May 27, 1940

LIB

James Layton Ralston (Minister of Finance and Receiver General)

Liberal

Mr. RALSTON:

No.

War Appropriation Bill

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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CCF

Clarence Gillis

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

Mr. GILLIS:

I rise at this time, not for the purpose of retarding the matter which is before the house, but to get some information on questions which appear to be bothering some of the men who are in uniform. I know that one of the essential things if we are to have a proper prosecution of the war is to satisfy the expeditionary force. The men who are going to do the fighting must be assured that they have something to fight for and that the government are paying strict attention to their dependents.

The first matter in which I am interested is set out in a letter which I received to-day from a boy from my own constituency who is now in England. He says that there is considerable criticism within the ranks in England at the present time because, he says, they are paid on a fixed rate of exchange; that is, the pound at the present time is valued at $4.47, and on every $5 they receive in wages they are losing 53 cents. The government should give some recognition to that complaint.

Another matter of which he complains is the differential that exists in the dependents' allowances, to the prejudice of the mother as against the wife. That matter has been raised here, but as far as I am aware, no satisfactory answer has been given.

There is another matter about which considerable complaint exists, and I should like some information on it. According to press reports it is the intention of the government to grant two weeks' leave with subsistence allowance to all members of the Canadian active service force in Canada after they have completed six months' training. According to my information that has not been done. It is reported that some have had leave, but that no subsistence allowance was granted. Many others have not had the furlough. What is the intention of the department of the Minister of National Defence with respect to this matter?

With regard to another matter I have had some trouble prior to coming here, and I know it has occasioned some correspondence with the Department of Pensions and National Health. It is probably a little unusual; nevertheless it exists. What is the regulation of the minister's department in respect of the following category: a married man with a wife and dependants, who was parted before enlistment, but who, in accordance with the court decision, was compelled to support his wife and child before enlistment, neglects to make provision for them? His wrife has presented her marriage certificate and a copy of the court order granting her support. This support had been taken from her by virtue of her husband's enlistment, he having failed

to register at that time. Have there been any complaints of that kind? If so, what is the ruling in such cases?

These are several matters that are pertinent to the welfare of the men in uniform, and in my opinion, if we are to have a proper prosecution of the war, the men who are to do the fighting must be absolutely satisfied that we at home are taking care of all those matters which, however much we may be inclined to regard them as minor details, are nevertheless of major importance to them.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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LIB

Norman McLeod Rogers (Minister of National Defence)

Liberal

Mr. ROGERS:

I shall be glad to take a

note of what the hon. gentleman has said and give him an answer to-morrow.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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NAT

Thomas Langton Church

National Government

Mr. CHURCH:

Some of this vote is for

home defence, and much of it has to do with public buildings throughout Canada for war purposes. The explanatory notes opposite page 2 of the bill give a list of items for militia services, naval services and air services. It will be noticed, in the explanatory notes opposite page 2, which will have to be read into section 2, that a good deal of this work is for home defence. As I say, it has to do with public buildings, land services, construction, repairs to naval buildings, expenses of the Royal Military college, Nothwest Territories radio services and a good many other things which formerly appeared in the main estimates and to some extent in the supplementary estimates as well. The other day the minister declared a holiday from public works, but these items have to be taken into account.

Home defence in Canada is not as important as it is in the old country, which is so close to enemy activities, because they are only twenty-five to thirty miles from the war zone. It is of course of some importance, but in my opinion the minister should give the committee some information on three or four points. In the first place, what part of this expenditure is for home defence and how much of it is for overseas? I find that a number of the undertakings under this bill formerly appeared in the main and supplementary estimates. I should like to know, for instance, whether the pegging of wheat and other commodities, if that is decided upon by the house, is to be included in the expenditures that are to be made out of this $700,000,000. Then, again, there may be further bonuses, subventions, subsidies, for other protectional purposes later. Many of these items will come up also in the main estimates and the supplementary estimates, if any. Will they form a part of the expenditures out of this $700,000,000? Last September the house voted $100,000,000 and no part of that money was earmarked.

War Appropriation Bill

We are spending $700,000,000 now in connection with a war overseas, defence at home and as a protection to bonds, railway securities and public securities; yet there is not enough money to insure the men who are fighting our battles overseas, to give them this protection. I suggest that the minister should lay down some policy of soldier insurance for all Canadian soldiers such as they had in the United States in the last war. That effected an economy in other ways later and helped the soldier and his dependents; it was found cheaper and lessened pensions, bonuses and the like. 1 hope the minister will consider some system such as they had in the United States with a view to insuring every soldier who goes overseas, so that in the event of his death in action or of his coming home crippled there will be some means by insurance of reestablishing him in civil life after the war. An insurance system was set up in Toronto in the great war, and it aided recruiting and helped the dependents when the soldier was killed. There was no reason why the people should have done it in Toronto, but they did it as a means of helping recruiting and the war.

I think the time is coming when we should definitely consider the huge taxes placed on the shoulders of the people to-day, especially the industrial workers of Ontario and Quebec. They pay the large share of our taxation both direct and indirect. The people in these cities and towns, the working class, have suffered from unemployment and depression in the last few years, and now they are suffering the consequences of a second war. A large number of these men have enlisted, and I urge the minister to provide that a larger part of these war votes shall come out of capital account and not be so heavily charged into the tax rate and charged to income. There is too great a charge upon income at the present time. We all know that whether it is charged to income or to interest, debt charges and sinking fund, it falls back upon the main body of taxpayers, the industrial workers, especially in Ontario and Quebec. The people of these two provinces contributed 80 per cent of the cash taxes of Canada, and they got little or nothing in return during the depression. The minister ought to give them some consideration. It seems to me that we are going too far in charging so much by way of taxes directly to income in the country.

I find that a great deal of what is outlined in this bill had been eliminated from the main estimates. This section refers to the conduct of naval, military and air operations in or beyond Canada. If the minister is given power to pass orders in council, I hope he

will see to it that some of the inequalities are removed as between those who serve on land or on sea and in the air. I do hope he will bring down a bill for the purpose of removing the discrepancies in dependency payments and removing inequalities found to exist from experience so far.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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LIB

James Layton Ralston (Minister of Finance and Receiver General)

Liberal

Mr. RALSTON:

In reference to the purposes for which these moneys are to be used, the committee will understand that the section is, as I have endeavoured frankly to point out, as wide as it can be made having regard to all the circumstances. It is, I think, word for word the same appropriation act that was passed in the last war, which gave the government power to use the money for the purposes indicated. It cannot be otherwise. Peacetime or normal public works are not contemplated by this bill, and so far as I am concerned I shall endeavour to see to it that expenditures of that kind are not made under this measure. They belong to ordinary peacetime estimates. There are expenditures contemplated for buildings such as those for buildings in connection with the services and the air training plan. The air training plan expenditure would appear to be capital expenditure, but it has to be amortized over the life of the plant. I assure the committee that the objects set out in section 2 cannot be limited to any greater extent than they are, and I can only assure hon. members that every endeavour will be made to see that the expenditures shall have relation to objects connected with the war.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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LIB

James Lester Douglas

Liberal

Mr. DOUGLAS (Weybum):

We should have an explanation from the government to assist us in discussing this matter further. When this bill was in the resolution stage, the Prime Minister suggested that a committee would be set up representing all parties to receive confidential information regarding the appropriations. Is it the purpose of the government to set up that committee to review these appropriations before this bill is finally passed, or will that be discussed after the bill is passed?

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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LIB

James Layton Ralston (Minister of Finance and Receiver General)

Liberal

Mr. RALSTON:

I think the Prime Minister was going to discuss the matter further with the leader of the opposition; I believe that was what was intimated at the time. I thought we could go ahead with the bill in committee.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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NAT

Percy Chapman Black

National Government

Mr. BLACK (Cumberland):

Does this

appropriation cover ordinary peace-time expenditures necessary for administering the military, naval and air services?

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
Permalink
LIB

James Layton Ralston (Minister of Finance and Receiver General)

Liberal

Mr. RALSTON:

Yes, peace-time expenditure for military services.

Section stands.

War Appropriation Bill

On section 3-Government may act as agent.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
Permalink
LIB

James Layton Ralston (Minister of Finance and Receiver General)

Liberal

Mr. RALSTON:

I answered my hon. friend the leader of the opposition incorrectly when 1 intimated that this 8700,000,000 was the only fund out of which moneys could be paid by the government in acting as agent for allied governments. As he will see from this section, moneys may be paid out of the consolidated fund, not necessarily out of the $700,000,000.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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?

Thomas Miller Bell

Mr. COLD WELL:

This brings up a very important matter. I do not know whether this is the time to ask the Minister of Finance to give the committee some idea of the intentions of the government regarding the financing of allied expenditures through repatriation of Canadian securities. I take it from the wording of section 3 that it gives the government power in that regard. If so, I think the committee should have some idea, before passing this section, as to what the government intend to do in that connection. I am not objecting in any way to the government assisting the allies in this matter to the fullest degree. But I have heard a great deal of discussion as to the extent of the repatriation of Canadian securities held in Great Britain and the effect it may have on our own economy both now and after the war. I understand that in Great Britain there are something like 82,500,000,000 worth of Canadian securities held. If it is the intention to repatriate these during the course of the war, we might find ourselves in difficult circumstances unless we know exactly what is to be done when the securities have been repatriated. Are they to be sold to the general public as they are transferred to Canada, or are some of them to be retained by the government, and thus some organizations represented by those bonds become government-owned institutions? And how is it proposed to proceed in marketing securities if they are to be marketed? I do not want to delay the passage of the bill, but if this is the proper time, as from the wording of the section I judge it is, we might ask that a rather complete explanation of what this clause means might be given now.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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LIB

James Layton Ralston (Minister of Finance and Receiver General)

Liberal

Mr. RALSTON:

I am one of those who hesitate to attempt to interpret a piece of legislation. It may turn out that the lawyers find that it means something different from what the legislators thought it meant. I always feel that one must take the wording of the clause and, if necessary, leave it to the courts to decide what it means.

It had not occurred to me until my hon. friend raised the point that this section was one under which repatriation procedure might

be carried on. As a matter of fact, the provision was in the appropriation act at the time of the last war, and was in last year, and I recall one instance already in which it was found useful in making certain advances temporarily to one allied government for a certain emergent purpose which it was felt should be attended to at once without the delay which would be attendant on having to get a remittance from the other side. That is the type of thing I have in mind under this section. However, as my hon. friend will notice, it does provide that-

-any obligations or costs incurred temporarily or assumed by the government of Canada in the exercise of the powers hereby conferred may be paid out of any unappropriated moneys in the consolidated revenue fund.

But it is always prefaced by this, that in respect of the exercise of any powers under this section the government of Canada must be acting as agent for the government of any British or foreign country allied with his majesty. So I rather apprehend that it does not apply to repatriation proceedings such as my hon. friend suggested.

But, if it is convenient for the committee, let me finish now what I have to say regarding repatriation. I do not think I can add much to what I said the other day. Repatriation is simply one method which this government has adopted in order to provide Canadian dollars for our allies to purchase goods in Canada. It is a simple method; the leader of the opposition and I had a dialogue about it the other day; it simply means that Canadian securities have been sold in the British market and are held by British holders. The British government through their exchange control provide that all such securities must be registered, and the government have the right to requisition them from the holders. The British government needing Canadian dollars, and the Canadian government being willing to provide Canadian dollars for the British government, say to that government in effect, We will take these securities which have been absorbed by the British market and see that they are absorbed by the Canadian market and Canadian dollars representing the purchase price put to your credit. In turn the British government credit the holders of the securities with the amount represented by them and pay them the necessary funds in pounds, shillings and pence. As a matter of fact, the sum of $91,000,000 of one of our issues was repatriated during the first three or four months of the war. Since that time there have been some other operations; certain credits have been extended; certain substantial accumulations of sterling have taken place and exist at the present time. As I

War Appropriation Bill

intimated to the house when introducing the resolution, I have authorized another very substantial sum by way of accumulation of sterling, which means that in connection with certain transactions between us and the British government we did not ask them to pay in Canadian dollars but were content that for the time being sterling should be credited to our account in London. It may be that later on repatriation procedure may be taken-I was going to say to regularize that, but to settle the outstanding balance so that the British government in effect, gets the Canadian dollars for that sterling. At the present time I can describe it as more or less an open account; a very large balance in sterling is to our credit for goods sold by Canada. This will later be closed out by a repatriation operation.

As to the extent of repatriation operations from this time on, I have in mind quite definitely an arrangement arrived at with the British government as to the extent of the operations and the nature of certain intermediate operations which would take place between the two governments. The committee will understand that I do not feel at liberty to disclose the nature of those arrangements, because it will be understood that they affect the economy of both countries, and securities and exchange transactions in both countries. I can only say that the undertaking Canada is entering into in that regard is a very substantial one and I believe will be of material assistance to our allies; in fact, it has been indicated in very unreserved terms that such is the case.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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CON

Joseph Henry Harris

Conservative (1867-1942)

Mr. HARRIS (Danforth):

While the minister is on this subject, I should like to mention something along the same line, although probably it will not be quite in order until we reach the next section. It is with regard to the repatriation of Canadian bonds and Canadian dollars, particularly from the United States. As the minister knows, shortly after war was declared Canadian bonds in the United States dropped considerably below the Canadian level, with the result that there was considerable bootlegging, if I may call it that for lack of a better word, of Dominion of Canada bonds from the New York market. These bonds were brought to Canada and sold, and some unscrupulous financiers made a good deal of money out of that practice. I should like to ask the minipfer what new or further safeguards the foreign exchange control board are putting into effect to stop that practice, particularly in view of the announcement made by the minister last night with regard to the sale of war certificates.

I might add one further question along '[DOT]he same line. Many hundreds of thousands

'Mr. Ralston.]

of Canadian dollars are finding their way across the border and are being bought up, even by Canadians, in such places as Buffalo, for example. I have in mind one incident which occurred just yesterday. Canadian dollars spent in Buffalo are being accumulated by people in that city at 78 cents each, and quite a few of those dollars will find their way back into Canada to buy some of the very war certificates of which the minister spoke so highly last night. Now that the question of the repatriation of Canadian funds has been opened, I wonder if the minister would give us a statement as to what is being done to protect our interests in this connection.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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LIB

James Layton Ralston (Minister of Finance and Receiver General)

Liberal

Mr. RALSTON:

I do not think the committee will expect, as I am sure my hon. friend will not, that I should go into the details of the foreign exchange control regulations, because they are really extremely intricate. I can only state the general principles. My hon. friend mentions the bootlegging of Canadian bonds, by which I think he means that a non-resident holder buys Canadian bonds at a low rate in .the New York market and succeeds in getting a Canadian resident to purchase the bonds, giving him Canadian money for them. That, of course, is an export of capital and is contrary to the regulations; it is an export of the capital necessary .to pay the United States holder for the bonds. I can assure the committee that every effort has been made to deal with that situation, and if there can be any tightening up of the regulations, that will be done.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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NAT

Karl Kenneth Homuth

National Government

Mr. HOMUTH:

Is there any particular control over that? The bonds held in the United States are bearer bonds, are they not?

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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LIB

James Layton Ralston (Minister of Finance and Receiver General)

Liberal

Mr. RALSTON:

Even bearer bonds payable in United States currency but held by a Canadian resident are registered with the foreign exchange control board. But in the case of bonds held by United States residents it is not the bond, it is the Canadian purchaser's bank balance over which there is control. That is to say, the payment by the Canadian out of that bank balance is what is prohibited, because that is really an export of capital.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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CON

Joseph Henry Harris

Conservative (1867-1942)

Mr. HARRIS (Danforth):

I merely bring this to the attention of the minister and of the committee in the hope of drawing from the minister an emphatic statement that the government will take this problem definitely in hand. Then people who are in this most unscrupulous business will know that the government is aware of what is going on and will take drastic steps to deal with it. My purpose in

War Appropriation Bill

mentioning this matter is purely constructive, to try to stamp out an evil which to my mind is one of the worst in which anyone interested in finance in this country can be implicated.

I have something to say about the war certificates but I will say that when we come to the proper section. In passing, I may say that I hope there will be no scandalous financial operations with regard to the raising of part of this money by way of loan. I should like to have the minister make an emphatic statement with regard to the repatriation of Canadian funds, indicating that every possible precaution will be taken so that no unscrupulous methods will be tolerated.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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LIB

James Layton Ralston (Minister of Finance and Receiver General)

Liberal

Mr. RALSTON:

As a rule, committees are reluctant to accept general statements from ministers in connection with these matters. I appreciate my hon. friend's motive in mentioning this situation. I was saying that I thought it was not the matter of the bonds, but rather the matter of the bank balances, the Canadian who buys cheap Canadian bonds from an American who has purchased them in that market. That is contrary to the regulations, and I say to my hon. friend most emphatically that if I can do anything to make that regulation more effective, he may be sure it will be done. With regard to the matter of Canadian dollars, of course my hon. friend understands that this money may be carried down to the United States, or there may be a Canadian balance held by a United States resident, who may sell it cheaply in the United States. The result is that somebody buys cheap Canadian dollars and comes up here to spend them, possibly for war savings certificates, as my hon. friend suggests.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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NAT

Karl Kenneth Homuth

National Government

Mr. HOMUTH:

Would it be possible to have all bondholders registered?

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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LIB

James Layton Ralston (Minister of Finance and Receiver General)

Liberal

Mr. RALSTON:

Canadian holders of Canadian securities payable in United States currency must register with the Foreign Exchange Control Board even if they hold bearer bonds. They must register as holders of those bonds.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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May 27, 1940