May 5, 1941

CCF

Angus MacInnis

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

Mr. MacINNIS:

Mr. Speaker-

Topic:   UNEMPLOYMENT-STATEMENT OF MR. DOUGLAS (WEYBURN) ON MOTION OF MINISTER OF FINANCE
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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

I regret

that the arrangement made between the Prime Minister and myself was not communicated to the group at the other corner of the house, but I believe that notwithstanding the difficulty that has arisen these hon. gentlemen will have ample opportunity at a very early day to carry on the discussion wThich they are seeking to engage in this afternoon. In courtesy to myself I think at least they should have given us some notice that they intended to speak on the pro forma motion to go into supply for the purpose of enabling the government to have business with which to continue on Thursday and Friday of this week.

Motion agreed to and debate adjourned.

Topic:   UNEMPLOYMENT-STATEMENT OF MR. DOUGLAS (WEYBURN) ON MOTION OF MINISTER OF FINANCE
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THE BUDGET

DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE


The house resumed from Tuesday, April 29, consideration of the motion of Hon. J. L. Usley (Minister of Finance) that Mr. Speaker do now leave the chair for the house to go into committee of ways and means.


NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Hon. R. B. HANSON (Leader of the Opposition) :

Mr. Speaker, in the remarks which I have to make to-day I shall deal for the most part with principles and their application. I shall refrain from narrow or party viewpoints, be as judicial as I can, and above all in my contribution to this debate I shall endeavour to keep in mind always the fact that Canada is at war with a ruthless enemy, and that we are engaged in the greatest joint enterprise ever undertaken by any group of people.

If I should err in this endeavour I hope it will be attributed to me personally and not to the party which I represent in this house. For here and now I assert that this party has one end, and one end only, in view-the winning of the war, the preservation of liberty and freedom and the elimination of all the forces of evil so strongly arrayed against the democracies.

The lengthy budget statement of the Minister of Finance (Mr. Ilsley) on Tuesday last was no doubt received with mixed feelings by the Canadian public. But to that portion of the public which is most anxious that Canada shall put forward her utmost effort at this most critical juncture of the world war, it came as no surprise. In fact, there will no doubt be found a substantial body of public opinion in this country which will think that, speaking generally and in the abstract, the budget proposals perhaps have not gone far enough. There are only two costs in this war-and may I emphasize this-the cost of victory and the cost of defeat.

I have said from the very first that the Canadian people will willingly bear our share of the cost' of this war, either in the form of taxation or of loans to the government, provided always that the money thus raised is expended efficiently, wisely and economically, and without waste or extravagance. To-day, in the name of those same loyal people, I reaffirm that position, and say to the government that they will willingly bear the tremendous additional burden to be imposed upon them by the measures proposed by the Minister of Finance, on the assumption and theory that we are in this war until victory shall be won. We Canadians are determined to do our utmost, not only in terms of

2536 COMMONS

The Budget-Mr. Hanson (York-Sunbury)

dollars and cents, but in man-power and material tilings, so that we may remain free men in a free country.

Undoubtedly there are those who will differ from the minister's proposals as to ways and means. That is to be expected, and much may be said in support of alternative proposals. But speaking generally there will not, in the minds of those who are determined to remain free men in a free land-and that should include all of us-be much, if any disposition to oppose the minister's proposals, provided the government puts into practical operation the theory that our contribution shall be an all-out effort, accompanied by a firm determination that waste and extravagance, incompetence and inefficiency shall not be tolerated.

To those who followed the Prime Minister's historical narrative on Monday last, to those who have analysed the situation on their own account, it must be apparent that with the loss of the battle of Greece the fortunes of our armed forces have not only suffered another very serious reverse, but that there is now extreme danger that the whole of the near east, the Levant, and the control of the Mediterranean area itself, may pass out of the hands of the British. If that does happen, then for all practical purposes the whole of western, central and southern Europe will have passed under the domination of the dictators. The gateway to the far east will be closed, and the whole position will have assumed a greater gravity than at any time since the opening of hostilities. If that position is attained, then we may anticipate that the enemy will further concentrate on the battle of Britain and the battle of the Atlantic. The mere mention of such eventualities will serve to impress upon us the seriousness of the whole position and will bring home to Canadians not only the danger of defeat but also the fact that the war is not so far away from the shores of North America as some people may have assumed.

I do not wish to be interpreted as being an alarmist. Quite the contrary. I am as firmly convinced as ever I was that the battle of the Atlantic will be won, that the invasion of Britain will be repelled, but I do not think we should lose sight of possibilities that might arise. We should be realistic and should, so far as lies in our power, be ready for any eventuality and to extend any and every aid within the compass of our powers and resources.

If you will recall the story of the Napoleonic wars, extending over a quarter of a century, you will remember that many times the British forces were driven out of Europe, but under one circumstance or another they always returned, and finally at Waterloo the

destiny of Napoleon was settled, and the position in Europe was stabilized. Britain has been in many wars and has lost many battles, but it is my comforting thought that come what may she has always won the last battle. History, no matter what may be our fears, has a habit of repeating itself, and I am as confident as I ever was of anything in my life that the battle of the Atlantic will be won, that Britain will not be successfully invaded, and that freedom and liberty will survive. But it will be at a great price, at great sacrifice in both blood and treasure. This herculean task will only be accomplished by the united effort of all the liberty-loving peoples of the world. We are indeed fortunate in having by the side of the empire at this time the active aid and support of the people of the United States, who 'have in a real sense made this war their own and who will, I feel certain, in due course make this gigantic struggle their fight also.

To Canadians this struggle has always been ours, and it is on this assumption and on this theory that we on this side of the house, casting aside all thought of partisanship and of party advantage and thinking only in terms of national unity and of concerted national effort and of ultimate victory, have pledged our support to this government in an all-out war effort; and following that pledge we are prepared to give our support to the provisions of this budget. It is at least one way in which we may exhibit that spirit of unity which should guide us at this critical juncture. There will be no amendment and no carping criticism from this party.

It may be, and it is wholly natural, that we should in a degree differ from some of the government's detailed proposals. We reserve in this discussion the right of analysis and of constructive criticism and suggestions. But with respect to the prime objective of raising adequate supplies of money to carry on the war we are in agreement and to that end I pledge the support of this party.

The minister was confronted with a gigantic task and in my view he acquitted himself with credit. I have already tendered him my personal congratulations and Shall not repeat them. He did not attempt to adorn the tale with any rhetoric or useless verbiage. He told us lucidly and in plain language what the position is and what the proposals are.

And what did he tell us the task was? He told us that the federal treasury for war expenditures and for peace-time activities required the huge sum of approximately 1,800 millions of dollars; and that in addition Canada has undertaken to underwrite or pay for $900 millions of war orders which Britain is asking us to produce and for which she cannot

The Budget-Mr. Hanson (York-Sunbury)

presently pay either in Canadian dollars or in sterling. This makes an astonishing total of $2,700 millions, a gigantic sum for twelve millions of people, equal to about $225 per head. If we add to this $2,700 millions the sum of $575 millions estimated for provincial and municipal expenditures during the same, or approximately the same, period, we reach the staggering figure of 3,275 millions of dollars, or $273 for every man, woman and child in Canada, which will have to be produced by taxes and by other means.

I mention these figures, not to magnify them, but to bring home to our people the size of the undertaking with which we are confronted. They are so great that many of us can scarcely comprehend them. But let us not be terrified by them. Let us not flinch or shrink. Let us rather review the situation in the light of the past, dispassionately but earnestly and realistically.

In 1916, as the minister stated, our total revenues were $172 millions; in 1919, $313 millions. Last year they totalled $871 millions, or five times that of 1916. I submit that this was a huge sum to take from the Canadian people in a single year, and some of it, notably that produced from individual income taxpayers, was heavy and onerous. There was not equality of sacrifice; but the burden was not comparable with that which they will have to bear as a result of the proposals now before us. But the fact is that the Canadian people did produce for the federal treasury $871 millions and this in addition to over half a billion dollars for provincial and municipal purposes. What a marvellous achievement for less than twelve million people!

This year we are asked to tighten our belts and produce in a full year $300 million more in revenue from increases in existing taxes and in yields from new taxes. If it were not for the urgent necessity, it would be unthinkable. But there is urgent necessity. The task must be undertaken, and it will be done. But having regard to the gigantic proportions of the task, to the fact that every one of us must meet the situation realistically, retrench in our private expenditures, reduce in most cases our standards of living, is it unfair for me to appeal to this government, to provincial governments and to municipalities to lead the way in retrenchment in all peace-time activities?

We are asked to give, to pay, to reduce our standards of living; but is the government setting an example? I fear not. I am appalled when I read that the total deficit of the Canadian National Railways was over $16 millions in a year when war transportation was at its peak, when it was hoped that the system would pay all its operations and all its carrying

charges, not to speak of or include its obligations to the federal treasury. Frankly, this result was far from satisfactory, and we should have some explanation from the ministry and from the management.

In this connection may I remind the house that in spite of the necessities for war expenditures and in spite of the problem of foreign exchange in relation to United States dollars, the railway went on with the Montreal terminal, a project that will cost, or actually has cost, over 25 millions of dollars, a substantial portion of which had to be paid in United States funds. That is not a comfortable situation; indeed I once characterized it as shocking. But the minister defended it on the ground of necessity and utility, a defence which, to me at least, was not convincing. Let us have an end of that sort of thing, and let the government, especially in peace-time activity, give an example to the people of Canada. The people are asking for it.

But is the government doing it? I do not think so. Recently I heard that because of traffic congestion between Moncton and Halifax the railway is contemplating, if it has not already arranged for, the installation of a remote electric control system of operating trains between Pacific Junction in New Brunswick and Truro, Nova Scotia. It will cost at a minimum, it is said, $1,200,000 and will likely reach one and a half million dollars. Of this, half a million dollars at the very least will be required to purchase certain equipment in the United States not available in Canada. United States dollars must be provided. Is this necessary?

I enter into no discussion as to the merits of this device. I do not know much about it. It may be wholly desirable; in fact I am inclined to believe that it would be very desirable in normal times, provided the money was available. I do not know much about it except what I have learned from the officials of the road. But this I do know, that while there may be congestion between Pacific Junction and Halifax, not one ship has been delayed at an eastern port for lack of cargo, that more freight is offering than can be moved. Now, in the light of these facts how can the government justify this expenditure?- for mark you, this is a new capital expenditure. It must have the approval of an order in council, if it has not already received such approval. How can the government consistently ask the Canadian people to raise $1,000,000,000 in taxation when it will not itself give the lead?

And what of our provincial governments and municipalities? What cooperation is there between them and this government with a view to cutting down expenditures through

2538 COMMONS

The Budget-Mr. Hanson (York-Sunbury)

these avenues? None whatever is discernible. Our provincial legislatures have all prorogued, I believe, after budgeting in the aggregate for the largest taxation proposals and the largest provincial expenditures in the history of Canada. Even the municipalities are not substantially retrenching. In fact some of them have increased their budgets. Mr. Speaker, peace-time expenditures in every sphere of governmental activity will have to be cut to the bare bone, and I call upon the minister and this government to lead the way and set the example. If this is done, the new imposts will be paid, in most cases, cheerfully. But, without this retrenchment, there will be resentment, if not resistance.

I do not intend to go into the field of war extravagance and inefficiency, although I could do so. A multitude of instances have come to my knowledge. I may be permitted to mention only one. I hesitate to refer again in this house to Federal Aircraft Limited in relation to the Avro-Anson contract, especially after what the minister promised us and upon which promise in relation to production I had every right to rely. Recently it was brought to my attention that there was absolutely no control over costs, and there was no target of cost to shoot at, no standard by which claims may be judged. Now that is to me evidence of inefficiency in the management of Federal Aircraft. And, by the way, it may be of interest to the house to know that important engineering data, plans and blueprints, are not yet available; that numerous parts have not yet been ordered, or at least delivered, and that production of the frames and parts to be assembled in Canada are still being retarded, in any event have not been accelerated.

Topic:   THE BUDGET
Subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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LIB

Clarence Decatur Howe (Minister of Munitions and Supply)

Liberal

Mr. HOWE:

No.

Topic:   THE BUDGET
Subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

I think it is true. I ask the minister to look into this and give to the house the result indicated by the recent interdepartmental report on the present status of this production, or else lay it on the table. It will astonish the country.

Topic:   THE BUDGET
Subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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LIB

Clarence Decatur Howe (Minister of Munitions and Supply)

Liberal

Mr. HOWE:

There is no such report.

Topic:   THE BUDGET
Subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

There is such a report.

Topic:   THE BUDGET
Subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
Permalink
LIB

Clarence Decatur Howe (Minister of Munitions and Supply)

Liberal

Mr. HOWE:

No.

Topic:   THE BUDGET
Subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
Permalink
NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

There is such a report and I have seen it.

Topic:   THE BUDGET
Subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
Permalink
LIB

Clarence Decatur Howe (Minister of Munitions and Supply)

Liberal

Mr. HOWE:

I have not.

Topic:   THE BUDGET
Subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

I am not at liberty to use it. The minister will find, I think, that to say the least it is very disappointing. Again, if my fears are well founded. I would ask the minister to review

the whole problem of Federal Aircraft judicially and without bias and see for himself if there is not inefficiency.

If the Minister of Finance (Mr. Ilsley) does not know that there is unrest and dissatisfaction in the country over the lack of thrift in government expenditures, both peace-time and war, let me ask him to interview those who were in charge in the field of the war savings campaign, and I venture to say he will hear a few things that may be convincing. I think he has already heard them. I recently learned about this unrest and dissatisfaction at first-hand from a man, a friend of this government, who had charge of the organization of this campaign in one of our provinces. He told me of the resistance which was met and which had to be overcome, and which was only overcome by a united effort on the part of citizen committees who undertook the work. The chief complaint was against alleged unnecessary and extravagant expenditures on the part of the government in war as well as in peace-time activity, and right in the forefront was placed the cost of taking the census this year. In spite of warnings which must have reached Ottawa this work and expenditure is going on, but it will have its repercussions in the country and the government will have to take the responsibility.

I now desire to deal with a subject which we often hear about but which is not much discussed in this house; I refer to the question of the national income. Our ability to raise these huge sums in new and increased taxation is based on the theory of a greatly increased national income. That is the very foundation of the proposals, and I confess to some doubt as to the validity of this foundation-at least in such large increases. Recently I have attempted to give some study to this very complicated subject. Studies have been made by the bureau of statistics and by the economists of the Bank of Canada for the purpose of the Sirois report, and I find that neither study is mathematically perfect, that neither is exact, but that both are based on data and statistics which in some instances at least are purely estimates and in some very questionable.

I have found, too, that there is much difference of opinion as to the methods to be adopted in arriving at conclusions, and that there is disagreement between different schools of economic thought. On the whole I have arrived at the conclusion that this is one of the most obscure fields of economic investigation and that no method of computation is accurate, or even approaches accuracy.

I had held, in my ignorance, the view that the production of new wealth was, in a degree, synonymous with "national income".

The Budget-Mr. Hanson (York-Sunbury)

Without going into a diagnosis, I am now convinced that I was wrong. I am now advised that the basis of the term "national income" is the measure of all economic goods and services produced by, and made available to, the people of the nation during any given year. It is stated to me that this figure is simply an aggregate of the net values of production of all economic enterprises, or, conversely, of the total incomes received from productive enterprises, paid out by, and/or accruing to all individuals in the country.

The economic enterprises of the nation are divided into two categories, governmental and private.

AVith respect to private enterprises, the calculation of the net value of production is comparatively simple, provided the data or statistics are available and complete. This proviso is important. The data are not always available and complete, and resort must be had to estimates.

The value of governmental services is much more complex.

The question is asked, what is the economic value of government activity? Well, judging by partisan standards and being cynical, one might say that it has little or no economic value. That would not be true, however. Laying aside some margin for extravagance, inefficiency and other factors, there is still a field left which has an economic value, and it would appear that those estimating national income must adopt a criterion which should be dissociated from and independent of what are termed subjective valuations and be consistent and practical. And the method adopted is to value the governmental contribution to the national income at the amount paid by the government to individuals for productive services rendered. Thus there are included salaries and wages paid to civil servants, military pay and allowances, other military expenditures of certain characters, rents paid by the government and interest paid directly or indirectly to individuals on government debts incurred, or for the acquisition of socially productive assets.

Presumably it would include the S400 million or more which the government has paid, or will pay this year, in connection with the operations of the wheat board in taking over an unsaleable asset. If so, I am not in agreement, for this at the moment is not a liquid asset. I am assured that it does not include government payments to individuals in the form of direct relief, non-contributory pensions and public welfare services, the exclusion of which seems sound in principle.

All this is a pretty large order, and I may be pardoned if I express some doubt as to the soundness of the basis of the factors

of calculation upon which the estimate of our national income is made, especially when I find differences of opinion among economists themselves.

I assert my belief that all such governmental expenditures as I have indicated are not true national income in the sense that a good sound business man would view them. Many governmental expenditures are not made for productive activity, and therefore a substantial allowance on this account should be made. Just how much, I do not know, and I do not propose to use any arbitrary deduction without some reasonably sound basis for my deduction. However, on the basis of the report of the Bank of Canada economists the national income for 1939 was $4,040 million. Apparently for the same period of time the bureau of statistics estimated the national income at $4,409 million-a very substantial difference: nearly $400 million. For 1940 the figures are stated by the economists of the Bank of Canada to be $4,594 million, as compared with $4,800 million estimated by the bureau of statistics. So you see there is a *wide variation. I think it will be admitted- indeed has been admitted by the bureau- that its estimate is altogether too high.

For 1941 an estimated income of $600 million over 1940 has been made. At the most this would total less than $5,200 million, and if proper reserves and deductions are made I suggest that the national income will be under $5 billion. Yet the people of Canada are being asked to provide in taxation and loans over $3,200 million, or in excess of sixty per cent of the estimated national income. This is a colossal sum, and I suggest to the government that the whole problem be reviewed. Revised estimates of national income should be made, and on the other side the most careful consideration should be given to retrenchment and economy in expenditures. Unless this is done, I warn the government that the going will be hard when the appeal is made to the public in June for the 1941 victory loan. The money will be raised, but it will be raised only by the patriotic action of the loyal people of Canada, who so far are not any too well pleased with the government's war effort as exemplified by actions and results, not as portrayed in terms of dollars and cents or in propaganda speeches of ministers of the crown. These loyal people most assuredly are not satisfied that a dollar expended means a dollar in value received.

The minister made slight and only casual reference to the amount to be borrowed this year, but it is quite clear from what he said that over a billion dollars will be required to be raised this year from the people, the business firms and institutions of the country.

2540 COMMONS

The Budget-Mr. Hanson (York-Sunbury)

This is a staggering amount when we consider that the total savings of the people now in the chartered banks is much less than $2 billion.

To add to the difficulty, the individuals who will be expected to subscribe heavily and substantially to this coming war loan are the very people who have again been hit most heavily by the increased income tax proposals. Last year these same people found themselves confronted with sudden and tremendous heavy increases in their income taxes. They have no sooner adjusted themselves to the new situation and manfully endeavoured to meet their obligations to the state than they are met with new demands and impositions of a staggering character. The government has adopted the easy course. The people will comply as long as humanly possible, but how they can pay from forty to fifty per cent income tax increases and at the same time buy war loans is beyond my comprehension. You just can't have your cake and eat it too.

I now desire to deal briefly with the budget proposals generally. These are many and in some cases drastic. Obviously one cannot discuss them all, and I do not propose to do so. The outstanding feature, of course, is the extension of the principle of direct taxation.

The next outstanding feature is the marked invasion of the field of provincial taxation. In a degree this was inevitable. The income tax field was entered by the federal authority during the last great war-with some reluctance at the time, because then there was a tacit understanding that, speaking generally, direct taxation ought properly to be reserved for the provinces. If my memory serves me aright, only one province, British Columbia had at that time-in 1917-an income tax. Due largely to the extension of social services by the provinces and declining revenues from certain other sources, the provinces, with the exception of New Brunswick and Nova Scotia, have since entered this field. Certain municipalities have been in this field for years. Personally I have been paying income tax in my own city for nearly forty years. But all the provinces have in recent years imposed taxes on corporations-not only on profits but in some instances on the capital structure itself. In my own province, in the case of public utilities these taxes which fall on the capital structure are forbidden to be passed on to customers and clients, which I have always thought was, in certain given cases, unjust and unfair.

Now it is proposed that the provinces be invited to give up both their sources of revenue and receive adjusting compensation in

lieu. I express the hope that the offer will be accepted. The compensations offered are generous-perhaps too generous. It occurs to me that the proposal comes a little late. This is one of the things which should have been proposed and accomplished at the dominion-provincial conference which was so unceremoniously ditched by the subversive action of three of the provincial premiers-two of them favourite sons of the Liberal party-and by the lack of leadership displayed by the Prime Minister and his colleagues. I do not propose to debate this matter now. Suffice it to say that while the three recalcitrants made it abundantly clear that they would not confer on the basis of the Sirois report-one of them, in terms which were at least discourteous, if not actually insulting-they, or at least two of them, left the door open for a round table conference between the dominion and the provinces on the basis of a united war effort. This offer was summarily rejected by the Prime Minister, and for this he must be held responsible. It was at this juncture that he showed a lack of national leadership.

Now an effort is being made to repair the damage. Personally I hope it will be successful, and that the whole field of income tax will be transferred, for the duration at least, to the federal authority.

But do not let us delude ourselves. It does not and will not mean any relief for the taxpayer. At most, it can only mean that he will have one taxing master instead of two, or in some cases three, but the burden will not be reduced, save possibly in the matter of the cost of collection. Some economies may be effected there.

Already, I understand, one province has agreed to come into the scheme. Is this an eleventh hour repentance on the part of Mr. Pattulio? It would appear so. He is an astute politician. He has heard from the people of British Columbia.

The little provinces, such as the maritimes, will, I have no doubt, agree, because on balance they will probably find that it will be profitable to do so. But what of the municipalities, such as Fredericton, Moncton, and Saint John, in my own province, which have had substantial revenues from this source for many years? Will they be protected and will such part of the adjustment grants in lieu, which the dominion will pay to, say, the province of New Brunswick, as are equal to the loss sustained by these municipalities, be passed along to them? The minister's intention is, no doubt, that this will be done, but it is not clear, because the minister's language, at page 2345 of Hansard, is that:

. . . the dominion will offer to pay each year for the duration of the war to any province-

The Budget-Mr. Hanson (York-Sunbury)

Obviously he is thinking of dealing only with provinces.

-which, together with its municipalities, will temporarily vacate the personal income tax and corporation tax fields either

(a) The revenues which the province and its municipalities actually obtained from these sources during the fiscal year ending nearest to December 31, 1940, or

(b) The cost of the net debt service actually paid by the province during the fiscal year ending nearest to December 31, 1940 (not including contributions to sinking funds), less the revenue obtained from succession duties during that period.

Either of such payments is to be augmented by fiscal-need subsidies, whatever that may be construed to mean, where it can be shown that these are necessary.

What I want the Minister to make clear beyond peradventure is that whatever choice is made by a given province, the municipality giving up this source of revenue is protected one hundred per cent and will not, by reason of the province's decision, sustain any loss in revenue. I suggest that that is a reasonable request to make.

In my mind's eye, Mr. Speaker, I can see the premier of New Brunswick, surrounded by the little band of little men with little minds whom he calls his government, sitting down and sharpening his pencil and figuring, figuring, and endeavouring to see how much he can save or make out of the travail of the country. And then, being unable to determine which course to adopt, calling in that great master of finance, Mr. Neill MacLean, who is the political godfather and mentor of the provincial secretary-treasurer of New Brunswick, and waiting breathlessly for his decision. The Minister of Fisheries (Mr. Michaud) laughs. He knows that what I am suggesting is about true.

I now want to talk for a moment about succession duties. I confess I am perturbed over the further invasion of the provincial field by the imposition of succession duties. The provinces are not being asked to vacate this field. Up to date it has been their own. Personally I am convinced, after a careful study extending over a long period of years, that the smaller provinces do not get their just share of this tax, vis-a-vis the rich provinces of Ontario and Quebec. I could cite many reasons and examples, but I will just give one of them. Nearly all public securities are registered in either of those two provinces, because of the presence of stock exchanges in Montreal and Toronto and the necessity of being able to register quickly. For that reason, those two provinces exact in certain cases tribute-no other word will apply to the

case-from estates situate or domiciled in the small provinces, to the ultimate detriment of the small provinces. This has long been a source of vexation and trouble.

In essence and in practice, succession or death duties are not, properly speaking, taxes, but are in their nature confiscation of private property. Surely we will all admit that. I know the arguments the other way and I shall not repeat them-to do so would be futile because we have these imposts now and always will have them. They are an accomplished fact, not a theory, and we are dealing with facts, not theories. Nevertheless, I personally am not convinced that the dominion should enter this field at the present time. However, the government, because of the necessities of war, has been driven-at all events, it has decided to enter this field. And, mark you, without any previous consultation or arrangement with the provinces. That, I think, is a major mistake, and time should have been taken by the forelock long before the budget and some arrangement entered into under which consideration would have been given to the whole problem and some reasonable accommodation made, whereby the one sum of money would not be subject to two, perhaps three, imposts. Double or triple taxation is always odious. Consultation 'has not taken place. It could very properly -have taken place last January at the time of the conference. It is one subject which, if then contemplated, should have been dealt with.

Personally I think that the attempt should have been made. The opportunity was lost and is another example of lack of national leadership.

I shall not attempt at this stage to enter into a discussion of the scheme outlined or the general level of the proposed rates. That will come in the committee stage, and I Shall certainly have something to say.

The minister predicated his proposal on the assumption that, while this field had previously been used by the provinces and not by the dominion, neither has any exclusive legal rights to it. I agree. But he went on further to say that while some of the legislatures had exploited the field to a greater degree than others, he believed they had not fully occupied the field and that there was room for an additional and independent dominion tax. Evidently the minister is not familiar with the situation which has developed in the province of Ontario, and by no stretch of the imagination can it be assumed that he has had to deal with the treasury officials in the province of Quebec. I could tell some interesting experiences in that regard. I suggest to him that he is wrong in his assumption. In my view the field has been fully

25-12 COMMONS

The Budget-Mr. Hanson (York-Sunbury)

occupied and exploited by all the provinces and especially by the two larger provinces. Now we are to have the two imposts on the same property, without any regard to the incidence of the tax except possibly with respect to the proposed rates.

I do protest against this injustice. I hope that between now and next year negotiations will be opened with the provinces with a view to reaching some conclusions so that double taxation may be avoided, at least so that there shall not be taxes imposed on taxes, as is so often the case to-day in other fields and as is the case to-day in connection with the provincial succession duties, where you have the situation that the very property going to pay the tax is in general itself taxed.

This is hasty legislation and should be reviewed. I do not mean the principle of the tax; for I fear that is too late, but the incidence of the tax.

I have no objection at all to many of the new luxury taxes. Some of them are overdue. But I wonder whether the minister has thought through to the end the effect of the twenty per cent tax on motion pictures in small towns of approximately three thousand people, when there is no new war industry or new community income. I want him to think about that. My information is that these people just cannot stand this tax and continue to exist. Neither have I any objection to the increased taxes on beer and malt. The only criticism I have to make is that they are not higher, but possibly I do not understand all the ramifications and underlying reasons for the moderate increase.

I am a little surprised that nothing has been done to increase taxes on spirits. Have we reached the saturation point in that regard? Is the law of diminishing returns in force? I do not know, but this I do know, that a lot of good temperance people in this country, especially shall I say in the province of Nova Scotia, are going to be disappointed with my hon. friend. Already many evidences of discontent with the greatly increased sale of strong spirits and of malt liquors in that province have reached me. Good people down there are perturbed, as they are in my own province, over the increased consumption. Well, all I can say is that my hon. friend has grievously disappointed some of his warm and loyal supporters. I leave him to make his own peace with them.

But I do want to discuss briefly the increases in the national defence tax. When this new tax was introduced last year I prophesied that this tax would produce a lot of money and was here to stay. It is imposed primarily to catch people in the lower income tax brackets.

I agree that these people should make some contribution, according to their ability to pay. But the tax is now raised to a much higher level. When you add to the new level the assessments for unemployment insurance, contributions by wage deductions to war savings certificates and an increase in the cost of living of, at the very least, ten per cent, you will find that an enormous burden has been placed upon the income of people in the lower brackets, many of whom are employed now for the first time in many years and have not been able to pay their debts in days gone by. When all these factors are in full operation you will find that something not less and probably much more than twenty per cent of a workingman's total income is being taken, I suggest that a man with a family cannot stand such severe taxation and live on a decent standard.

The inevitable result will be a constant and increased demand for more and more wages, and the vicious circle of inflation which is already on us will receive an increased momentum and velocity.

Then there is the question of the excess profits tax amendments. Before the Easter recess the minister brought down a statement of some seventeen or eighteen proposed changes in this act. We are now invited to consider several new and additional changes.

This is the third revision of the act, and I venture to suggest it will not be the last. It is a classic illustration of hasty legislation. I believe the inherent difficulties in operation and the inherent injustices occasioned by its operation will compel the minister to come back to parliament time and again for further revision as new or unforeseen situations arise.

The act is based on the theory that there shall be no fortunes made out of this war. Well and good. I agree. But does this mean that a company, for example, which in the harsh days between 1930 and 1939 suffered severely from the depression, shall not be allowed to recover and pay its old debts and be in a position to withstand the shock of post-war depression which is bound to come after this terrible storm of war is over? This act is an instance of yielding to the cry of the demagogues without thinking the matter through. I agree that neither the public nor the country shall be exploited for the benefit of the few. Most decidedly I agree. But I do suggest that the method is wrong. I have made some study of the situation, and I am convinced that the British treasury and the British taxing authorities know much more about this matter than we do. We cannot teach them anything about income or excess profits taxation. Per contra, we can learn much from them, and I suggest to the minister

The Budget-Mr. Hanson (York-Sunbury)

that it is not too late to review the whole position and to pattern our taxation proposals in this regard upon the British system. Tax profits as high as you like, but in the proper sphere. Collect them at the source, and collect them from those to whom they may accrue, but do not penalize these companies to such an extent that they cannot pay accumulations of debts incurred in depression times, or survive and give employment during the post-war period. Let them earn, and keep, reasonable standard profits; then take the excess if you will.

In England they have no corporation income taxes. Here we have them now to the tune of forty per cent, and we tax these profits twice-once in the hands of the company, and again in the hands of the recipients. This is wholly inequitable. Let us at least consider adopting the British practice, if it is not too late, and I believe it is not. Then after making provision for standard profits, which Shall be taxed as high as you like in the hands of the proprietors, take the whole of the excess, if you will, as they do in Britain. But do not make it impossible for these institutions, upon which the nation will rely for employment for our people after the war, to live. That principle will yield quite as much revenue, if that is what is sought, but it will not destroy.

I shall not allude in detail to any of the proposals, new or old. I do not understand them all. The minister has told us that the changes proposed are not intended to and will not result in any general relief from the weight of the tax. I do not think anyone has advocated that. But they have asked for more equitable treatment, more equitable distribution of the burden, and in particular that companies as vehicles for the effective use of accumulated capital devoted to production and employment may not be so weakened that in times of future adversity they may not survive. Many of these companies have been once through the wringer; if there ever was water in them it has all been wrung out. To put them into the hands of receivers again and repeat the process of reorganization will, to many, mean destruction.

Since I heard the budget I have been asking myself this question: Does the budget face with sufficient realism the question of unnecessary consumer purchasing?

There is little or no extension of the principles adopted in the December "baby budget," so called. The taxes imposed or increased are revenue taxes, not designed primarily to restrict consumption, although of course 6ome of them will have that effect indirectly. The tax on sugar is a revenue measure. The slight increase in the tax on motor vehicles,

on cosmetics and toilet preparations, and the withdrawal of building materials from sales tax exemption, would appear to be designed to restrict consumer purchasing. But are they sufficient?

I regret the removal of the sales tax exemption on materials for repairs on small holdings and on materials for new small houses. This I suggest might well have been left as it was.

One of the purposes of the budget should be to deflect the increased income of the nation from the purchase of unnecessary and perhaps wasteful and extravagant luxuries to the purchase of war savings certificates and victory bonds. The deflection of income in this manner would not only provide the public exchequer with additional funds for carrying on the war but would also ensure that our man-power is engaged in essential tasks which will contribute to the winning of the war. Make no mistake about it, increased civilian consumption means diminished war effort. On the other hand, deferment of immediate consumption would make available to our citizens an opportunity of consuming when the war is over. Deferred consumption would take up the slack which inevitably must result in the change-over from war-time production to peace-time production.

The minister has adopted this principle in the case of building, but I suggest to him that he has picked upon an industry which because of present conditions is least amenable to such treatment. At a time when serious housing shortages exist in many centres of population, and when it has been found necessary to set up a government-owned housing corporation, it seems to me to be the path of folly to discourage our people from pursuing the sound family policy of home ownership.

Deferment of expenditures and restriction of consumption could and should have been applied on a wide scale to luxury articles. I believe that our people were anticipating and were prepared for a severe curtailment of their right to purchase non-essential commodities of many kinds. The failure of the minister to take action in this respect will not only cause him difficulty in the promotion of his war savings drive but will mean that man-power and factory space which could be turned to essential war tasks will continue to be engaged in what is, for the present time at least, non-productive activity.

Just a brief word in conclusion. In common with all the other liberty-loving peoples of the world, Canadians are realizing more vividly and more fully each day the fact, which cannot be emphasized too frequently or too forcefully, that democracy and all the term implies stands to-day on trial and in

2544 COMMONS

The Budget-Mr. Hanson (York-Sunbury)

peril. We who hare eyes to see and ears to hear cannot be blind or deaf to the sights and sounds that threaten our very existence. The issues at stake are clear. So essential are they to the maintenance and continuance of Christian civilization that our governments do not hesitate to place them above human life itself.

In every one of his many notable speeches, Mr. Churchill has warned us, clearly and unmistakably, that the battle for the vindication of our way of life will be long, fierce and costly. He has not only encouraged us to believe, but he has made us ashamed, indeed defied us, to doubt that out of our willing and increasing sacrifice, our untiring and unceasing effort and our constant mindfulness of the high purpose for which we fight, victory is assured. There is the cost of victory and the cost of defeat. Which shall we choose?

Never before in the history of the world has the individual responsibility for victory been so great and so serious. And never before has the individual had so much at stake-so much to gain by victory and so much to lose by defeat.

In this country of ours, free as yet from the devastation of bombs and fire, we are more and more beginning gratefully to recognize the protection we are receiving from our first line of defence in Britain. And out of our heartfelt gratitude is bom a firm and unflinching determination to hold fast that line at whatever cost, or whatever sacrifice it may entail. We know we must give freely of men, of money, and of resources. We must not fail in any one of those demands.

In the fulfilment of our purpose, no class, no race, no group in our population is excluded from active obligation. I think I have said before that in this conflict there is no grandstand for spectators. We need neither a cheer leader in our victories nor a gloom spreader in our temporary defeats. We need, and I hope and pray we may have, a united nation, its eyes fixed on the main purpose, its energies bent steadily and unceasingly on the accomplishment of that purpose.

I am firm in my belief that the Canadian people will willingly undergo the trials and sacrifices that so surely lie ahead of us. I am equally confident that their demand is for that high and inspiring leadership which a Churchill is giving in Britain and a Roosevelt in the United States, leadership which, setting the example, will fearlessly press on, light the way and guide our people along the path to ultimate victory.

Topic:   THE BUDGET
Subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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SC

Victor Quelch

Social Credit

Mr. VICTOR QUELCH (Acadia):

First, Mr. Speaker, I should like to congratulate the Minister of Finance (Mr. Usley) upon the presentation of his budget. By this I do not not mean to say that I am congratulating him upon his financial policy, but I appreciate the fact that the presentation of a budget, which at any time is a heavy task, in time of war becomes a task of major magnitude, because it involves the question not only of raising money but of how it may be raised without impairing the efficiency of our war effort. That entails maintaining a healthy, contented and united people, and I do not believe that can be achieved by the government showing a contemptuous disregard for the will of so many bodies, including the western provincial governments, the various farm organizations and even this parliament, as was the case recently with regard to the wheat policy. Sometimes it almost seems to me that we are becoming contaminated with the same disease that afflicts Germany; that is, that we are beginning to do things altogether too much in the totalitarian manner.

In the past it has been stated that the British always blunder their way to victory. This war, I believe, is somewhat different. Movements are made with such incredible speed that we may not have time to continue to blunder as we have done in the past. We entered this war under a very great disadvantage. For a period of seven years Germany had been doing everything physically possible to fit herself for a major war, while we in this country remained in a state of semi coma. Even after the declaration of war, in September, 1939, it took eight months and a major setback to awaken this government to a realization of the seriousness of the situation. Last year I was speaking to an official of the Department of National Defence with regard to certain matters, and he told me that we had been regarding this as a closed war, a private war, and perhaps I would be justified in saying, as Britain's war. Instead of industry being ordered to go full steam ahead, it had to wait for orders from Britain. Apparently we were still thinking in terms of money; we were still deciding whether we could afford to spend this much or that much on armaments, instead of giving the industries of this country orders to produce to their maximum capacity.

I appreciate the fact that we have made tremendous strides in expanding our production since May, 1940; nevertheless there is still something radically wrong in our attempts to achieve maximum production. For example, there are still thousands of unskilled men, thousands of students coming out of

The Budget-Mr. Quelch

our schools and colleges, who have been unable to find places in war industry. I have received many letters from these men, and I do not for a moment doubt that every member of this house has received letters to the same effect. I have referred these letters to the Minister of Labour (Mr. McLarty) and various other ministers, but invariably the reply is that these men should go to the employment agencies, to which, of course, they had applied before writing me. The result has been practically nil.

Topic:   THE BUDGET
Subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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LIB

Paul Joseph James Martin

Liberal

Mr. MARTIN:

Does the hon. gentleman

mean the emergency war classes, when he refers to the schools?

Topic:   THE BUDGET
Subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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SC

Victor Quelch

Social Credit

Mr. QUELCH:

Topic:   THE BUDGET
Subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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LIB

Paul Joseph James Martin

Liberal

Mr. MARTIN:

We are training them.

The Budget-Mr. Quelch

Topic:   THE BUDGET
Subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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SC

Victor Quelch

Social Credit

Mr. QUELCH:

I read a report of one technical school in Alberta which was taking on sixteen men to train. At the rate we are training these men, the war is liable to be over before their training is completed. And it will not be over in the way we wish it to be unless we awaken to realities and realize that this war is being fought at a terrific speed. There is no time to train men in the way in which they were trained in the past.

Topic:   THE BUDGET
Subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
Permalink
LIB

Paul Joseph James Martin

Liberal

Mr. MARTIN:

Does the hon. member know how many men are being trained at the present time?

Topic:   THE BUDGET
Subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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May 5, 1941