July 30, 1940

LIB

Clarence Decatur Howe (Minister of Munitions and Supply)

Liberal

Hon. C. D. HOWE (Minister of Munitions and Supply):

Mr. Speaker, the purpose of this report is to set out in general terms the scope of the work of the Department of Munitions and Supply in providing the equipment and munitions required for Canada's service branches and by our allies overseas. I will attempt to avoid detail and statistics other than those required to indicate the magnitude of certain projects. In a general way, I hope to give hon. members a fair estimate of what has been, is now being accomplished, and our plans for future development.

The nature of our problems is changing, now that many of our industries are finding their capacity fully utilized. In the days of the defence purchasing board and the war supply board, the problem was largely that of placing orders at reasonable prices. The problems recently have become more in the nature of organizing and initiating sources of production. Secondary industries, that is manufactured products to be incorporated in a finished article, now present great difficulties. At the outset the only primary product difficult to obtain was wool, but we now have serious problems in obtaining steel, lumber, 95826-134

copper, aluminum, and various other minerals to fill requirements for Canada and Great Britain.

The problem has changed materially in another respect. At the outset, Britain appeared to believe that there would be time to build her own munitions industry, without calling on North America in a large way. Within the last few weeks, Britain has been asking Canada for practically anything that can be supplied in the way of munitions and war materials.

The point of view of Canada's armed forces toward this supply problem has also changed. Formerly, it was almost automatic to order naval supplies, coast defence guns and the more intricate electrical devices from Great Britain. It has become all too evident that Canada requires to be self-contained in the production of all such war material, and we are proceeding as rapidly as possible to bring this about.

I find it difficult to convey an appreciation of the magnitude of Canada's present industrial effort in the production of war materials and supplies. All of us are aware that Canada's industrial tempo is at the highest peak in our history. Even this tempo will increase rapidly as factories now under construction go into operation and as plants now tooling for new production begin to produce. During the past few months we have been buying machine tools in the United States and in Canada in a volume that challenges the imagination, all for the purpose of creating new manufacturing capacity for our industry. As I have said, our production to-day of manufactured goods is the largest in our history, but even it is small when compared with what our productive capacity will be six months hence. To illustrate, plants now under construction, involving a capital cost of some 120 million dollars, will have a productive capacity of 500 million dollars of goods per annum.

Our problem of supply deals with three stages: first, the raw material; second, the components or manufactured articles entering into the finished product; and third, the finished product. In the following discussion I shall not attempt to differentiate between Canadian orders and those placed either directly or through this department by the British and other empire governments. All represent an equal demand on our resources of raw materials and manufacturing capacity. While our Canadian demands represent much more than half our programme, the requirements of Great Britain are becoming increasingly important.

I will deal first with the finished products, which are in themselves the munitions of war.

Canada's War Effort

Mr. Howe

Shipbuilding.-Since last addressing the house on the development of the naval service, I am able to report that very satisfactory progress is being made in the fifty million dollar ship construction programme. Operations continue to be maintained well ahead of schedule.

Sixteen shipyards, located on the east and west coasts, on the St. Lawrence river, and on the great lakes, are carrying out our construction programme for larger warships.

The major naval programme engaging the attention of these yards includes 54 corvettes for the Royal Canadian Navy, to the amount of $29,400,000; 10 corvettes for the Royal Navy, amounting to $5,500,000; and 28 minesweepers for the Royal Canadian Navy, amounting to $16,500,000. The foregoing include 10 minesweepers of a new type, for which the construction details have recently been completed, and on which work has also begun. Of the corvettes, formerly called patrol vessels, several have already been launched and 10 more will be launched within the next five weeks. The machinery and other equipment required to complete these vessels are being delivered as required, and will be ready for installation on launching dates.

It is anticipated that before the end of the year 28 corvettes and 5 modern minesweepers will have been delivered to the naval service.

In addition to the sixteen shipyards engaged in large boat production, there are eighteen other shipyards working to capacity on a small boat programme. Included in this work are refuelling gasoline scows for the use of the Royal Canadian Air Force, rescue boats, numerous aircraft tenders, bomb loading tenders, 84-foot wooden salvage boats, and many pieces of floating equipment such as scows and supply boats.

Also to be included in Canada's naval force are trawlers requisitioned from their trade which have been converted into minesweepers, and highspeed motor torpedo boats, rescue vessels, and target boats for bombing practice, now under construction. Many merchant vessels have been fitted out with guns and armament to defend themselves at sea. Three fast passenger vessels are being converted into armed merchant cruisers, at a cost of $1,700,000.

Existing shipbuilding yards have been used almost exclusively in the construction programme, and facilities have been developed to permit enlarged operations where shipbuilding workers and technicians are available.

It is of interest to note that some 14,000 men are now employed in Canada's shipyards and allied industries on the ship construction programme. The number of men so employed has trebled itself in the last three months.

Aerodromes and Training Schools.-In October 1939, the responsibility for the selection of suitable sites for the aerodromes required for the training plan, and the preparation of these sites for use, was placed on the civil aviation branch. This branch was then completing a ten-year programme of similar work on the trans-Canada airways during which a wide experience had been acquired.

In the original programme aerodromes were required for 26 elementary training schools;

10 air observers schools; 10 bombing and gunnery schools; 16 service flying training schools; and 2 air navigation schools. Since for each of the service flying training schools 3 aerodromes are required, this means in all 96 projects.

The construction season was already over when the air training programme appeared, and it was only possible during the fall of . 1939, to select the aerodrome sites and have complete surveys made of them. This work was pressed with energy and before the end of the year suitable sites had been selected and surveys put in hand for about 80 per cent of the programme. This saved at least six months in the execution of the programme as satisfactory selections and surveys could not have been made with snow on the ground. All winter, work went on in the office, laying out the aerodromes on the surveyed sites to the best advantage, and preparing plans and specifications so that tenders could be called for, and contracts let in time to take advantage of the whole working season of 1&40.

Selection of aerodrome sites, even on the prairies and in good agricultural land, is not an easy task. Good drainage is an essential; also approaches to the airport site clear of obstructions. The ordinary amenities of civilization are very necessary near these schools. They must, therefore, be easy of access by road or rail and it is desirable that they should be located near some centre of population. This limits the choice considerably.

The selection procedure was as follows: Mountainous and thickly wooded areas were avoided for obvious reasons. A study was made of topographical maps available to determine the areas where approximately a square mile of level, accessible country could be obtained. Geographical distribution across the dominion was desirable, though some sections naturally lent themselves to easier and less costly development than others. After selections had been made from maps in the office, the sites were observed from the air and, if apparently suitable, in greater detail on the ground where observations were made of roads, telephone lines, railways, power and drainage and water supply. Reports of these surveys were then studied in detail and,

Canada's War Effort-Mr. Howe

if approved for development by the headquarters of the Royal Canadian Air Force and by the civil aviation division, a detailed survey plan of the aerodrome site and its surroundings was then ordered. The highway departments of the various provinces lent valuable assistance in this work and the majority of the surveys were carried out with the greatest efficiency by their parties. The engineering plans, showing the contour of the land, were then studied by experienced officers, and the aerodrome laid out to take the best advantage of the site. Plans and specifications for the grading, drainage, hard surfacing and lighting were then put in hand. At the same time, full information was made available to the Royal Canadian Air Force so that their buildings might be planned to fit in with the general development. Rapid progress was made on this work with the result that as soon as the frost was out of the ground, contractors were put to work in all sections of the country. Wet weather in May and June impeded progress to a certain extent % but, in spite of this, satisfactory progress has been made on all projects. Some are already complete and many others nearing completion.

It was found possible on some of the larger aerodromes to accommodate an elementary school on the same airport with one of the air observers schools so that the number of separate aerodromes required has been reduced accordingly.

The original schedule for opening these schools contemplated construction over a period of two and a half years. Recent events have made it necessary to expedite the completion of the whole scheme and accordingly construction on 90 per cent of these projects will have been completed by November of this year.

Extensions of the original programme are now under consideration. Eight additional service flying training schools, each requiring three aerodromes, are now required as well as several aerodromes for active service operation of the Royal Canadian Air Force. This will increase the programme to some 120 separate projects. Of these 77 are already in hand, calling for 47 entirely new aerodromes and the extension of 30 of the existing airports.

The 26 elementary flying training schools where the pupils are taught to fly light aircraft call for all-way fields, that is fields that can be used in any direction. A turf surface is preferable for this class of school, but in special cases hard surfaced runways will be necessary to take care of spring and fall conditions while on some existing aerodromes being used for the schools hard surfaces are already available. The acreage required for this type of school is from 200 acres upwards with clear 9582ft-1344

approaches from all directions. No field lighting is required at the elementary schools and the buildings consist of a hangar, living and messing quarters, storehouses, lecture rooms, and a small hospital, costing on an average of $100,000 for the buildings, with another $100,000 for the aerodrome.

The other classes of schools require much larger aerodromes with hard surfaced runways to provide for all weather flying, lighting for night flying and more elaborate buildings. The average size of such airports will exceed 500 acres. The number and cost of the buildings and cost of the aerodromes for the different types of schools are as follows:-

1. An air navigation school costs on the average about $300,000 for the aerodrome proper and $500,000 for the buildings;

2. An air observers school costs $350,000 for the aerodrome and $200,000 for the buildings;

3. A bombing and gunnery school costs $350,000 for the aerodrome and $800,000 for the buildings;

4. The service flying training schools, which include three aerodromes-one main aerodrome with a large area of hard surfaced runways and taxiways and on which hangars, workshops, living and messing quarters are concentrated; No. 1 relief aerodrome with a less elaborate system of hard surfaced runways and No. 2 relief aerodrome, with a turf surface for use in fine weather only-will cost for three fields approximately $800,000, and the six hangars plus 31 other buildings on the airport cost $900,000.

These figures include the cost of supplying a system of roads and taxiways inside the aerodromes, provision of power and light, water supply and sewage, and communication services, such as telephones, teletype, etc.

Eight of the elementary training schools are already in full operation, as well as one air observer and one service flying training school. Others will be opened in quick succession. By the close of the year about 40 schools will be in operation and the remainder will follow as quickly as aircraft and teaching personnel are available.

It will be understood that as the aerodrome construction season ends with the commencement of winter, all airports required during the first six months of 1941 must be finished before the snow flies this fall. The progress so far made indicates that this will be possible. The anticipated completion dates of airports in 1940, by months are as follows:-

June 3

July 15

August 18

September 11

October 24

Canada's War Effort-Mr. Howe

The anticipated cost of aerodrome construction on the 77 projects now approved for construction is $15,500,000. Up to the present it has involved the purchase of 30,000 acres of land at a cost of approximately $2,000,000. The grading of these aerodromes will involve the moving of 14,500,000 cubic yards of earth and the paving programme amounts to 8,500,000 square yards of pavement, equivalent to nearly 700 miles of standard highway 21 feet wide.

Aircraft.-From small beginnings, the aircraft industry of Canada is being developed to sizable proportions. Last week our factories delivered 25 finished aircraft, and, as new plants come into production, these deliveries will increase rapidly. Eight Canadian aircraft companies have in hand orders totalling some 3,200 planes, of which 257 have been delivered. Contracts in hand involve approximately 110 million dollars. Early in 1941, we expect to have a production of 360 planes per month, or about 12 planes per day, Sundays and holidays included, on the basis of production now arranged for. A further production programme is now being discussed between Great Britain and ourselves which promises to materially increase this output.

We are still dependent on importation of aeroplane engines, propellers (except wooden propellors), and instruments. An exhaustive study of. the aeroplane engine situation has not convinced us as yet that the production of aeroplane engines in Canada is warranted, having in mind the very large capital involved, and the drain on our resources of machine tools and skilled mechanics. Sources of supply of aeroplane instruments in Canada are being developed, and the production of metal propellors is under consideration.

As to types of planes, the present production includes Fleet primary trainer, Tiger Moth trainer, Fleet 60 advanced trainer, Norseman, Harvard trainer, Anson twin-engine trainer; and for fighting planes, Lysander, Hurricane fighter, Bolingbroke bomber, Hampden bomber, and the Stranraer flying boat.

The British commonwealth air training plan had involved the supply from Great Britain of some 1,500 Anson twin-engined trainers, as well as other training aeroplanes. Some two months ago, we were advised that the present emergency situation there had made it necessary for Britain to suspend shipments for a time, and immediate arrangements were made to manufacture substitute planes here. Some 5,000 aeroplane engines were purchased in the United States on this account, and nine Canadian firms have been put in production on components and assemblies of the Canadian Anson programme. In order to coordinate the work of these nine firms and to

ensure a supply of raw materials, engines, and instruments, as required, a wholly government-owned company, Federal Aircraft Limited, has been formed to take over the responsibility of the government for the production of aircraft of this type. It is anticipated that Canadian production of Ansons will commence before the end of this year. In the meantime the gap in the training programme is being filled partly by the purchase of new or used aeroplanes in the United States, and partly by Britain resuming shipment of the minimum number of training planes that will be required until Canadian production can supply the needs.

The supply of skilled labour for the aircraft industry is coming chiefly from our universities and technical schools, many of which have special summer courses directed toward increasing the supply. That is, of course, in addition to the winter courses. The extent to which our aircraft industry can be expanded will depend on how rapidly this trained personnel can be built up. At present the department is negotiating for the production of the . latest types of long-range bombers, fast fighters and modern flying boats, all of United States design, and with components obtainable on this continent.

Building Construction.-Our engineering division has, in addition to its work on buildings for the British commonwealth air training plan, placed large contracts for hutments for the troops, coast defence fortifications, aeroplane overhaul depots, buildings for new industrial plants, and a wide variety of less important projects. The building industry of Canada is working at the highest rate in its history, to meet our requirements for new construction. During the month of July the department awarded 72 contracts for building construction, totalling 11 million dollars.

Automotive Equipment.-Perhaps no country in the world is producing automotive equipment in the volume that now obtains in Canada. At present about 600 mechanized units per day are being produced, and in another month or two this figure will be substantially increased. Canadian government orders now placed for mechanical transport alone amount to S54.500.000, and Great Britain, South Africa, India, and other parts of the British empire are also large buyers in this market. The types of equipment being manufactured include several types of service trucks, gun towing vehicles, ambulances, station wagons, and service motor cars. Canadian motor transport is acknowledged to be the best that has been produced in this war.

The production of universal carriers is well advanced, and deliveries will begin before the

Canada's War Effort-Mr. Howe

end of this year. Six Canadian firms are cooperating in this production, and a high rate of output will be realized. The Ford Motor Company of Canada will be responsible for the assembly of these units, and this company is now building a large factory especially for that purpose. These universal carriers will be of Canadian manufacture throughout.

The Canadian Pacific Angus shops have undertaken the production of British "Mark III" tanks and have associated a number of other firms with them in that project. Production is being planned at the rate of 30 tanks per month. Tanks ordered by Canada will be furnished of complete Canadian manufacture except for engines, which will be imported from the United States until Canadian production can be organized. The "Mark III" tank project has involved the creation of new types of Canadian industry, and all are well underway. British and Canadian orders are in hand for "Mark III" infantry tanks to a total value of 63 million dollars.

Munitions.-Canada's munition programme involves the manufacture of Lee-Enfield rifles, Bren machine guns, Colt-Browning aircraft machine guns, sub-machine guns, 2-pounder anti-aircraft guns and carriages, 25-pounder quick-firing guns and carriages, 40 mm. Bofors anti-aircraft guns, 3-7 anti-aircraft guns and mountings, anti-tank rifles, and 20 mm. Hispano-Suiza aircraft cannon. This programme of gun manufacture has in most cases involved the building of a new plant. Our largest gun plant is for the manufacture of 25-pounder, quick-firing, guns and carriages and heavy naval guns, and represents a capital investment of 10 million dollars. This plant will be in production before the end of the current year, and will be one of the largest and most modern gun plants in the British empire. The Bren gun plant has been placed in operation and is delivering guns in substantial quantity. The capacity of this plant is being doubled by building an addition, now underway.

In the matter of shells and ammunition, our programme is a large one, and demands for still larger quantities continue to be received. We now have 14 plants producing shells, which include 4 mm. shells, 18-pounder, 25-pounder, 3-7-inch, 4'5-inch, 6-inch and 9-2-inch. In addition, Canada is filling large orders for fuses, games, traces, primers, cartridge cases, copper tubes for driving bands, brass and cupro nickel strip, and, in fact, everything necessary to complete all types of shells.

Total orders placed for ammunition of all types, including component parts such as fuses, primers, and cartridge cases, amount to

69 million dollars, of which 9 million dollars represents capital expenditures to increase plant capacities. In the immediate future, these orders will be increased by some 33 million dollars, involving the production, amongst other items, of several million shells.

The production of small arms ammunition is being expanded rapidly. The capacity of the Quebec arsenal for the production of this material is being multiplied by six. Privately owned plants are being enlarged and two new plants are being designed. Definite orders for small arms ammunition placed to date total some 19 million dollars, and the ceiling will be our productive capacity.

Canada is building two large new explosive plants-one of which will be in production in September next. These plants produce TNT, nitro-cellulose powder and rifle cordite. Existing explosive plants are being expanded largely. The total capital investment in explosive plants at present in hand will amount to some 30 million dollars. Just to show how rapidly these matters move, may I point out that a cable was received this morning which will have the effect of doubling that programme, and will involve an explosives programme of 160,000,000 instead of $30,000,000.

Topic:   MINISTERIAL STATEMENTS WITH RESPECT TO
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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

It is all for the British government, is it not?

Topic:   MINISTERIAL STATEMENTS WITH RESPECT TO
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LIB

Clarence Decatur Howe (Minister of Munitions and Supply)

Liberal

Mr. HOWE:

Partly British and partly Canadian. It is predominantly British, but we have a fair amount of capacity of our own.

A new shell filling plant is under construction, at an estimated cost of 8 million dollars. On its completion, all shells, fuses, components and the required explosives will be routed into this plant, and finished shells will be shipped abroad, or delivered for use in Canada. The operation of this programme has been placed in the hands of a wholly government-owned company, Allied War Supplies Corporation, which will, in addition, operate the secondary chemical and other industries incidental to the programme. This company will be responsible for the administration of new capital investments totalling some 110 million dollars. Additional munitions production includes anti-submarine nets, gas masks, depth charges, mines, pyrotechnics, smoke screen chemicals, and various types of bombs.

Glass: An interesting development is the construction, now in progress, of a plant which will manufacture optical glass, fire control apparatus and predictors, and sound detecting apparatus, none of which has previously been made in Canada. The processes to be incorporated in this factory have all been developed by our national research laboratories, to whose

Canada's War Effort-Mr. Howe

inventive genius Canada is indebted for a type of production that can only be the result of extensive scientific research.

Clothing and General Supplies.-Less spectacular than ships, aeroplanes and munitions, but most necessary to every member of the armed services are such supplies as boots, army dress, blankets, braces, caps, greatcoats, service shirts, shorts, shoe polish and tooth brushes.

Since the outbreak of war, this department and its predecessor boards have purchased over 18 million yards of woollen and cotton cloth, enough to stretch from Ottawa to Berlin and back again. This has been, or is being, manufactured into 400,000 service battle dress uniforms, 225,000 summer battle dress uniforms, 383,000 overcoats, winter and summer underwear and other items of clothing. Orders have been placed for 850,000 pairs of boots and shoes and production has been stepped up to 30,000 pairs per week. Production of battle dress is reaching 20,000 suits per week. Blankets are being produced at the rate of 30,000 per week; braces 18,000 per week; caps 18,000 per week; service shirts 12,500 per week; and greatcoats 7,000 per week.

It may be interesting to note in passing that 350,000 cattle have contributed their skins to make the necessary quantity of shoes worn by the army, the navy and the air force. Specifications covering the manufacture of these boots are most exacting, and not more than 50 per cent of the best quality hides obtainable in Canada are good enough to produce uppers or soles to government standard. So far as possible, the departmental purchase of barracks stores is geographically distributed in order that all parts of Canada may participate, and also to facilitate prompt shipment to destination.

General buying, which includes purchase of clothing, food and all personal equipment for the troops, as well as all purchases not directly included in the classification previously discussed, has totalled to date 245 million dollars, of which 44 per cent has been delivered and paid for. Of these purchases, 217 million dollars have been made in Canada, 22 million dollars in the United Kingdom, and $6,700,000 in the United States. During the week ending July 20, 1,434 contracts were placed, to the amount of over 7 million dollars, which is at the rate of 32 contracts per working hour, and spending at the rate of $2,650 per minute. This large scale buying has resulted in Canadian manufacturers undertaking the manufacture of many products not previously manufactured in this country.

Foodstuffs are bought through nine branch offices in the principal distributing centres across Canada, each office purchasing for the region that it serves. The magnitude of food purchases can be illustrated by butter, of which 305 tons were purchased during the second quarter of this year.

Secondary industries.

I now come to a discussion of the very important and difficult branch of our work, namely, the production of manufactured products essential for inclusion in the types of manufacture previously discussed. In many cases this secondary production involves large capital expenditure for new plants, and the highest degree of technical skill.

New plants have been built, or are under construction, for the manufacture of hexa-chlorathane, ammonia, ammonium nitrate, magnesia and magnesium powder, toluol, and a new chemical not previously manufactured in the British empire. These new chemical plants involve a capital investment of some 35 million dollars. A plant is being built to manufacture gas mask charcoal, and a number of unusual chemicals are being produced incidental to the manufacture of pyrotechnics and for other military and naval uses.

War production has created a tremendous demand for brass. A new plant for the manufacture of brass is being built, and an existing brass plant is being largely extended, this programme involving a capital expenditure of some 12 million dollars. The production of aluminum in Canada is in process of being doubled, and plants are under construction for manufacturing this metal into sheets, shapes, extrusions, and forgings, this programme involving some 20 million dollars. Aluminum is the present bottle-neck of the aircraft industry, and steps must be taken to restrict its use for domestic purposes.

The machine shop capacity of Canada it rapidly being taken over by war work. Canada's production of machine tools is being expanded through plant additions, and many million dollars worth of machine tools are being imported. The Citadel Merchandising company, a wholly government-owned company, is in charge of the procuring of machine tools, both for government and private account and has, since its formation six weeks ago, purchased on its own account machine tools and equipment valued at $1,300,000, and for private account for government contractors, some $15,000,000. This company is performing an invaluable service in expediting procurement and deliveries of machine tools, on which our entire production depends.

The manufacture of munitions involves large and intricate gauge production. Some thirty Canadian firms are now manufacturing gauges,

Canada's War Effort-Mr. Howe

involving precision workmanship to 1/10,000 of an inch, and this programme is being further expanded.

The plant survey branch of the department has continued to investigate the productive capacity of our industrial plants. The number of plants surveyed now totals over 2,000. This branch is most helpful in advising on the particular plant to which new production can be assigned and in assisting in overcoming difficulties in the initial stage of manufacture of new plants.

Primary Industries.-The war needs of Canada and Great Britain have placed a tremendous strain on our primary production, in fields that we have become accustomed to look upon as inexhaustible. Lumber and timber, particularly aeroplane spruce, have become difficult to obtain in sufficient quantity. Production of Canadian steel is being extended to the limit. While not yet a problem of production, petroleum products have assumed importance as a strain upon Canada's supply of foreign exchange. An adequate supply of wool has been a problem since the outbreak of war. Many products normally imported are becoming difficult to obtain.

The base metals, and particularly metals little used in peace time, are becoming difficult of procurement. The demand for boots and shoes for the service forces has outstripped the production of hides. To meet this situation and to obtain the maximum output of needed primary products, it is obvious that the government must have a thorough understanding of each industry, and that each industry must well understand the requirements of government. As a connecting link between government and industry, controllers have been appointed, with wide regulatory powers, in the lumber, petroleum, steel, and non-ferrous metal industries. At the outbreak of war, the war-time prices and trade board appointed a wool controller, who has performed invaluable service in arranging our supply since that time. A leather controller, similarly appointed, has also been of great assistance in our supply problems.

These controllers have been most helpful in organizing the productive capacity of their industries, in rewriting government specifications in a way that will permit maximum use of our raw materials, and in keeping us advised of any probable limitations of necessary raw material. These controllers are associated together in the war-time industries control board, which is headed by a member of our executive committee.

Two wholly government-owned companies have been organized to protect the supply of necessary imported raw materials that may be subject to interruption through causes beyond

our control. It is the duty of these companies to keep in stock a considerable supply of such materials, and to sell them to our contractors as circumstances warrant. To give the names or any further particulars of the work of these companies would defeat the purpose for which they are organized.

The economics branch of the department studies the desirability of creating new sources of supply, attempts to prevent unnecessary expenditure of foreign exchange, reports on the merits of alternative solutions offered for the same problem, and is available in a consulting capacity to any of our officers who may wish to have any particular problem studied.

In conclusion, let me say that the preparation of a report on the work of the Department of Munitions and Supply invites one to go into almost endless detail. The problems it is handling are of great general interest, and the expenditures involved are on a scale to impress anyone who is interested in the scope of Canada's war effort. I trust that I have given hon. members sufficient detail to permit them to understand in a general way the scope of our work.

We have been fortunate in having enjoyed the complete cooperation of Canadian industry. Practically every industrial plant in Canada has been placed at our disposal. Manufacturers have, in most cases, been willing to accept our decision as to a reasonable price for their product, and have subjected themselves to audit by a firm of chartered accountants if requested to do so. There has been no evidence of an attempt to obtain undue manufacturing profits. I can only hope that the manufacturers have found this department as cooperative as we have found them.

Labour throughout Canada has also entered into the spirit of Canada's war effort in a way that leaves little to be desired. At a time of emergency, labour was called on to work on holidays, on Sundays, and for all possible overtime work, and the response was nothing short of magnificent. It is well understood across Canada that this is every man's war, and few have shown a disposition to take any other view of the situation.

The pace at which our purchases are accelerating can be judged from the fact that since the inception of the Department ot Munitions and Supply on April 9, the average number of contracts awarded per week has been more than twice that of the war supply board, and almost eighteen times as large as that of the defence purchasing board. This has involved a continually enlarged personnel and great difficulty in finding accommodation. I cannot speak too highly of the manner in

Canada's War Effort-Mr. Gardiner

which the staff of the department has responded to the added burdens that are continually being placed on them.

In the last twenty years Canada has been geared to a peace-time economy. The change to a war-time economy has taken time, and has involved many problems, but nevertheless the change has been made to a very considerable extent. When the history of the war is written, I have every confidence that Canada's record as the arsenal of the empire will stand comparison with the records of her soldiers, sailors and air men.

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LIB

James Garfield Gardiner (Minister of National War Services; Minister of Agriculture)

Liberal

Hon. J. G. GARDINER (Minister of National War Services):

Mr. Speaker, it has been suggested that I review with the house work which has been done by the National War Services department. That department has been in being for about ten days only and therefore the record of its work up to date will not deal with as many subjects as other ministers have found it necessary to deal with.

I should at the beginning like to call the attention of the house to the fact that just a little more than two months ago the ministers representing each of the departments which have been reviewed within the last few hours reviewed the activities of their respective departments up until that time, and I am sure that members of the house must have been surprised at the remarkable development which has taken place during the two months in which we have been busily engaged with the work of this session.

Agriculture

On that occasion, on May 23, I placed on Hansard the position of agriculture in relation to our war effort. As I still am minister of the Department of Agriculture it is my intention to give a short review of the work of the department bringing our position up to date in general terms in relation to matters with which I dealt at that time.

It is not my intention again to place on Hansard the names of the different organizations which have been set up since the beginning of the war in order to assist in production and in the distribution of farm products. Those can already be found on Hansard. But it is my intention to review in a few words the position as it is to-day as compared with the position as it was two months ago.

I was able to show on May 23 that our production was up in the essential food products; that we had increased our exports to Britain in our essential food products; and that our storage of essential food products other than cheese was also up. In short, I was able to show that we in Canada were in a

position to provide Britain at any time with great supplies of wheat, and with greatly increased supplies of meat, dairy products, poultry, canned vegetables and fruit products. The possibility of providing food products to Britain has if anything been improved since that time.

We have an unprecedented carry-over of wheat, we have another crop about to be harvested, we have had a remarkable increase in the production of pork products, we have had a reasonable increase in the production of dairy products, and our surplus supplies of vegetables and fruit are substantial. We are, therefore, in a position to send greatly increased supplies of every food product to Britain on short notice.

This should be reassuring to Britain at a time when she will be denied supplies from many of the European countries from which she previously obtained a considerable part of her pork and dairy food products.

In May I was addressing the house as Minister of Agriculture and concluded what I had to say with these words:

We in this house who represent agricultural constituencies are interested in seeing that farm surpluses which do accumulate from time to time in the early stages of the war are properly taken care of, and that farmers do not have to assume too great a share of any losses which may be incurred during the early years of a struggle of this kind.

We do not expect that in this war the farmers will receive so high prices for farm products as they did during the last war, but we do hope that matters will be so managed during the period of the war that the farmer will secure his just returns.

Since that speech was delivered there have been a number of changes. I have been asked to assume the position of Minister of National War Services and am still administering the Department of Agriculture. When the Prime Minister was moving the second reading of the bill setting up the new department he stated that the immediate task of the new department was registration, publicity and organization of voluntary effort, as reported at page 1572 of Hansard under date of July 12, 1940. He then stated:

Problems of internal security, of economic organization and development, of meeting social, industrial, financial and other needs, will continue constantly to arise. These may be dealt with by the Department of National War Services, by itself or in conjunction with other departments of the government as authority for such purposes may, from time to time, be given the minister by the governor in council.

Where the problems which have arisen to date may concern our war effort and are at the same time associated with agriculture, they therefore come under one or other or both

Canada's War Effort-Mr. Gardiner

of the departments I am now administering. There is only one exception to that, and that is the marketing of wheat, which is under the Department of Trade and Commerce. Since the speech of May 23 was delivered, there have been changes in world relations which are much more far-reaching in their effects than anything which has or could have happened locally. The arms of Hitler have advanced across Holland, Belgium and northern France. Great areas of food crops have been destroyed. Untold numbers of cattle, hogs and poultry have been destroyed. Much of what may be left will find its way to the armies of Hitler or into Germany. In any case none of it will find its way into Britain. To the extent that this is true Britain will require our extra surpluses sooner or later. Cheese is already being required in greater quantities than our agreements call for, and we shall be negotiating a new agreement on bacon and other pork products during the month of August.

The situation relating to apples and wheat is still serious from the point of view of the producer and in relation to the economic position of Canada. We have an understanding in Nova Scotia in relation to apples which will assist the producer in that area but at some considerable cost to the treasury of Canada. We expect to negotiate some understanding with the other two apple growing areas of Canada within the next few days. As a matter of fact, their representatives are in the capital at present. The wheat problem is one which, while of no greater importance to the individual producer interested than any other, involves more individual producers and in its handling affects the economic and international relationships of Canada to a greater extent than any other farm problem and possibly any problem which is a direct result of the war. It is safe to say that Britain's imports of wheat from the continent just about balanced with Canadian exports to the continent over a period of recent years. This Canadian wheat can be made available to Britain in quantities which will render Britain's wheat supplies secure. We can easily supply Britain with all the cheese she previously received from the continent of Europe. She received from 35,000,000 to 40,000,000 pounds a year. This, added to what we sent last year, would not equal our exports to Britain before the last war. Britain received 546,000,000 pounds of bacon and ham from the blockaded countries of Europe in ten months this year; Canada supplied 169,000,000 pounds in that same period of ten months. Canada could, with her present production, easily increase her exports to Britain by 230,000,000

pounds during the coming year. This would take care of about 40 per cent of what Britain previously obtained from the blockaded countries. These supplies can go to Britain if they are desired by Britain.

I wanted to make that review of the situation as it exists at present in relation to food products in order to emphasize the fact that, from the point of view of the position which Britain holds to-day in the titanic struggle which is going on, we in Canada are in a position to supply her with food products to a greater extent than ever before and therefore to assist her in that direction in winning the war. I think I can say this in relation to the question which I am now discussing, without entering at all into the economic effects of price or anything of that kind, that the people of the Dominion of Canada are bent upon seeing to it that all Canada's food products which are a surplus over and above our absolute needs do go to Great Britain in order to assist her in winning this war.

National War Services

The Prime Minister stated, when setting up the department, that the immediate task to be assumed and assigned to the department by council was that of registering all persons in Canada over the age of sixteen. As indicated by the Minister of National Defence, the task of finding men for the training plan set up by the Department of National Defence has been assigned to the Department of War Services. The registration will place at the disposal of all departments of the government information which will assist in mobilizing both human and material resources.

I have given a short review of developments in relation to food products. The Minister of Munitions and Supply has just given to the house a detailed review of the efforts made to mobilize industry and the results obtained from that mobilization in the direction of supplying munitions and machines of war. It is my intention to place side by side with his review a method by which registration of human resources is to be made, the system under which men are to be provided to the defence department for training, without interfering unduly with industry, and finally an estimate of the human resources of Canada.

I think it will be agreed that although munitions and machines of war and material supplies generally are necessary to achieve victory, they can only function effectively when placed in the hands of men and women of healthy physique, fine spirit and good training. The nature of our country, with its wide spaces and free institutions, produces people

Canada's War Effort-Mr. Gardiner

with the first two qualities. It is the work of the government to add the third in preparation for our war effort.

At the expense of repeating some things already contained in the regulations tabled in the house, and statements already made in this house, I propose to review the whole procedure to be adopted by the department in registering our human resources, so that it can be found in one place in Hansard.

The national registration takes place on Monday, Tuesday and Wednesday, August 19, 20 and 21. The geographical units for the registration are the electoral federal constituencies which are, in turn, subdivided into polling subdivisions, the boundaries of which are the same as the polling subdivisions in connection with the dominion election of March last.

There will be two deputy registrars for each polling subdivision. It is not necessary to refer to the voluntary helpers who are being organized by members of this house and others in order to assist the deputy registrars.

At the conclusion of the registration period the deputy registrars in the polling subdivisions will segregate the cards of all single men between the ages of nineteen and forty-five, and they will make copies of the registration cards of the group so segregated, and these copies will be sent by the deputy registrars to the registrars for the electoral divisions. I might suggest in that regard that, particularly in polling subdivisions where enlistment is large, it might be wise for those who are organizing such registration to see to it that a number of tables are provided. It would be a very simple thing for one standing at the door to ask each individual as he comes in whether he is single or married; if single send the men to a table for single men, which would result in all the cards for single men being at one table at the end of the day, the single women to another table, and married men and married women to others, thus dividing the work into about four groups and making it possible for four persons to be working at the desk throughout the day. A division of that kind would make it easy to get the task finished in the three days provided.

The 19 and 20 years class are being extracted now, as they may be used, in the case of the 20 year class next year, and in the case of the 19 year class two years hereafter. This will save having next year and the year after to go to the dominion statistician to extract the cards-should they be required.

The registrar for the electoral district will then take all the cards and classify them into age groups, i.e., the cards of the 19 year olds in the district-single males-will be all put together. The cards of the 20 year olds will

be put together, the cards of the 21 year olds and so on, so that there will be a separate group for each age class of single men between 19 and 45.

There are 11 military districts in Canada, namely, one in British Columbia, one in Alberta, one in Saskatchewan, one in Manitoba, three in Ontario, two in Quebec and two in the Maritimes. The Manitoba district includes a portion of that section of Ontario which borders on Manitoba and there may be a slight overlapping of military district boundaries from one province into another, but not of great consequence.

The registration, as I have said, is being made on an electoral district basis.

The 243 electoral districts of Canadr will be divided into 12 groups, the outer boundaries of each group being as nearly as possible the same as the boundaries of the military district.

The province of Prince Edward Island will be dealt with separately, so that while there are 11 military districts, there will be 12 organizations set up along the lines I propose to outline, 11 of them being as nearly the same as the military district, and the 12th being Prince Edward Island.

Twelve boards will be constituted, namely, one for each of these military districts and one for the province of Prince Edward Island.

Each board will be headed by a judge of a superior court, or where deemed advisable, by a judge of a lesser court, of the province in which the appropriate military district is situate.

The chief justice of the province will be asked to nominate this judge and he will be appointed by order in council. As a matter of fact, these judges have practically all been nominated in this manner already.

Each board will consist of three members and, as I have said, a judge shall be the chairman of each board. The other two members of each board will be representative citizens of the district in which the board will have jurisdiction.

It will be impossible, with a board of three, to have all the various phases of the economic life of the country represented on the board, but this will be kept in mind in the appointments, so that the members of the board will be fully conversant with the predominant industries of the district in which the board has jurisdiction.

These boards will be located at the same point as the headquarters of the military districts, except in the case of Prince Edward Island, where the headquarters will be in Charlottetown.

Canada's War Effort-Mr. Gardiner

Each board will have a district registrar whose duty it will be to look after the administrative end of the organization and who will be answerable to the Department of National War Services.

The registrars for the constituencies, after they have classified the cards of all the single men, 19 to 45, into age groups, will then send these copies of cards in to the district registrar.

It will be his duty to direct the tabulation and indexing of these cards, so that he will have in his office a complete record of all single men between the said ages for the whole territory under the jurisdiction of the board.

As stated by the Minister of National Defence, the military authorities will indicate the number of single men they propose to train within a year in Canada, and the Department of National Defence will advise this department of the number of men it wishes to call up for training at any one time.

All training of classes called up is to be completed within a year, and it is the intention to make eight calls within the year and to space these calls equally as nearly as possible.

As soon as the national registration is over, the registrar for each constituency will indicate to the Department of National War Services the number of single men in each of the age groups in the electoral district over which he is registrar, and thus we will know at once the number of single men in each group between 19 and 45 in Canada.

The Department of National Defence, with this information, will advise the Department of National War Services as soon as possible after this information is available, as to the number of men it wants called up on the first call.

As soon as possible after it is ascertained what year classes will have to be called to meet the first demand of the Department of National Defence, a proclamation will be issued, warning all persons within such classes, commencing with the 21-year-old class, that they will be called for service within a certain designated time.

This will be done to give them a chance of arranging their own affairs.

Every single person, male, who is medically fit, between the ages of 21 and 45 in Canada, may be compelled to take military training within one year.

It is possible that the requirements of the Department of National Defence will be satisfied by the calling up of single men from 21 to 35, and it may not have to go beyond this in the first year.

This factor depends on the result of the national registration and the number of men the Department of National Defence can train within the year. The only exceptions not subject to call will be as follows:

(a) Judges of superior, district, or county courts of justice;

(b) Regular clergymen or ministers of religious denominations, members of the clergy or religious orders;

(c) Members of the naval, military, or air forces of Canada on active service;

(d) Those who, in the opinion of the Minister of National Defence, have already received military training, within the previous twelve months, at least equivalent to that to be given to men being called up under these regulations;

(e) Members of the Royal Canadian Mounted Police or provincial police forces;

(f) Members of the police forces and fire brigades permanently employed in any incorporated city.

(g) Wardens and officers of all penitentiaries, prisons, and lunatic asylums or mental hospitals.

Under an order in council passed in 1873, certain privileges with respect to military service were given to a sect of persons known as Mennonites, and under an order in council passed in 1898 certain privileges with respect to military service were granted to the sect known as Doukhobors.

It is the intention of the government to recognize these orders in council and a method of dealing with the individuals who feel they are entitled to the benefits of these orders in council will be worked out and duly announced.

Every employer of labour in the district, under the jurisdiction of the board, shall be required forthwith to furnish the board with a list of all single male employees between the ages of 21 and 45.

Any industry shall be entitled to submit a plan to the district registrar for the calling up for military training, within the said period of one year, of its single male employees from the ages of 21 to 45.

The plan so submitted must provide for the training of all their employees within the year but can be adjusted by the industries in such a way as to enable all to be trained within the year in a manner which will interfere in the least possible way with the conduct of the business of the industry. The men subject to call from any industry shall be divided into equal groups so that the same number of men will come up for training on each call.

Canada's War Effort-Mr. Gardiner

The district registrar, on receiving this, shall submit it to the board, and the board shall fix a date for hearing, and shall hear a representative of the industry submit the plan, and the board will have the right to either approve, reject or vary the plan.

After it is approved, either in the form submitted, or is varied, then the men therein listed shall be called as therein provided.

The Department of National War Services will submit to the board in each military district a list of the main seasonal industries within the jurisdiction of such board, and the periods during which it is inadvisable to call men for training from such industries, and it shall be the duty of the board so to adjust the call of men within its jurisdiction as to interfere as little as possible with the conduct of such seasonal industry.

The board will also have the right, in the case of a student at a recognized college or university, to postpone his call until the end of the scholastic year, provided the college or university has a system of compulsory military training in effect in the institution.

The Department of National War Services will be charged with the responsibility of having all men called up for training, medically examined, and will arrange for qualified medical men to be located at points throughout the district, under the jurisdiction of the board, convenient to those to be called.

All men called up will have to pass the same type of examination, as they would have to pass if they were volunteering for service in the non-permanent militia.

The medical examiners will place all persons examined in their proper medical categories in accordance with the practice of the Department of National Defence. It is intended to call up all men in the category of C-l and above that, in the classes from time to time called.

After each call is made, the person to be called up will receive a notice in writing telling him where to submit to his medical examination, and where to go for his period of military training.

He will, therefore, first be examined. If he is rejected as medically unfit, then he returns home, and this fact will be noted in the record. If he is medically fit, he will proceed to the point where he is to be trained.

These men will be furnished with transportation to the doctor who is going to make the examination and to the military training point.

All medical examinations will be subject to review by the medical branch of the Department of National Defence.

Severe penalties will be provided for the failure of any person called up to submit to the medical examination and to take his period of training, if medically fit.

Severe penalties will be provided for the medical man who fails to make a proper examination or fails to report the true facts of the state of health of the individual.

All employers of labour will be required, under penalty, to put the employee back in his job at the conclusion of his period of training, or into a job the equivalent of the one he had.

A representative of the Department of National Defence may attend at sittings of the board and make such representations thereto with respect to any matter being considered, as he may see fit, but such representative is not a member of the board.

This whole scheme, in broad terms, means this:

(a) As a result of the national registration, we know the numbers of single men between the ages of 21 and 45 throughout Canada, and we know the number in each age class.

(b) The military authorities decide the number of men they propose to train within the next year.

(c) Every medically fit male Canadian, subject to above exceptions, between the said ages, up to the number the Department of National Defence can train, will be called up during the year for a period of thirty days training.

(d) This will apply to every person, regardless of his occupation or any other consideration, save the small excepted list, that I have enumerated.

(e) There will likely be eight calls within a year, and the age classes will be called up in consecutive order, and all must be trained within the year.

All arrangements are made by the Department of National War Services, and the only connection with the Department of National Defence is the furnishing by that department to the Department of National War Services of the total number of men they can train and the number to be called up in each group.

The Department of National War Services will deliver the men to the Department of National Defence for training purposes and then our duties in this regard are completed.

There is considerable anxiety as to what effect this registration and proposed training of men will have upon production of primary products and industry in Canada. It might be of interest to state in a few words what our human resources are.

Canada's War Effort-Mr. Ihley

There are in Canada-at least this is the estimation, before we take the registration- between the ages of 18 and 44, approximately 4,700,000 people, of whom 2,400,000 are males and 2,300,000 females. Included in this total are approximately 1,198,000 single males. But this is by no means the full strength of our human resources. Between the ages of 44 and 59 the total male population is 950,000 and female 820,000. In those over sixty years there is substantial productive and directive capacity and I must not leave out of the national effort youths from 10 to 18. It is for the future of these that this conflict is being waged, as well as for the preservation of all our institutions of government.

It will be agreed after an examination of these facts that there are a sufficient number of men in Canada to provide the man-power for a much larger force than could be equipped at present, and at the same time carry on activities both primary and secondary. It should be remembered too that those called only for training return at the end of thirty days to their employment. In addition to these there are the millions contained in other categories to draw upon for industry. I may interject that in every long-drawn out war it has been found necessary, before the end, in many of our industries to depend upon people who in peace time would expect to be free from undertaking work in connection with those industries.

We know from our experiences to date with registration that we are going to have one hundred per cent cooperation from every section of our population from coast to coast. Ever since we indicated that we were interested in having people volunteer their services our desks have been piled high with communications from people in every part of Canada. Some of these communciations represented whole staffs in large organizations, determined to see that this registration is properly made in the shortest possible space of time. That cooperation is given to the end that every available man, every product of industry and primary production and the whole credit of Canada shall be placed at the disposal of the governments of Canada and Britain to drive back the forces of Hitler and reestablish freedom in the world. On this occasion the House of Commons, in passing the estimates to be brought before it, will be assisting in that cooperative effort on the part of all our population, so that we may get on with the prosecution of the war at the nearest possible future date, in a degree even greater than that which has been possible up to the present.

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NAT

Thomas Langton Church

National Government

Mr. CHURCH:

Here endeth the second

lesson in plain cooking.

Economic and Financial Activities

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Hon. J. L. ILSLEY (Minister of Finance):

Mr. Speaker, I hope to be able to complete what I have to say before one o'clock, because I am going to speak only briefly on the financial and economic aspects of our war activity. It is only a month since our financial position and policies were reviewed in detail in the budget; therefore I propose only to recall to you the main facts and to mention a few developments that have taken place since the budget was presented.

You have heard the Prime Minister (Mr. Mackenzie King) and the ministers of national defence describe our military activities and plans. You have heard the Minister of Munitions and Supply (Mr. Howe) and the Minister of National War Services (Mr. Gardiner) discuss the means by which our resources of men and material are being organized for war service and the production of war supplies. These various activities are the primary ones. Behind them lie those secondary, though no less essential, economic and financial activities that enable the resources of the nation to be turned to war purposes. The task of finance is to provide the funds which are used to pay for the war services. But in a deeper sense the task of finance is, by taxation and borrowing, to restrict the civilian demand for economic resources in order that they will be free when the defence or supply departments require them. I cannot too strongly impress upon the house that this is the fundamental function of finance in time of war. It is vitally important that in discharging this function it keep in step with the defence and supply programme; for if finance proceeds more rapidly in curtailing civilian demand than defence proceeds in making use of the resources thus set free, there will be unemployment and waste, while, on the other hand, if finance lags behind the defence services, they will be faced with shortages and delays, and the competition between military and civil demands will bring about inflation.

In the first war budget speech delivered last September, the principles of war finance which we proposed to follow were set forth. I will not go over them to-day beyond merely recalling that it was indicated (1) that we would, so far as practicable, pay as we go by means of taxes based upon ability to pay,

(2) that we would borrow as cheaply as possible and (3) finally, that we would continue to follow scientific principles in monetary management, avoiding inflation on one hand, and monetary stringency on the other.

These principles have been applied from that time to this.

Canada's War Effort*-Mr. Ilsley

I shall not weary the house by recounting in detail the financial activities of the government since war was declared.

Among their main features were these:

(1) At the September session a war appropriation of a hundred million dollars, with provision of the necessary borrowing powers to the government and enactment at that session of the first new war taxes indicating the main lines of the government's taxation policies.

(2) The establishment in September of various economic organizations, including the war-time prices and trade board and the foreign exchange control board.

(3) A moderate and carefully controlled expansion of money and credit during the first three months of the war.

(4) The negotiation of a loan of two hundred million dollars from the chartered banks upon an issue of two-year two per cent notes.

(5) Repatriation of ninety-two million dollars of dominion government securities for the purpose of providing the British government with Canadian dollars with which to make purchases in this country.

(6) Various other financial arrangements with the United Kingdom, including those connected with the British commonwealth air training scheme.

(7) The first public war loan in January, which took the form of three and one-quarter per cent bonds issued at par, redeemable by lot over the five years from 1948 to 1952, and which resulted in a prompt and substantial over-subscription for the two hundred million dollars required in cash.

(8) Unexpectedly buoyant revenues during the latter part of the fiscal year, enabling us to end the fiscal year with a deficit about seventy million dollars less than was anticipated in September and with a very strong cash position.

(9) A reduction in the estimates for non-war expenditures for the new fiscal year to 448 million dollars from the comparable figure of 525 million dollars for the previous year.

(10) Transfer in April to the foreign exchange control board of all our available holdings of gold and foreign exchange, including both private holdings and those of the Bank of Canada.

These, I think, are the main financial activities of the government since the beginning of the war, and have been, as I have said, more or less fully dealt with in the

budget speech and other reviews of our financial activities. There are, however, a few other matters, most of them recent, to which I should like to refer more fully.

For example, there is our cooperation with the United Kingdom in economic warfare. Economic warfare has had its importance in waging the war. It has depended mainly upon the British naval blockade. But Canada has cooperated by careful control of trade to ensure that no Canadian supplies reach the enemy directly or indirectly. Direct trading with the enemy was, of course, prohibited from the outbreak of war, and this prohibition was extended to cover trading with agents or suspected agents of the enemy in neutral countries. The export of certain essential commodities, notably metals, was subjected to control by a permit system as from September 20. My colleague the Minister of National Revenue (Mr. Gibson) is responsible for the issuing of permits. Later, in January, all exports to countries contiguous to the enemy, or to territory occupied by the enemy, were subjected to similar control. This control was carried out in cooperation with the British ministry of economic warfare, and with the purpose of preventing any such exports reaching the enemy by indirect means.

Towards the end of May another important financial development took place with the launching of the war savings campaign. This campaign is a continuing and voluntary one. Its purpose is to sell war savings certificates and war savings stamps. This enables even the smallest sources of savings to be tapped effectively and regularly, and in this way everyone in Canada who can afford to save at all is given the opportunity of helping to finance Canada's part in the war, while at the same time investing those savings in the very best of securities yielding an interest return of more than three per cent.

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CON

Joseph Henry Harris

Conservative (1867-1942)

Mr. HARRIS (Danforth):

They all go into the consolidated revenue fund?

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

Yes. A nation-wide voluntary organization is handling this savings campaign, and is doing so with efficiency and success.

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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

Without wishing to interrupt, would the minister indicate what the sales have amounted to?

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

I shall do that immediately. The total sales of war savings certificates to July 27 had a face value of $16,690,435. For this amount there were 336,602 individual applications with an average of $49.58 per certificate.

Canada's War Effort-Mr. Ilsley

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CON

Joseph Henry Harris

Conservative (1867-1942)

Mr. HARRIS (Danforth):

I was hoping it would reach $50,000,000. It is a long way from that amount.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

It was never anticipated that it would reach $50,000,000 at once.

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CON

Joseph Henry Harris

Conservative (1867-1942)

Mr. HARRIS (Danforth):

I was also

hoping the liability would be earmarked as such.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

We had hoped the $50,000,000 would be reached in the course of the year, and less than two months have elapsed to date. These figures do not include the sales of such war savings stamps as have not as yet been converted into war savings certificates.

In each of the nine provinces provincial war savings committees have been formed and these committees are now in process of forming district and local committees, of which it is expected there will be about 1,500 in active operation by the end of next month. There are now about 35,000 retail outlets for the sale of certificates and stamps, including post offices, banks, investment dealers, brokers, retail stores and schools, all performing this important national work without remuneration.

At the present time there are 9,040 employers cooperating in a programme for obtaining war savings subscriptions by voluntary pay deductions on the part of employees. These 9,040 firms employ a total of 1,300,000 employees, and it is safe to say that there are now over 1,000,000 employees cooperating in the purchase of war savings certificates and stamps under the slogan of "serve by saving."

A breakdown of sales by provinces is now available for the period up to the end of June. I have here a table showing the dollar value of total sales in each province and the average amount per head of population. The table is as follows:

Dollar Dollar value

Province value per capitalPrince Edward Island. $ 62,940 $0.67Nova Scotia 529,910 0.97New Brunswick 342,020 0.77Quebec 2,252,125 0.71Ontario 4,624,890 1.24Manitoba 1,005,935 1.40Saskatchewan 939,960 1.00Alberta 837,935 1.07British Columbia 1,386,035 1.82Yukon 7,700 $11,989,450 $1.07

Before I leave this subject I think I should refer to an entirely new development in our financial programme, that is, the issue of interest-free certificates. We have been fortunate in having offered to us many interest-free loans by generous public-spirited individuals and corporations who wish to and feel themselves able to make a contribution to Canada's war effort by forgoing the interest return which they could have obtained by investing their funds in war loan bonds or other securities. The government is glad to receive such loans as free-will offerings and has made special provision for them by authorizing the issue of $10,000,000 of interest-free certificates. This amount will be increased from time to time as circumstances warrant. Certificates are issued in registered form only and can be made available in any denomination required. They are to be distributed, as in the case of our ordinary loans, through the Bank of Canada, to which all applications should be made. In the normal case, certificates will be issued to mature on June 15, 1945, but any holder who finds it necessary to ask for the return of his money before the maturity date may send in his certificate for redemption at par at any time after six months from date of issue.

While these certificates have been available for only a short time we have already received subscriptions from 87 individuals and firms, amounting to $2,262,203. Included in this total is a subscription from a large industrial company for $1,000,000, another for $500,000, and a number of very small subscriptions. I should add that this total does not take account of a considerable number of cases where purchasers of first war loan bonds and war savings certificates have donated to the government the interest accruing to them from their holdings of these securities for the duration of the war, or in some cases until the obligation matures. This sacrifice of interest may be a contribution which many of our citizens cannot afford to make, but I wish to express here publicly the appreciation of the government, and I am sure of parliament as well, to those patriotic persons and firms who desire and are able to make this type of contribution to Canada's war programme.

By the time parliament met in May the war situation had, of course, changed radically. The first action taken by parliament was the provision of a greatly enlarged war appropriation of $700,000,000. This figure is larger than the total expenditures of the dominion in any year in its history, except 1920 when the dollar was worth much less than at present. Moreover, it has already been indicated that even this figure must be increased by the sum of at least $150,000,000 to $200,000,000 as a result of commitments which have been made since the war appropriation bill was

Canada's War Effort

Mr. Ilsley

introduced. As it is anticipated that parliament will reassemble well before the end of the present fiscal year, the vote of these additional amounts will not be requested until parliament meets again.

Since the budget was brought down there have been several new financial developments. These were foreseen in a general way at the time of the budget, but they could not be discussed then. The first of these has been the restriction of the use of foreign exchange for pleasure travel. Since we require every available dollar of foreign exchange for the purchase of aircraft, engines, equipment and other war supplies in the United States, we felt that Canadians could be asked to do without the luxury of purely pleasure travel outside of Canada at this time.

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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

I understand that there is no restriction on sterling exchange to be used for pleasure trips.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

I do not think there is a reason for it.

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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

I think the minister will find that I am correct.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

I should think so. Exchange is still available for those who have to travel, either for business or personal reasons. We are confident that our United States friends will understand that we are just as anxious to see them and to visit them as ever. We are not trying to save money at their expense, but rather we are determined that as much as possible of our receipts of United States dollars shall be used for the purchase of those things we need for the war. This is a war lot only to defend Britain but to defend this continent as well. We want very much to have United States citizens visit us during the war and we are eager to see that they enjoy their stay in Canada and that they are treated as honoured guests and good friends.

The second new development is the provision this house has made for unemployment insurance. This is a far-reaching measure of social security for our working classes. It is also a vitally necessary preparation for the postwar situation. I do not believe, however, that even members of parliament, let alone the public generally, realize how useful this unemployment insurance may be from the point of view of war finance. Once it gets in operation it will result in the collection of about $4,000,000 a month-I think that is the estimate-in the form of employers' and employees' contributions. Since the amount

[Mr. Ilsley. 1

likely to be paid out in unemployment benefits during the war will be small, most of these contributions will be accumulated in the insurance fund. This fund will be invested in government securities and will therefore assist indirectly in financing the war. Secondly, and this too is important, it will involve the setting up of an active, national system of employment offices, which will serve as a placement service enabling all unemployed persons, whether or not they are covered by the unemployment insurance, to be brought into touch with those needing additional labour. This will be of great usefulness as labour becomes more and more difficult to find, and as it becomes more and more important to transfer what unemployed labour there is to the places where it is most needed. In fact, I should not be surprised if the employment service set up under this insurance scheme proves to be just as important, from the point of view of mobilizing our labour force, as national registration itself. For these two reasons the war makes it more desirable than ever to establish unemployment insurance and a thoroughly efficient system of employment exchanges.

The third new financial factor to be considered is the prospect of greatly increased British purchases in Canada in the next twelve months. You will have noticed from time to time in the last month or two announcements of new contracts or orders for munitions or supplies. In connection with our repatriation programme, I have recently been considering the total of these prospective purchases in various fields, and it is a very large one. It should result in a considerable increase in the demands on our production, both of raw materials and manufactured goods. In addition, however, it will also require a considerable increase in the amount of financial assistance given to Britain by way of repatriation of Canadian securities in order to provide Canadian dollars for purchases in this country. This will involve a substantial addition to the amount of financing to be done to meet our own deficit. It will be a great deal more than the figure of two hundred million dollars a year suggested in the budget. While the increased income resulting from the British purchases will help us to make the savings necessary to finance them, the additional borrowing cannot be done without a considerable effort.

Before closing I should like to impress upon you, Mr. Speaker, and upon others, the magnitude of the financial problem that we face, quite apart from taxation. The volume of

Canada's War Effort-Mr. Ilsley

savings that will be required to meet our own deficit and to assist Britain in purchasing in Canada is really enormous. Moreover, we must obtain these savings at a time when taxation is heavy-much heavier than ever before. We shall have the income from which we can, if we will, provide the savings. What is necessary is the voluntary effort to make the savings. They are necessary because we are determined to make the greatest use of our resources. We must not be misled by the existence of large surpluses of a few things- particularly of certain agricultural products or even of unskilled, untrained labour-into believing that war activity on the scale on which we are proceeding will not compel us to make the maximum possible use of all our man-power and our material resources. One of our most urgent economic problems now is to prepare for the transfer of resources, human and material, from places where they may not be needed for the present to places where they are or will be urgently needed.

I have said we face the need to raise large sums by borrowing. Part of this we shall obtain from the war savings campaign. Much of this part will take the form of deductions from pay envelopes, in addition to the deductions under the national defence tax and the unemployment insurance scheme. Some of our people may be worried by all these deductions. I appeal to such persons to realize that this is the form taken by their contributions to the cost of the war. Such contributions should not be considered as grounds for demanding increased wage rates or salaries. If they were, that would defeat the very purpose of these deductions, since they are supposed to be borne by the persons from whom the deductions are made, and not by the general public in increased costs and prices.

Despite these new sources of savings and despite our new high taxes, we must continue to rely upon a very large volume of savings in the form of subscriptions to war loans. These MUSI come irom voluntary savings, from real efforts to do without luxuries and even comforts in order to help win the war. Never before in our history have we faced a saving problem-an investment problem-of such magnitude. It will require sustained and determined effort, but the kind of effort of which the aroused Canadian people are now fully capable.

Last night I listened to the eloquent words of my colleague the Minister of National Defence (Mr. Ralston). I heard his ringing appeal to Canadians to fight, first in defence, then when the defensive phase of the war

is over, to carry the attack to the very haunts of the enemy. As I listened I felt like saying to him, as to his colleagues the Minister of National Defence for Air (Mr. Power), the Minister of National Defence for Naval Services, Mr. Macdonald, and the Minister of Munitions and Supply (Mr. Howe): See that Canada does her utmost-on the land, on the sea and in the air-and the cost, in so far as money can meet it, will be gladly and proudly paid.

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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

Before the minister resumes his seat may I ask him if he will-perhaps not now, because I do not think he could do it at the moment-rectify what I think is an omission in the review oi the government's war effort, that is, the extent of Canada's commitments in dollars and cents under the programmes now under review and the portion which may be assumed by the British government. That is one of the things I mentioned when asking for this review, and I think we ought to have it. It may not be available to-day but later, perhaps to-morrow, the minister might be able to give us the information, having regard to the huge sums mentioned this morning by the Minister of Munitions and Supply.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

I will try to get that.

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July 30, 1940