that this resolution has suffered the fate of many of its companions. In preparing a budget, a bewildering array of complex questions demand attention, if one is to give a reasonably complete and accurate statement of the economic and financial position of Canada in these difficult years. To abbreviate further the statement which I now offer would mean presenting to this house something less than is expected in an annual review of this kind. But, Mr. Speaker, if I cannot bring you greater brevity than last year, perhaps I can bring you greater cheer. A year ago I was able to show that the state of business and trade was generally encouraging and suggested that we might reasonably expect throughout the year a strengthening and broadening out of the forces of recovery then clearly in evidence. My expectations of a year ago have been amply realized. The last twelve months have witnessed a continued and increasing vigour in the recovery movement, and the gratifying evidence of expanding business activity and more widely distributed economic betterment stands clearly recorded. In many directions the gains have exceeded expectations. The strength of Canada's recuperative power, the success of our constructive efforts, both as individuals and as governments, and the improvement in world economic conditions generally are seen in the growing volume of newly created wealth finding broader domestic and foreign markets and in the renewed spirit of confidence and enterprise on the part of our people. I shall have occasion later to refer to the less satisfactory aspects of current developments and to certain signals which may point to danger ahead. Viewing the situation broadly, however, in the light of the progress of the past year and the major underlying forces at work, I believe I can fairly say that since 1929 no New Year has dawned with brighter promise for Canada. I shall be greatly disappointed if, by this time next year, Canada has not moved substantially further along the road of economic recovery. I shall now present, with as little resort to statistics as possible, a few of the more significant evidences of our economic progress during the past year. Consider, first, our most comprehensive measure of economic activity in Canada, the index of the physical volume of business. This index is made up from forty-five important factors, and measures the physical volume of output in nearly all our leading industries as well as freight traffic on our railways, construction activity, and domestic trade. At the low point of the depression in February, 1933, this index had The Budget-Mr. Dunning



fallen to 67 as compared with 100 in 1926. The average level of this same index for the final quarter of 1936 was 119-3, an improvement of over 78 per cent from the low point and of .more than 10 per cent as compared with the last quarter of 1935. The preliminary index for January, 1937, the latest month for which the figure is available, stood at 117-3 as compared with 106-2 in January, 1936. This substantial improvement in business as a whole is confirmed by other broad indicators of general economic activity such as electric power production and carloadings. During 1936, the output of electric power established a new record, the total being 8-9 per cent higher than that for 1935, which was the previous record year. During 1936 also the railways carried more freight, total car-loadings increasing by 54 per cent. The improvement in carloadings has been greatly accelerated since the beginning of the year. Total cars loaded in January, 1937, exceeded the figure for January, 1936, by about 20 per cent, and were greater than in any previous January since 1931. Railway freight traffic is still substantially below the volume of the years 1926-20, but the return of normal grain crops in the west and restoration of construction activity with normal building material shipments would eliminate much of this differential and produce a radical change in the earning position of the two railway systems. Manufacturing of all kinds showed a generally well-sustained growth during the past year. The gain over the preceding year was 10 per cent, and the output was greater than for any previous year since 1929. Output of automobiles was somewhat lower in 1936 than in 1935, but this was due to the production of some of the new 1936 models in the fall of 1935. In the case of pig iron and steel production, one of our major capital goods industries, the upward trend is now clearly defined, steel output rising by IS per cent in 1936 to the highest point since 1929. In general, the capital goods industries which normally suffer so severely in depressions and thus contribute so greatly to the spread of unemployment, have in the past year shown a marked increase in activity, recording gains in output of over 8 per cent. This improvement, which may be regarded: as one of the most significant features of the recovery in 1936, may reasonably be expected to be accelerated during the present year, as the latent demands arising from equipment replacements and plant extensions exert further impetus. Activity in the forest products industries throughout 1936 showed truly remarkable gains over 1935, the general index for this group having moved up more than 25 per cent from December, 1935, to December, 1936. In British Columbia the lumber cut increased by about 15 per cent. Exports of planks and boards to the United States, increased by more than 55 per cent as compared with 1935, while sales to the United Kingdom were almost 40 per cent higher. Expanding output has brought a most heartening increase of employment in logging. The seasonally adjusted index for the final quarter of 1936 recorded an average improvement of more than 28 per cent over the same period in 1935. Since the turn of the year, unfortunately, activity in the industry has been retarded because of weather conditions- too much snow in some sections, too little in others. The production of newsprint in Canada soared to a new high point in 1936 with an output of more than 3,200.000 tons. This represents a gain of 16 per cent over 1935, and of 66 per cent over 1932, the low year of the depression in this industry. This output means that Canadian mills operated at an average of over 82 per cent of rated effective capacity for the year as a whole, and at 91 per cent of rated effective capacity in the last quarter. The increase in demand for Canadian newsprint, chiefly in the United States but also to an increasing extent in other world markets, and the probability of a moderate rise in prices augur well for the immediate future of this important industry which for so long has suffered from actual or threatened bankruptcy. An ever-mounting total of wealth continues to flow from our mines. In 1936 the value of our output reached the imposing total of over $360,000,000, an increase of more than 15 per cent over that for 1935, the previous peak year for mineral output in Canada. At current production levels our mines are turning out wealth at the rate of a million dollars a day. While gold continues to hold the spotlight with an output of $130,000,000 in 1936, or double that of ten years ago, and with many new mines still coming into production, yet the other metals, such as nickel, copper, lead and zinc, are finding an increasingly important place in the growing volume of our mineral exports. Canada's base metal industry has undergone remarkable changes in the last ten years as the result of an expenditure of almost $100,000,000 in plant extension and equipment and the coordination of mining, smelting, refining, fabricating and marketing facilities. In the production of nickel, lead, zinc, the platinum metals, asbestos and salt, new all-time records were established in 1936 and the output of The Budget Mr. Dunning coal was greater than in an}' previous year since 1929. As in the case of the lumber industry, the mining industry in its expansion is showing a steadily mounting pay-roll. The seasonally adjusted index of employment in mining was over 12 per cent higher in December, 1936, than in December, 1935, while the index of employment in metal ores moved up about 20 per cent during the past year. It is extremely gratifying to note this movement of our people into primary industries, where they find profitable occupation in the output of natural products with which Canada is so bountifully supplied. Agricultural production suffered in 1936 through unfavourable weather during the growing season. Improved prices, however, resulted in a money return for field crops greater than in any year since 1930, amounting to approximately §600,000,000, an increase of about 17 per cent over 1935. With regard to wheat, the 1936 yield was about 52-7 million bushels below that of 1935, and was the smallest crop since 1919. Drought conditions again played havoc in certain areas, destroying crops completely in some districts and reducing to meagre levels the yield in others. In spite of the smaller 1936 yield, however, the value of this crop was substantially above the value of the 1935 crop due to greatly enhanced prices, which are again reaching levels which promise more profitable and stable conditions for the western farmer. During 1936 an increasing volume of live stock was marketed, but with prices slightly less favourable than those prevailing in the previous year. The bureau of statistics' index of live stock sales rose over 12 per cent above the previous year's average. For the dairy industry generally, prices were moderately higher during the past year. There was a striking increase in cheese exports, and the volume moving abroad in 1936 was more than double the amount exported in 1935 with prices higher than at any time since 1930. Recent price movements have operated distinctly in the direction of reducing the farmer's handicap. As the house well knows, the farmer was particularly hard hit in the collapse of prices following 1929, and we find that by 1932 the average level of prices for farm products was down to 48-4 per cent of the average level in 1926. Since that time, however, prices have greatly improved, particularly in the past year, and by the end of 1936 this index had moved up to 82-4. While prices of things which the farmer sells have been moving upward, there has been relatively little change in the prices of things which he buys. In fact, taking 1926 prices as equal to 100, we find the retail price index in December, 1936, standing at 81-8, while, as noted above, prices of agricultural products had reached the 82-4 level, after a rapid rise in the last few months of the year. At the end of 1936, therefore, the farmer's relative position, as far as prices were concerned, was slightly better than in 1926. Wide disparity between prices of primary and finished products is perhaps the most significant feature of what we call a depression, and it is greatly to be hoped that this approximate parity between agricultural and other prices can be maintained. The general level of wholesale prices which had been remarkably stable in Canada since 1933 has finally begun to move sharply upwards. During 1934, 1935, and the first half of 1936. the bureau's index fluctuated narrowly around 72 per cent of the 1926 level. In the last half of 1936, however, the wholesale price index rose by over 10 per cent to 79-7 at the close of the year, an upturn that has restored wholesale prices to the level prevailing at the end of 1930. This rise in prices is a world-wide condition and the forces which have brought it about continue to be effective. One may express the hope that such forces may not be allowed to get out of hand. While they may correct the economic disparities from which we have recently suffered, and while they may give every evidence of abounding prosperity for a time, they are likely, if the pace is too rapid, to create new disparities and plunge us once more into the throes of depression. An obvious indicator of the general state of our economic health is the volume of dividend distributions by corporations. It is gratifying to report, therefore, that reliable estimates of profits for the past year were the highest since 1930, and reveal an increase of more than 13 per cent over the 1935 total. An unofficial index of dividends distributed stood at 117 for December, 1936, against 100-1 for December, 1935, and 62-5 at the low point in August, 1933. Profits are the mainspring of economic activity in the system under which we operate. Increasing profits are therefore the best augury for increasing employment, the best indication of the approach of the day when private industry will be able to release governmental bodies from the enormous burden which they have had to bear in recent years. In the financial field, conditions have remained generally favourable. The year 1936 witnessed a striking increase in the volume of capital issues publicly floated. Bond issues The Budget-Mr. Dunning



publicly offered in Canada for new capital and for refunding purposes, excluding treasury bill issues, are estimated to have reached a total of $715,000,000 as compared with $541,000,000 for the previous year, an increase of over 32 per cent. Of this 1936 total, $242,000,000 was for new capital and $473,000,000 for refunding purposes. Financing for private corporations accounted for $232,000,000 of the total in 1936, or more than five times the total of such financing during 1935. The increasing volume of such private corporate issues and the increasing proportion of such issues offered for new capital purposes are healthy signs. This heavy volump of bond flotations is in part a reflection of prevailing low interest rates. The wages of money, as measured by the yield on high grade bonds, averaged lower in 1936 than at any time since before the war. These low rates have made it possible for the dominion government and for the eastern provinces to refund outstanding obligations and to raise new funds at record low cost. For short term money the dominion is paying on a yield basis of approximately three-quarters of 1 per cent per annum, while on long term issues the rate has been only slightly over 3 per cent. Except for an interruption in September and October, the trend of high grade bond prices was steadily upward during 1936. An unusual number of actual or pending flotations and fears engendered by the weak financial position of certain western provinces, coupled with unfavourable developments in foreign markets, have caused some hardening of the rates during the past month. The somewhat lower levels of bond prices resulting have attracted renewed investment buying and yields on high grade securities for the most part are still slightly above the levels prevailing a year ago. The continuance of interest rates on substantially the present basis will foster economic recovery by encouraging private enterprise to expand existing equipment and undertake new projects on a low capital cost basis. It is unfortunately true, however, that ;he financial position of several of our provincial governments is such that they are unable to take advantage of prevailing low interest rates in order either to reduce their fixed charges by refunding outstanding debt or to obtain new funds for relief and other expenditures. Despite drastic efforts to reduce expenditures and increase taxes, and despite a long record of honourable dealing with their creditors, they have been unable either to balance their budgets or to have recourse to the investment market for the funds necessary to meet their commitments. This is a problem to which the government has given the most serious and unremitting attention since the day it assumed office. I need not recount the efforts which were made last year to find a solution. The plan then evolved which would have made low rates available to the provinces as a result of dominion assistance under appropriate safeguards, proved unacceptable in several quarters. The acute stage which the problem has reached in Manitoba and Saskatchewan during the recent past led the government to make the decision which was announced by the right hon. the Prime Minister (Mr. Mackenzie King) to the house last week. That decision followed investigations which demonstrated what had long been recognized as a fundamental weakness in the allocation of financial powers and responsibilities to the provincial governments by the fathers of confederation seventy years ago. The revenue-raising powers assigned to the provinces do not appear to be commensurate with the responsibilities which they were given or which they have assumed in an age of increasing provision for governmental social services. It is a basic principle that a government should be able to stand financially upon its own feet-that it should itself be responsible for raising the revenue necessary to meet its own needs. I look therefore with great confidence to the results of the investigation into this whole problem to be made by the royal commission which is to be appointed. If this investigation and report are as competent, as impartial and as constructive as the occasion demands, they may well serve to point the way to such action as to make the year 1937 as significant in Canadian history as the year 1867. In this connection may I pay tribute to the assistance given by the Bank of Canada in conducting the preliminary investigation of the financial position of these two provinces at the request of their governments *and of this government. The province of Alberta has now requested a similar investigation. As the house knows, the bank has power to act, upon request, as the fiscal agent and the adviser of any provincial government. We now have an illustration of the important contribution which the bank may make to the financial welfare of the dominion merely by providing a source of competent and disinterested advice to our major governments. Our banking system currently finds itself with ample reserves for the accommodation of commercial borrowers. While the volume of commercial loans is abnormally low, there have recently been indications of growth, and a moderate increase is expected during the present year. Contrary to the prevailing The Budget-Mr. Dunning belief in some quarters, the banks will heartily welcome the opportunity thus provided to invest their funds at somewhat higher rates than have recently been available on gilt-edge securities. It is also encouraging to note in recent banking statistics that debits to individual bank accounts in the clearing house centres of Canada-in other words, the cheques drawn by the public on their bank accounts- showed an increase in December, 1936, of 16 per cent over December, 1935. We have to go back to 1930 to find an annual volume of debits exceeding the level reached last year. This indicates, Mr. Speaker, that the velocity of circulation of cheque-book money is speeding up with the rising tempo of business activity and the increase in public confidence. This is the factor so frequently forgotten by advocates of monetary panaceas. The volume of money-work done is the product of the amount of money multiplied by its velocity of circulation. An arbitrary increase in the amount of money by the fiat of a government is likely to defeat its object by a proportionate or more than proportionate decrease in the velocity factor. If the increase in the volume of money continues beyond a certain but unpredictable point, public confidence is lost altogether and a flight from money occurs. In the early stages of a severe and prolonged depression credit expansion may be an essential weapon to combat the deflationary forces at work. It must, however, be recognized as a very dangerous weapon requiring the use of expert technique as well as great wisdom and caution. The control of the volume of money and credit with a view to mitigating the extremes of booms and depressions is one of the primary functions of a central bank. The easy money policy which has been followed in the recent past is, in my opinion, an illustration of appropriate action in a time of depression. There will come a time, however, and it may come more quickly than many of us expect, when precisely the opposite policy will have to be followed, if the best interests of the country are to be served. Monetary policy has a role to play during depressions. That role is an important one; although I am bound to say that as a medicine for depressions monetary techniques are far more effective when applied before rather than after the event. During the present depression, more deliberate use has been made of monetary devices and remedies than in any previous depression. This is largely to be explained by the great advances made in monetary theory and central banking practice during the postwar years and, in so far as Canada is concerned, by the fact that we have only recently been building up the necessary mechanisms for control. But monetary policy should not be 31111-77 regarded as a panacea. It can, at best, only create conditions favourable to sound development. In a constructive program it should merely take its place as part of a much larger whole. Fundamentally our need is an increase in our aggregate national income-an increase in material wealth, not a different yardstick by which to measure it. Real purchasing power consists in goods and services produced, not in the number of monetary tickets which are used to facilitate the exchange of these goods and services. An increase in our national wealth and income can best be secured by facilitating the production of the many things which Canada is best fitted to produce; and by exchanging these products on as large a scale as possible for products which Canada cannot advantageously produce. To these objectives the government has been energetically devoting itself by opening up and expanding foreign markets for our basic products, by stimulating employment in productive lines, and by endeavouring to eliminate uncertainty and fear which paralyze initiative and retard industrial enterprise. The success of these efforts is indicated in part at least-for I do not wish to claim for the government all the credit for the recovery which we have enjoyed- in the statistics which I have already given, indicating encouraging expansion in nearly all lines of productive activity. These statistics are confirmed by preliminary estimates of the national income for 1936. By national income I mean the income of all the people of Canada-I am not using it in the sense of governmental income. These estimates indicate a total of 84,520,000,000 as compared with $4,- 094,000,000 in 1935. This is an increase of over 10 per cent in the national income, that is, the aggregate of the individual incomes of all the people. It is an increase in real purchasing power, created not merely by writing up a credit to ourselves in our national bank account but by providing profitable opportunities for the production of goods and services. While there is still a substantial distance to go, this advance, like the others which I have recorded, is impressive and gratifying In surveying the general outlook, however, we must not close our eyes to the fact that business cycles in their course from depression to full recovery never completely conform to an established pattern. We cannot deduce from past experience that the upward movement must inevitably continue or that it will proceed evenly and satisfactorily in all directions. The point I am making is this, that while the general movement is at present strongly upward, yet we must not lightly assume that we have solved our problems, or



The Budget-Mr. Dunning



that we have by any means reached the stage where we can relax our vigilance or our economies. We must not lose sight of the fact that, in certain fields, improvement has lagged, and that to a large number of our people the recovery of business has not yet brought the expected relief. In other directions there is more than a suggestion of a mentality that led to the deplorable excesses in the late twenties. Greed and unreasonableness in industrial relations are dangers that can paralyze our best efforts. There are forces unleashed in the recovery period that must be grappled with no less vigorously than those facing us in times of depression. These realities must not be neglected. Furthermore, disturbing factors in international relations still perpetuate much uncertainty in the world outlook. To these less favourable factors I wish to devote a few moments. Apart from those sections of our agricultural industry which have suffered from the ravages of drought, the most conspicuous laggard among our major industries has been private construction. While there was a very slight improvement in total private building, and a moderate increase in residential and industrial building, the bureau's index for construction activity averaged slightly lower in 1936 than in 1935, and stood at the deplorably low level of 49-8. The value of contracts awarded amounted to only 8162,000,000 as compared with an average of 8428,000,000 in the prosperous years from 1925 to 1929. This is especially unfortunate in view of the fact that so large a proportion of our unemloyment is to be found in the construction trades and the industries dependent upon them. It was for this reason that the home improvement plan has been devised and it is confidently hoped that during the next twelve months it will lead to a substantial volume of repair and modernization work which will transfer skilled craftsmen from relief rolls to pay-rolls, and at the same time serve to protect and increase the value of an important capital asset, the homes of our people. As already indicated, the betterment and extension of industrial plant and equipment should also make a larger contribution to employment and business activity during the present year. Improvement should also occur in the field of housing construction, long retarded by uncertainty as to continuance of employment and particularly by high real estate taxation. It is obvious, however, that these difficulties are in part at least the result of a vicious circle. Real estate taxes are high, for instance, because relief costs are high; relief costs are high because unemployment is heavy; and unemployment is heavy, to an [Mr. Dunning.) important extent, because the building industry is inactive. Conversely, the building industry is inactive because all these other things are true. We are now reaching the stage in the recovery movement when this vicious circle must be broken. In my opinion, therefore, it behooves every branch of the construction industry, including the lending institutions which finance the repair and erection of houses, to study the facilities now available through the government's housing programs and to use the utmost ingenuity in providing a sound product at a reasonable price and in selling that product to the ultimate consumer. Public works construction cannot be continued indefinitely on the scale of recent years without building up an intolerable burden for the future. If it must be kept up in the late stages of a recovery movement, what hope can there be that governments will be in a position to use public works requirements as a reserve against future depression? If the construction industry makes the effort which I have indicated, and if it receives, as it should, the hearty cooperation of the general public, the results will go far to solve the next problem with which I wish to deal, that of unemployment and relief. The bureau of statistics publishes monthly an index of employment which is reasonably representative of all industries. It is based on returns submitted by about 10,000 firms employing approximately 1,000,000 persons. After adjustment for seasonal variations, this index stood at 111 -1 for January of this year. Compared with January, 1935, this represented an improvement of about 5 per cent. In the field of manufacturing, employment moved up 6 per cent. In lumbering and mining, as mentioned previously, it showed substantial gains, while wholesale and retail trade employment in December was at the highest December figure on record. In the construction and maintenance industries, however, the index showed an actual decrease of employment which brought down the general average. The disheartening aspect of these figures, however, is the obvious failure of employment to keep pace with the striking gains in business activity previously reported. Partial explanation of this is to be found in the substitution of full-time for part-time work and in the taking up of the "slack" which previously existed as a result of redundant staffs maintained by many employers who were reluctant to dismiss employees not really needed. For the rest, the explanation rests upon the progress of invention and the improvement in technical and managerial processes. To this extent it is a phenomenon The Budget-Mr. Dunning which is usually met with in the early stages of recovery from depression. As it indicates an increased efficiency in the productive mechanism, its results are not to be deplored. Its ill effects are temporary; in the long run it increases employment by cheapening production and expanding consumer purchasing power. As recovery gathers momentum, increases in employment will tend to conform more closely to expansion in business activity. Still more disheartening to most observers is the failure of the numbers on relief to decline proportionately with the revival of business. The registration of relief recipients maintained by the national employment commission, the results of which are now available on a preliminary basis for last month, indicates that as compared with January, 1936, heads of families on relief rolls in January, 1937, had decreased by 8 per cent and the total number of individuals on relief by 5 per cent. Excluding those on relief in the drought area, the respective declines were 11 per cent and 7J per cent. These decreases are of sufficient importance to confirm our belief that with expanding activity, industry will be able to re-absorb at least that portion of our relief recipients who are employable. However, to those observers who look for an early end to the relief problem the decline during the past year will appear discouragingly small. In addition to the factors mentioned above, the explanation for the slow rate of reabsorption is to be found in the fact that the new jobs opening up are being taken in large part by persons who were unemployed but not on relief, and by the new recruits who annually leave our schools and colleges to join the ranks of industrial workers. It is probably true, Mr. Speaker, that a hard core of unemployment and relief will always remain. Doubtless there will be a number of those in the higher age brackets, who have been on relief for several years, who may be permanently ^"unemployable." Even in the best of times, we have always had unemployment, but the unemployed have not been "in the statistics" nor a charge upon public funds to the same extent as to-day. The depression will leave us with a new problem which will demand new methods of treatment from the appropriate authorities. I am convinced, however, that in the policies now being followed and in the economic forces now working with increasing momentum, the present and major problem will rapidly be reduced to manageable proportions. The real solution must come, and is coming, through the expansion of private enterprise, based on conditions favourable to the more 31111-77} extensive development of our primary and other industries. The fostering of private construction along sound lines, as already indicated, will also make an important contribution. As real purchasing power thus created becomes more broadly diffused throughout our economy, we will find the problem of relief dwindling in its proportions. In the meanwhile, the situation also demands important supplementary activities such, for instance, as the national employment commission is sponsoring as part of its contribution to the solution of this national problem. I refer particularly to the farm placement scheme, the home improvement plan, the coordination of the efforts of various governmental bodies and private organizations with regard to youth, the organization of community cooperation, and measures designed to bring about a more efficient and economical administration of direct relief. It may seem ironical for me to sound a warning about a problem of prosperity whilst we are still harassed by the problems of depression. Evidence is accumulating, however, of the prevalence of a state of mind which justifies a warning signal. If we may judge by the activity in brokerage offices, the rapid rise in stock market prices, and the ratio of stock prices, particularly in some sections of the market, to nearby earnings and dividend prospects, we are forced to recognize a revival of that get-rich-quick spirit which proved so disastrous in the pre-depression years. As business activity increases and especially if the commodity price level shows a rapid rise, this speculative fever is likely to become more widespread and more hectic, creating false standards of value and an unbalanced development with their inevitable aftermath. It is not too early, therefore, to call attention to these potential dangers and to express the hope that adequate measures may be taken with sufficient promptness to keep unsound developments in check. The Bank of Canada has the power to control the total volume of credit in circulation, but if the amount of credit flowing into the special channel of speculation is to be regulated there will be needed the effective cooperation of the stock exchanges and the banking institutions which will be called upon increasingly to finance speculative activity. We are, I hope, too close to 1929 to forget the necessity of ordered progress and well-balanced development. Finally, a word as to the international situation. On the financial and economic side, the year has brought much of encouragement. Perhaps the most significant development in The Budget-Mr. Dunning



this connection was the devaluation, of the gold currencies of continental Europe. After years of resistance, during which continuing deflation in an important area constituted an important barrier to world recovery, most of these "gold bloc" countries finally took the inevitable step and adjusted their monetary units in order to correct the overvaluation of their exchanges. In this operation they were assisted by an international understanding that the United States, Great Britain and France would use all available means for keeping their currencies approximately stable in terms of each other. This cooperative agreement, which Holland and Switzerland have since joined, marks a notable advance in international collaboration in the field of monetary management. Not only has the devaluation thus effected with international support resulted in a greater degree of stability and certainty in exchange rates but it has placed the economic structure of the gold bloc countries in a position of better equilibrium with other countries, an essential condition for sound world recovery. It has also removed one of the major reasons for the exchange controls, quota arrangements and other restrictions which have been strangling international trade. Already some tentative steps have been taken in certain European countries to relax tariff barriers and trade restrictions. International trade has felt some impetus from this stimulus as well as from the greater stability in exchange markets and particularly from the rise in world prices for primary commodities. World trade as a whole, however, has not made the progress which one might have hoped for, and in some areas there are still evidences of financial or economic strain. Nevertheless, in most countries, as in Canada, the signs point to continued progress if only peace can be preserved and political friction reduced. Looking back on 1936, however, one cannot pretend that political progress has kept pace with economic improvement. War and the fear of war appear to loom larger in men's eyes than at any time in recent years. Rival ideologies clash in the press and the chancellories of Europe; doubt appears to have been cast for the moment at least upon the value of cooperative undertakings and the sanctity of international commitments; and an increasing proportion of national income goes into expenditure for armaments. Regret it as we must, realism compels us to face the facts squarely and take these potential dangers into our reckoning when we look to the future. Perhaps the best hope for peace lies in the fact that the dangers are so clearly realized. Where all can see the danger it may not be too much to hope that sufficient wisdom will be found among the nations to avert catastrophe. I propose on this occasion to defer the review of the growth in our foreign trade and also of our treaty negotiations with other countries until I have discussed the public accounts for the year.


GOVERNMENT ACCOUNTS, 1936-37


With reference to the government accounts, may I first point out that, because of the early date at which the budget is being brought down, the figures which I shall present for the current fiscal year ending March 31 next are estimates only. I trust that our estimates of revenue and expenditure will be very close to the actual results disclosed when the books for the year are closed, but it will be recognized that they are approximations only and, also, that it is especially difficult at this- time to present our annual balance sheet. Following the procedure of last year, I shall first, with the permission of the house, place on Hansard a number of tables giving a complete summary of revenues and expenditures under the various categories and of the total deficit or increase of net debt for the current year, together with comparative figures for the four prededing fiscal years. The tables follow:



The Budget-Mr. Dunning


STATEMENT OF REVENUES FOR THE LAST FIVE FISCAL YEARS


(000 omitted) - 1932-33 1933-34 1934-35 1935-36 Estimated 1936-37Tax Revenues- % $ $ % sCustoms import duties 70,073 66,305 76,562 74,004 81,500Excise duties 37,834 35,494 43,190 44,410 45,500War tax revenues- Banks 1,328 1,336 1,369 1,281 1,255Insurance companies 826 742 750 761 '763Income tax 62,067 61,399 66,808 82,710 102,000Sales tax 56,814 61,392 72,447 77,552 115,500Manufacturers', importations, stamps, transportation taxes, etc 25,377 45,184 39,745 35,181 38,100Tax on gold - - 3,573 1,413 JTotal revenue from taxes 254,319 271,852 304,444 317,312 384,618Non-Tax Revenues- Canada Grain Act 1,445 1,236 1,205 1,213 1,402Canada Gazette 74 56 47 49 49Canals 831 878 838 890 1,782Casual 3,205 3,622 4,337 4,636 5,432Chinese revenue 9 6 6 6 6Dominion lands 459 419 516 458 475Electricity 298 440 485 542 615Fines and forfeitures 212 178 90 295 392Fisheries 5 39 43 42 54Gas inspection 84 76 96 91 90Insurance inspection 160 149 139 147 152Interest on investments 11,221 11,148 10,963 10,614 11,218Marine 178 208 218 222 223Mariners' fund 180 188 181 187 204Military college 20 20 20 20 20Militia pensions revenue 166 165 174 178 183Ordnance lands 17 18 16 16 17Patent and copyright fees 539 429 426 455 455Penitentiaries 121 98 74 68 50Post Office 30,928 30,893 31,248 32,508 34,310Premium, discount and exchange 146 752 36 Public Works 213 250 254 251 221Radio licenses 1,404 1,291 1,487 1,574 1,000R.C.M.P. officers' pensions 12 12 9 11 14Weights and measures 394 400 407 401 40652,321 52,219 54,031 54,910 58,770Total ordinary revenues 306,640 324,071 358,475 372,222 443,388Special Receipts- Sundry receipts 4,490 409 3,397 320 8,125*Other Credits- Refunds on capital account 500 90 80 27 565Credits to non-active accounts 105 91 21 27 45Total Receipts and Credits 311,735 324,661 361,973 372,596 452,123 * Includes $8,000,000 from Canadian Wheat Board to be taken into the accounts as an offset, in part, to the disbursements in 1935-36 re losses on 1930 wheat pool and stabilization operations. The Budget-Mr. Dunning


STATEMENT OF EXPENDITURES BY DEPARTMENTS FOR THE LAST FIVE FISCAL YEARS


(000 omitted) Ordinary expenditures 1932-33 1933-34 1934-35 1935-36 Estimated 1936-37$ $ $ $ $Agriculture 8,066 6,996 7,107 9,399 8,929Auditor General's Office 380 376 377 429 423Civil Service Commission 244 221 221 259 308Externa] Affairs, including Office of Prime Minister 863 974 1,427 1,290 1,381Finance- Interest on Public Debt 134,999 139,725 138,533 134,549 137,405Cost of Loan Flotations 1,639 2,550 2,890 3,577 3,900Premium, Discount and Exchange (net).. - 167 - - 300Subsidies to I'rovinces 13,677 13,728 13,769 13,769 13,769Special Grants to Provinces 1,600 1,600 1,600 3,975 3,225Other Grants and Contributions 499 396 467 736 643Civil pensions and superannuation 1,098 1,032 943 854 797Government contribution to Superannua- tion Fund 2,270 1,986 1,948 1,875 2,025Old Age Pensions 11,513 12,314 14,942 16,764 22,500General Expenditure 2,050 3,152 3,939 3,735 3,667Fisheries 1,787 1,596 1,641 1,710 1,750Governor General's Secretary's Office 136 136 133 138 144Immigration and Colonization 1,689 1,374 1,269 1,322 1,333Indian Affairs 4,499 4,380 4,362 4,869 4,921Insurance 161 152 156 103 175Interior 3,503 2,857 2,750 2,939 2,963Justice 2,691 2,711 2,718 2,748 2,780Penitentiaries 2,870 2,677 2,667 2,377 2,449Labour 605 561 581 660 725Technical Education 202 129 91 99 100Government Annuities-Payments to 272 maintain reserve 289 184 146 541Legislation- 1,796 1,486 1,749House of Commons 2,210 986 Library of Parliament 05 69 71 76 77Senate 747 286 491 491 599General 81 62 95 55 75Dominion Franchise Office - - 1,545 498 46Chief Electoral Officer, including elections 56 32 146 1,089 80Marine 5,802 5,439 5,742 5,857 5,723Canadian Radio Broadcasting Commission 149 1,025 1,249 1,500 878Mines and Geological Survey 1,049 909 965 1,040 1,180Movement of Coal and Domestic Fuel Act.. 1,220 2,772 2,124 2,103 2,304National Defence- Militia Service 8,719 8,773 8,853 10,141 11,416Naval Service 2,167 2,171 2,222 2,380 4,851Air Service 1,731 1,685 2,2.58 3,777 6,229Sundry Services 1,133 847 847 879 1,001National Revenue (including Income Tax).. 10,846 10,360 10,166 10,963 11,272Pensions and National Health- Treatment and after-care of returned soldiers 10,511 9,571 10,127 11,060 12,041Pensions, War and Military 44,183 42,923 43,232 42,790 43,092Health Division 924 802 809 993 880Post Office 31,607 30,554 30,252 31,438 32,417Privy Council 47 49 40 46 46Public Archives 174 157 209 165 167Public Printing and Stationery 231 172 368 169 175Public Works 13,108 10,827 9,905 12,945 14,643Railways and Canals 3,684 3,315 4,581 4,250 4,204Maritime Freight Rates Act 1,922 1,989 2,529 2,348 2,420Railway Grade Crossing Fund 318 310 275 128 104Royal Canadian Mounted Police 5,820 5,528 5,970 6,165 5,910Secretary of State 606 387 395 705 649Soldier Settlement 819 810 746 762 858Trade and Commerce 3,276 3,007 3,057 3,458 5,717Canada Grain Act 2,026 1,759 1,679 1,848 1,827Mail Subsidies and steamship subventions 2,082 2,221 2,274 2,426 2,077Total ordinary expenditure 354,643 351,771 359,701 372,539 391,860 IMr. Dunning.] The Budget-Mr. Dunning


STATEMENT OF EXPENDITURES BY DEPARTMENTS FOR THE LAST FIVE


FISCAL YEARS-Continued (000 omitted) - 1932-33 1933-34 1934-35 1935-36 Estimated 1936-37Capital Expenditure $ $ $ $ 3Canals 3,156 1,986 338 458 52Railways 1,659 754 526 287 217JPublic Works 4,234 3,840 6,243 5,799 3,178Total capital expenditures 9,049 6,580 7,107 6,544 3,447Special Expenditures Unemployment Relief Act, 1930 548 4 2 26 Unemployment Relief Act, 1931 17,048 564 52 26 Unemployment Relief Act, 1932 19,125 6,948 399 111 Unemployment Relief Act, 1933 - 28,382 2,420 494 Unemployment Relief Act, 1934 - - 49,114 1,152 Unemployment Relief Act, 1935 - - 48,027 Unemployment Relief and Assistance Act, 1936- Administration 225Grants-in-aid to Provinces 28,930^Dominion share of joint Dominion-Pro- vincial projects- Projects undertaken prior to March 31, 1936 - - 3,700New Projects - - 9,117Transportation facilities into mining areas - - 1,342Railway maintenance - - - 2,75036,721 35,898 51,987 49,836 46,064.Special Drought Area Relief- Direct Relief - - 5,490Feed and fodder and freight thereon - _ 4^160Freight charges on movement of cattle... - - - 919,741Dominion Projects (Special supplementary estimates)- Projects undertaken prior to March 31,1936 - - 17,360New projects - - - 7,014Miscellaneous - 250Public Works Construction Acts 8,673 29,581 Wheat Bonus 1,811 1930 Wheat Crop Equalization Payments Act - - - 6,600 Loss on 1930 Wheat Pool and stabilization operations- Payment to Canadian Wheat Board of net liability assumed as at Dec. 2. 1935. - - 15,856 Loss on 1930 oats pool under guarantee of bank advances to Canadian Co-opera- tive Wheat Producers Limited - - - 174 -Total special expenditures 38,532 35,898 60,660 102,047 80,429 The Budget-Mr. Dunning


STATEMENTS OF EXPENDITURES BY DEPARTMENTS FOR THE LAST FIVE


FISCAL YEARS-Concluded (000 omitted) - 1932-33 1933-34 1934-35 1935-36 Estimated 1936-37$ $ $ $ $Government Owned Enterprises-Coiic. Losses charged to Consolidated Fund- Canadian National Railway System, ex- 53,423 52,264 42,590 41,796 37,449Eastern lines 8,717 6,692 5,818 5,625 5,854Canadian National Steamships - - - 270 -National Harbours Board - - - 1,126 25CTotal charged to consolidated 48,817 43,553fund 62,140 58,956 48,408 Loans and advances non-active- 487 *333 *1,500Canadian National Steamships 1,382 14 Harbour Commissions 4,897 2,110 1,242 2,456 2,419Accounts carried as active assets transferred to non-active assets *62,938 - - - -Total non-active advances 66,453 2,096 1,729 2,123 919Total government owned enter- 44,472prises 128,593 61,052 50,137 50,940 Other Charges Write-down of assets chargeable to Consolidated Fund- Reduction in soldier and general land settlement loans 1,766 469 488 500Yearly established losses in seed grain and relief accounts-Department of Interior 106 91 21 27 45Non-Active Accounts- Canadian Pacific Railway advances (Relief Acts) 1,447 1,000 Active assets transferred to non-active... - - 11 - fl8,765Total other charges 1,553 2,857 501 515 19,310Grand total expenditures 532,370 458,158 478,106 532,585 539,518 * Credit. ** Canadian National Railways-Loans for 1931-32 $41,121,000; Sundry harbour commissions-Advances prior to 1932-33 $21,817,000. f Dominion contribution to Debt Adjustment Program being effected in Provinces of Manitoba and Saskatchewan respecting Drought Area Relief that was financed by the Dominion to Jan. 1,1935-Manitoba $805,000, Saskatchewan $17,960,000.


February 25, 1937