July 16, 1942

LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

Well, if the chartered banks could only lend as much as their cash reserve, it would mean that they would be conducting business at a loss, because the money would go back into the chartered banks and interest would be payable by the chartered banks to the depositors. The banks would have to discontinue paying interest, and therefore what my hon. friend is suggesting is a tax either upon depositors or upon shareholders, or upon both. If we are going to impose a tax upon depositors or upon shareholders, or upon both, we might just as well impose that tax directly. That would be a much fairer and more straightforward way of doing it than the way he suggests. He is merely suggesting, for that is what it amounts to, further taxation of an indirect kind when he suggests that we insist on a 100 per cent reserve.

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SC

Victor Quelch

Social Credit

Mr. QUELCH:

In the old days when you deposited your money with a bank, you paid the bank for looking after that money, and the people who get this service are the people who should pay for the service. It would not be taxation but a legitimate service charge.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

Call it anything you like.

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SC

Victor Quelch

Social Credit

Mr. QUELCH:

But the people who do not have any money in the bank would not have to pay any part of that charge.

I might quote to the minister what Irving Fisher says in that regard but no doubt the minister would reply to me as Mr. Dunning did, "Oh, Irving Fisher!" Mr. Dunning was very much interested in Babson's reports and was continually quoting from them. Let me quote what Babson's have t.o say. In their March 20, 1939, issue, Babson's devote a whole page to advocating the 100 per cent system, and they have this to say:

Lest anyone may think that the 100 per cent reserve system would be injurious to the banks, it should be emphasized that the banks would gain, quite as truly as the government and the people in general. Government control of the money supply would save the banks from themselves-from the uncoordinated action of some 15,000 independent banks, manufacturing and destroying our checkbook money, in a haphazard way.

I realize that that does not apply to the same extent in Canada because we have not quite the same banking situation, but otherwise the statement would apply quite well here.

Perhaps I should quote what Irving Fisher has to say, because, mind you, his proposal was endorsed by a large number of prominent bankers of the United States. This is what he has to say:

So far as this change to the 100 per cent system would deprive the bank of earning assets and require it to substitute an increased amount of non-earning cash, the bank would be reimbursed through the service charge made to its depositors.

Apparently the banks themselves do not take any great exception to such a proposal. As I said to the minister on the last occasion on which I spoke on this question, personally I am not overenthusiastic about the 100 per cent system, but I refer to it because the majority of monetary reformers in the country are in favour of the 100 per cent system. While I agree that it can adequately control inflation, I do not believe that it can adequately control deflation. I am of the opinion that the only fair and sound way to deal with the whole question of effective control is to nationalize the chartered banks of Canada.

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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

Then what would happen?

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SC

Victor Quelch

Social Credit

Mr. QUELCH:

The chartered banks would be under the effective control of the Bank of Canada and would be controlling the finances of the country for the benefit of the people as a whole. In so far as the charge that the

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government would be in the lending business is concerned, the chartered banks would be under the control of the Bank of Canada, and the minister has himself stated that the government does not interfere with the internal administration of the Bank of Canada. Therefore we would not be interfering with the administration of the chartered banks.

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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

How would that bring paradise?

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SC

Victor Quelch

Social Credit

Mr. QUELCH:

The chartered banks have found it profitable to bring about inflation and then deflation, and they have made more money out of that process than out of service charges. It pays them to manipulate prices, and they can make money both ways. When they bring about deflation they can buy stocks at deflated prices, and by bringing about inflation they can sell stocks at inflated prices. .

I should just like to quote what Mr. Nash had to say in regard to this question. I asked Mr. Nash, formerly minister of finance of New Zealand, when he appeared before the reconstruction committee, this question:

Mr. Quelch: Mr. Chairman, I wonder if Mr. Nash would tell us what method of financing is used when taxation and public borrowings fail to meet government expenditures?

Mr. Nash replied:

Hon. Mr. Nash: Well, the answer is inside a simple statement I made once in introducing the budget. If in connection with the production of the commodities that are necessary for ordinary human welfare the monetary means are not available to link unused resources with unused labour we, as a government, will find the money. We can do that because we are in control of the reserve bank; we can create our own money.

I should like to commend that statement especially to the hon. member for Vancouver East (Mr. Maclnnis), because I remember that some time ago when I was stressing the fact that the Bank of Canada should create money, he took exception and said that in New Zealand they created credit. I pointed out at the time that so far as the Bank of Canada or the Federal Reserve Bank of New Zealand were concerned, it makes no difference whether you use the term "credit" or "money" because they are both legal tender. Mr. Nash in his reply said that in New Zealand they can create their own money; he did not use the term "credit".

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?

Thomas Miller Bell

Mr. COLD WELL:

Money against consumer goods.

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SC

Victor Quelch

Social Credit

Mr. QUELCH:

There would be no sense in issuing money unless you had the goods to back it up. In peace time we had half a million men unemployed. We had industry

running only at a small percentage of capacity, and we advocated-it was all that we ever advocated-that the Bank of Canada should issue money to put these men to work, so that the money paid out in these public works would create a demand against the goods which our industries could produce but were not producing. In addition to that, we had a favourable balance of payments of 8219,000,000, and the only reason why goods were not being imported into the country to balance exports was that the importers knew that if they did bring them in they could not sell them. I asked this question of Mr. Towers when he was before the banking committee: In view of the fact that we had a favourable balance of payments to the extent of $200,000,000, is there any reason why we could not issue $200,000,000 and put people to work so that that money paid out would create a demand for imports that had been paid for but not brought in? He said that was a matter of government policy. There was nothing to prevent it, but apparently it was not considered an ideal policy by government.

The hon. member for Vancouver-Burrard said last night that there had been considerable hoarding of gold. That was not altogether the reason, because we had repatriated a great deal of the debt at that time. About twenty years ago a large percentage of the debt was owned externally, and to-day only a small percentage of the national debt is so owned. That is a worthy course to follow, but no country is justified in trying to repay external debt at such a rate that it causes extreme poverty within the country itself. Under such a policy, if we were to utilize the Bank of Canada at all times when it becomes necessary to have a creation of credit-I am advocating it only to the extent that taxation and the sale of interest-free savings certificates might fail to meet government expenditures-the money so created should be created by the Bank of Canada and not by the chartered banks. Not only would the result of that policy be a reduction in debt, but it would mean that our war effort would no longer be restricted. The minister stated the other day that no other nation has adopted such a policy. I have already quoted the statement by Mr. Nash to the effect that when taxation, and the borrowings of the savings of the people fail to meet government expenditures they do create money. Therefore apparently New Zealand is doing the very thing we are advocating at this time. The Minister of Finance made a specific reference to Germany. To make sure that I quote him fairly I will give his exact words, which will be found at page 4271 of Hansard-.

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But Germany at the present time is not relying on this method of financing. Germany has a tremendous heavy taxation load on its people and is borrowing from them to relieve the upward pressure on its price ceiling.

Some time ago I quoted a statement by Dr. Schacht, president of the Reichsbank, that Germany had had a very happy creation of state money for the purpose of developing the resources of the country. That was up to 1939, and I have often wondered exactly what the situation in Germany is to-day, because, no matter how we may dislike the type of government in that country, we must admit that as a fighting nation they are hard to beat. It is interesting to note what type of financial policy has been evalved in order to develop that fighting machine. Let me quote from the London Times. No one will say that is radical. The London Times is an orthodox paper. In the April 2, 1942, issue of the Western Producer there is a quotation from the London Times with reference to Germany, as follows:

"The achievement lias been so surprising that for a long time outside critics were inclined to regard it as an optical illusion." So far, it says, Germany "seems to have had no serious difficulty in financing the war. Nothing is ever heard of the necessity for increasing taxation, compulsory saving, or the issue of enormous war loans. Quite the contrary. Recently one important tax was abolished.

"Public savings banks deposits touched new monthly records again and again. Money is so plentiful that the interest on state loans could recently be reduced. . . . Hitler seems to have discovered the secret of making something out of nothing and to have evolved a system based on perpetual motion." These changes, says the Times, "may well call for drastic readjustments in our established conventions."

"In military matters," the Times goes on, "the French general staff enjoyed a prestige similar to that of our own authorities in finance and business. A hidebound persistence-

I should like the Minister of Finance (Mr. Usley) to take particular notice of that expression.

"A hidebound persistence," continues the voice of doom, "in methods and doctrines which were sound fifty years ago may easily prove as costly in the financial and economic field as in the field of actual war. It might not lose the war; it would almost certainly lose the peace.' "We should study the nazis' achievement," concludes the Times, "prepared to adopt whatever may be useful in it and to take warning from its mistakes."

The leader of the opposition stated that to adopt such proposals as were mentioned by the member for Party Sound would blow the lid off. I should' like to remind the leader of the opposition that, according to the London Times, Germany is using that type of financing and is blowing us off the map foot by foot,

step by step, and that unless we change our ways and change them quickly the Germans are likely to blow the top off us.

The budget faces a deficit of $1,850,000,000.

I am especially interested in knowing how that deficit is going to be met. There is no doubt in my mind that a very large proportion of it will be met by the creation of money, and I am hoping that when that money is created it will be created by the Bank of Canada instead of by the chartered banks. Let me refer to a rumour that is going around.

I know that perhaps the minister will say, "You should not take notice of rumours". Nevertheless, I saw this one in one of the Ottawa papers, and I hope the minister will immediately take steps to refute it. The rumour is that the next issue of bonds will be on the basis of 2 per cent, tax free. Is there any justification for that rumour at all?

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

I never heard the rumour. It is entirely unauthorized.

Mr. QUELCII: I am glad to hear the

minister deny that there is any such intention because, if that were done, it would mean that wealthy individuals, in order to evade a very high rate of taxation, could invest their money in 2 per cent, tax-free bonds and escape taxation altogether. It would be a most unjust proposal.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

The hon. gentleman need not tell me that.

Mr. QUELCH: I am glad to hear theminister deny it because very often these rumours we hear have a strange way of materializing. At any rate it was in one of the Ottawa papers three nights ago, the

Ottawa Citizen, I believe. The statement was that it came on good authority, but it was not an editorial. It was a letter written to the Citizen by a certain individual in Toronto who claimed it was based on good authority.

The Minister of Finance does not seem greatly perturbed over the tremendous increase in debt that is taking place at the present time. It is easy to understand why the

minister should adopt this attitude, because the governor of the Bank of Canada, Mr. Graham Towers, has taken the stand that national debt is a national asset. I want to be fair, and therefore I will quote his exact statement. This question was asked Mr. Towers by the hon. member for Vancouver-Burrard (Mr. McGeer):

Q. Is it possible for you to imagine any way by which we are ever going to pay the debt we have got?

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Mr. Towers' reply was:

As the debts of the government are an asset of the Canadian people I do not see much point in the thing, except that, to the extent that the government thinks that the distribution of those assets of the Canadian people

which are its debt-is unsatisfactory, it may take steps to remedy that distribution in any way that lies within the legislative power; in fact, in any way, I suppose-by income tax or succession duties or any other action it cares to take.

Generally speaking, I would agree with that statement. So long as we have made up our minds to continue under the debt-creating system, then national debt can be looked upon as a national asset so long as you have an equitable distribution of that debt. If everyone had the same amount, so that he would have an asset to balance the liability, everyone would be taxed to pay a similar amount to that which he received. Exactly the same thing could be accomplished by wiping the whole thing out.

Unfortunately that is not the situation in Canada. A comparatively small number of people own that national debt which is said to be a national asset. Therefore those few people receive the interest on that debt, while the whole of the people of Canada have to be taxed to pay it. In other words, it is a levy on the whole of the people of Canada in order to pay a comparatively few. This budget makes no attempt whatsoever to rectify that condition.

Let me give a few examples of what might be done. People in the low income brackets should, in my opinion, have the total amount of their tax refunded; single people up to, say $1,000; married people up to, say $1,500 should have the total amount of the tax refunded, thereby giving them a share of this national debt. Where wages are frozen at low levels the wages could be increased in the form of deferred savings, thereby giving those people a share of the national debt. When prices of primary products were frozen at a level below cost of production, the difference between the prices received and the parity price could be made up by war savings certificates, thereby giving the farmers of this country a share of the national debt. If we are going to look upon the national debt as a national asset, surely it is high time we did everything in our power to bring about a fairer distribution of that debt which some people refer to as an asset.

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LIB

George Henry Ross

Liberal

The ACTING CHAIRMAN (Mr. Ross, Calgary East):

The hon. member's time has expired.

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NAT

Thomas Langton Church

National Government

Mr. CHURCH:

I rise to say something on behalf of the main income tax paying city in the Dominion of Canada, a city which in the

years before the war paid between 28 and 29 per cent of the total income tax payments of this country. I have a great deal of respect for the hon. gentlemen to my left. They are a very sincere body of men; they have a right to express their views as they have done on many occasions, and they present their ease with some ability.

Let us look at the facts of this budget. Since this income tax resolution has been reached, there has been nothing but a hymn of praise and a hallelujah chorus for the budget. I am one who believes that criticism of the budget is a wise and sensible course to pursue. I do not believe the present Minister of Finance (Mr. Ilsley) is going to make any cuckoo-land out of this country by his budget. Far from it. I come from a city where I saw the sufferings during the last war and this and the long depression among industrial workers. Toronto sent nearly 56,000 men to the great war, and then along came depression and another war. I represent an industrial riding of an industrial city and a city which stands at the top in the dominion as far as payment of taxation goes.

Let us look at some of the principles on which this budget is founded, particularly the income tax part. The minister made a very strong appeal last night in connection with inflation. I say to him that before the people of Canada get through with this budget and with all the boards of control the government have appointed over parliament's head they will have inflation. What is inflation? The high cost of living in war which affects the working class of the country is popularly called inflation by some, although technically it is not. There are many phases and types of it. Speaking as a citizen I wish to say something about the way in which orthodox principles have been upset, not only in finance but in taxation and everything else, by the present Minister of Finance and by the government since this war started. There is nothing orthodox left in our land or any land in the world to-day, either in military affairs on land, sea, in the air or in anything else. The people of Germany believed might is right, but I believe that is wrong. Might plus right is right in my opinion. If we do not win this war, all our talk on inflation and budgets is unimportant. The war is Canada's only business until it is won.

What is the present policy of the government? Canada is no doubt the highest taxed country in the world. We have overgovernment and overtaxation by different bodies, dominion, provincial and municipal, carved out by the fathers of confederation for political, not economic purposes, with the

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result that this country has been suffering an untold burden of taxation without any system of control ever since confederation.

The minister, in his budget, forgets all about it. He forgets that in England the income tax clauses were not raised because they were prohibitive. They have no sales tax there. Sir Kingsley Wood was forced by public [DOT] opinion unwillingly to admit that other sources and ways of taxation would have to be developed during this war. Therefore he has upset all orthodox doctrines in his budget as a result of all orthodox doctrines being thrown into the waste-paper basket by those who believe that might is right. The United States has no sales tax either. A comparison was made by an evening paper the other night of the income tax levies of Canada, Britain and the United States, and they forgot that. They cannot fool the working class of this country.

The two old parties are on trial at the present time with regard to this budget. I am not going to sit silent here. I am a member of the opposition, but I do not represent the opposition; I express my own views.

I believe it is the duty of the opposition to tell the Minister of Finance that he is on the wrong ground, first, last and always, in regard to this system of taxation which, in my opinion, is, for the small man, the retailer, and the wholesale man, nothing but confiscation of property.

The minister has embarked upon a wide campaign and excursion into state socialism and regimentation. Look at the control boards he has appointed here in Ottawa. At a Rotary club luncheon a certain gentleman, Mr. Elliott Little, last Monday announced over the head of this parliament while we are in session a system of control calling up 250,000 men, which has practically abolished parliamentary institutions. The Minister of Labour (Mr. Mitchell) should be interested in that, because he comes from an industrial area himself. The system enunciated by Mr. Little will mean the regimentation of labour all over Canada, with 250,000 men to be found within the next few months. Where will they come from? They will be taken out of industry and trade and made subject to regimentation, with no definition of what is a war industry, with no provision for anyone to replace them, or whether they will help in war work or do a thing to beat Hitler. Then they are going to register the women as well, and we are to have a women's army. Many persons so taken will walk the streets, and with absenteeism in industry will do little. With all these registrations it is no wonder we have a budget like this presented.

Since the war began, we have six or eight or nine different registrations and regimentation for everyone from the time he is born until the time he dies. That is inflation of another kind, which is causing untold suffering in this country, and mostly not for war at all.

I believe too much money is being taken from the taxpayer, and the taxpayer wants to know whether or not all this money is being spent for war purposes. I could name thirty instances of large sums of money, ranging from $1,500,000 to $6,000,000, not spent for the winning of the war. We spent $6,000,000 for the League of Nations. We spent $1,500,000 for the taking of a useless plebiscite, pure political manoeuvring, which has occupied the time of this house off and on since last January.

All these control agencies started off in a minor way. When I asked the minister before Easter about this price ceiling he did not know what it would cost. Then during the Easter recess Mr. Gordon went to Winnipeg and announced that the cost of the ceiling would be $2,000,000. Later on, the minister announced for next year the estimated figure of $50,000,000, or $14,000,000 more than the Tupper government spent in 1S96, the year it went out of office. The Minister of Finance is spending a mint of money like water, with no adequate control and no attempt at economy. I can find no economy anywhere in the budget. You have to see the cause and effect of it all. The victory loans and war savings certificates campaigns cost from a point to a point and a half too much, and I do not wonder at some of the complaints that have been made by my hon. friends to the left. The cost of those loans was too great; the commissions to brokers were too high-entertainments, dinners, hotel and travelling expenses, and all that sort of thing. Too much money is being taken from the taxpayer. In the budget too much money is being charged to income and not enough to capital. The minister and his advisers forget that this generation is suffering in flesh and blood, as the last generation had to suffer in the last war, and I believe that posterity should be given a chance to pay part of the cost of this huge war effort, because they will reap the benefit of it.

This is purely a Washington budget, Mr. Chairman. Let me give you the seven points in the budget of Mr. Morgenthau and Mr. Roosevelt: first, that corporation earnings must be taxed heavily; second, that ceilings on prices must be maintained; third, that remuneration for work done must be stabilized; fourth, that prices received by farmers must be stabilized; fifth, that all

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citizens should buy war bonds and that there shall be compulsory saving-that is where our idea came from, but when these taxes are paid there will be nothing for the people to save-sixth, that scarce commodities must be rationed, and seventh, that buying on credit must be discouraged and repayment of debts and mortgages encouraged. Those are the seven points of the United States budget. They give the objective there for the coming twelve months, in war and in peace, and for civilian workers as well. In our budget, however, I can find no objectives for the coming year. The minister is just spending money right and left, taking too much from those who pay income tax, bringing the low salaried man under it, and creating conditions in industry, trade and commerce, and among retailers and small wholesalers which will bring about wide unemployment in Canada, complete regimentation and the absolute ruin of private retail and wholesale business. Those seem to be the objectives, and that policy also has been announced by the controllers, the sub-controllers, the dreamers and the controllers with schemes, who have been foisted upon the government of this country while parliament was in session, over our heads, and over whom we have no control at all, and who spend what they like.

Who are paying this income tax? It is being paid largely by the industrial workers of the two central provinces. They are the people who are going to be hit again, as they have been hit every time since the war started. First of all you talk about your orthodox methods in the budget, but look at the way in which the government has robbed the municipalities and the provinces of their revenues, by coercion, by seizing the income tax which until 1917 was the exclusive field of the municipalities, and then letting them have part of it back. This government is upsetting the whole basis of confederation. The provinces have had their revenues taken away, and therefore we might as well abolish the basis of confederation itself, and abolish municipal and provincial institutions. There is no such thing as an orthodox method at the present time. A great deal was said yesterday and to-day on the question of money. You would think the battle against Hitler was going to be won in this house by an academic discussion'- it is nothing more-about the functions of money and the basis of credit. Such a discussion is regrettable, because I do not believe any drastic economic changes can be made while the war lasts. I am not one of those who believe in a new utopia to

come after the war, but I do say that the present banking and economic system of this country has not functioned as it should during the war, which is one reason why it is being criticized so heavily to-day.

I have nothing against the present Minister of Finance. He is a very hard worker and painstaking. I have a great deal of regard and respect for him, though I do not know him very well except as I see him across the floor of the chamber. From what I have seen he has been a very hard working member of the government, though I do not always agree with eveiything he says. It has seemed to me, however, that a lawyer is not the proper person for a Minister of Finance, and there is no disparagement in that because I made the same statement ten years ago. The whole training of a lawyer is against him when he becomes Minister of Finance, because he studies briefs, and he has to rely on his assistants and advisers almost entirely. A lawyer is not trained for the vexed problems of the functions of money or systems of credit. There was one great Minister of Finance, Mr. Robb, who was a working-class man; who, as he said in one budget speech, went to work in a mill when he was eight years of age. He was a very able and painstaking Minister of Finance; he sympathized with those who paid the taxes and labour and the farmer and industry, and did all he could to remedy conditions in the country with regard to both capital and labour. Lawyers are all right in their way, but I think they are out of their proper sphere when they dabble in finance. That has been made evident by some of the lawyers we have seen in this house. Look at England. During the seven years' war, the great Napoleonic wars and the hundred years' war, the two Pitts were not lawyers. Burke and Fox were not lawyers, and they handled financial matters. George Canning, one of the greatest chancellors of the exchequer, who kept Britain out of Europe's wars for fifty years, was not a lawyer, nor Palmerston. John Bright was not a lawyer, Disraeli was not a lawyer. Gladstone, a chancellor, was not a lawyer. Mr. Neville Chamberlain was not a lawyer but a plain business man, nor Mr. Churchill, nor Baldwin, nor Bonar Law-all chancellors.

The country cannot stand these high taxes much longer. Look at the great upward increases that have been made in the income tax schedules. The government seems to have forgotten all about those who are dependent upon others for a living, those who are physically unfit, the halt, lame and blind, the aged people and soldiers' dependents who cannot go on relief. The municipality will not give them relief; the province will not give them relief,

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and it is and always was a federal burden. The dominion should shoulder the whole cost in war time of these people driven to the wall. It should look after the sick and aid the suffering, and not leave that to relatives who have enough to do to pay their own taxes, and who haxe worked hard all their lives.

I am surprised that the present Minister of National Revenue (Mr. Gibson), who represents an Ontario seat, in the Toronto district, does not know these things, and does not protect the toilers and workers of industrial cities like Toronto, Hamilton, London, and Windsor, from this confiscatory budget. I happen to know that when others occupied the office he holds they asserted their rights; they did not allow themselves to be used by a lot of people in another department, that of finance, who are nothing but theorists. That is the trouble with a lawyer in a department like that; he relies too much on his assistants. Here is the budget, and what have we? I doubt if there is one man trained in actual finance in the whole department. There are many men of great ability, like one of the two gentlemen who sit in front of the Min-inster of Finance to-night, Mr. Fraser Elliott, a man whom you could not replace for a great deal of money. These men are among the best officials we have, and I doubt whether there is a higher class of civil servants in any other country. If their more moderate economic views were more generally accepted by the minister of the day, who is there to-day and away to-morrow, we would get a better budget altogether and not an income tax beyond all bounds.

When the tumult and the shouting dies; when the captains and the kings of this financial budget depart; when this new-born financial scheme, this budget, has reached its maturity, what will the harvest be? It will mean that the small retailer will have to quit, that the owner of a little property-a small mill, a few cows, a little store-the dealer and the artisan, the men who have borne the heat of the day and worked all their lives, will, through the inequalities of this budget, be put out of business altogether. I have received many letters in the past few days from Toronto. Here is one from a poor working man, who would lose his job if his name were known:

I am going to lose my home through the new income tax. My boy loses his schooling. Can't you persuade the government to give a larger exemption and to not put the increases in effect till August 1st, instead of making them retroactive to January? I write to you because you are said to be the small fellow s friend.

This is typical of the case of many hardworking men in Toronto who have spent their lives in trying to make a living. During the depression many of them were driven to the wall. Some served in the great war.

I have urged that we should have a fixed date for a budget, as large institutions do; also there should be a committee of ways and means such as they have in Washington. If we had such a committee to consider all these inequalities in the income tax sections of the budget-two pages of them-they would make a better budget, by eliminating inequalities and all that kind of thing, than the budget as presented by the minister. Remember that this war may last seven years. There may be seven war budgets. What are we going to do about it? Is everybody going to work for the government? Is everybody going to have a job at so much a week in the public service by state socialism and complete regimentation? Are all those qualities of thrift, of saving, of initiative which made Canada, those qualities which made this empire great, which raised Britain to the position of the market of the world, which made the United States what it is, which developed Canada in those earlier days when everybody owned some property, the days of Macdonald, Cartier and Laurier, now to be taken away by budgets and controls and sub-controls and all that kind of thing?

There are a great many inequalities, inconsistencies, injustices and cruel wrongs in the income tax and these sky-high resolutions. First, there is the raising of the rates. If you make comparisons with Great Britain and the United States, allowing for overgovernment and its effects on taxation, it will be found that the rates imposed in Canada are the highest that any country has ever paid in the history of mankind. We have a huge sales tax; the other two countries have none. No country can stand it; the taxpayer is going to be driven to the wall and put out of business. I know there has been a great chorus of approval from the press, the paid workers, the victory loan people and others of that ilk, including two or three regiments of paid artillery, cavalry and infantry of control talkers and speakers at luncheons, who are backing up the controls of the present minister and being well paid for it. But in the hearts of the people at home in the constituencies you will find much more knowledge than some of us have who sit here, as to how this budget affects them and will affect their children and their children's children, and the values of property, and property rights which have been rights since the creation of the world. Let me say to the authors of this

Income War Tax Act

budget that the right to possess private property is not derived from man; it is derived from nature, and the state has no right to abolish it, but only to regulate its use.

Look over this budget and where will you find evidence of economy? One-half of the money is supposed to be used for war purposes, but under this budget things are being done in the name of the war which do not amount to war at all, which do not amount to an iota toward the defeat of Hitler. One has to consider cause and effect in relation to the income tax, and the reasons for it are the unpreparedness of Canada and the mis-judgment, by some who are the authors of this budget, of the whole world war situation.

What is there in the budget for the relief workers, for the aged, the infirm, the physically unfit? Those who have borne the heat and burden of the day are disregarded; and the soldier is the forgotten man of the whole thing. The minister, as I have read his address and special pleading here, has never had sympathy for the soldier. Since I came to this house I never heard him say one good word about equality of treatment for soldiers as compared with civilians. Is it the theory of the budget that a man who enlists loses his civilian rights, his right to adequate pay, while this country is spending four million dollars a day, and is going to spend ten million dollars a day in the coming year-far more in one week than was spent in the whole year 1896? Soldiers' families have to live, and they cannot live properly without a cost-of-living bonus and removal of the inequalities in the pay of the forces.

The minister has forgotten many things m connection with this budget-the housing question, a national fuel supply, a national moratorium, interest reduction, and many other things which would create work so that the toilers could earn a living.

The minister talks about shooting holes through the budget. I can tell you one agency which is doing a lot of shooting holes m the budget-the very people whom the minister represents in this house. He as a minister of the crown is responsible for all these controls and sub-controls and commissions which have been appointed, and these are the people who are shooting holes in the budget and crippling the ability of the taxpayer to provide money for all the schemes which have been proposed in this connection, and are not doing a snap of the fingers to help win the war.

The application of these exemptions omits all consideration for the sick, for those who are physically incapacitated, and there is no use in their going on relief. The minister has not

even considered the ability of the people to pay. Mr. Churchill, not a lawyer, who was himself once chancellor of the exchequer, said on April 13, 1939:

I know very well the patriotism and sincere desire to act in a manner of perfect rectitude which animates ministers of the crown,-

He was speaking about the preparation of the budget.

but I wonder whether there is not some hand which intervenes and filters down or withholds intelligence from ministers.

The people want to know whether all the extra money that is to be raised by these income taxes and the budget is to be spent for war. The people want the money that is raised for the war to go for the war, and not to be diverted to civilian purposes and frittered away so lavishly on price ceilings. They want the war vigorously and effectively carried on, and there would be no objection from a single taxpayer, rich or poor, high or low, if he could be assured that there was going to be an honest dollar expenditure for the prosecution of the war from every honest dollar of taxation raised by this budget.

Talk about the conscription of wealth! This budget will mean that from one-third to one-half of the people who in the last war and in this war have contributed to victory loans and war savings certificates will no longer be able to buy bonds and war savings certificates. The income tax features of the budget will cause widespread unemployment and the utter collapse of many businesses, large and small. It is leading to regimentation and state socialism.

The income tax schedules are unjust and unfair. The whole budget is just a gesture toward state socialism. Talk of the conscription of wealth! I do not know anybody who has any wealth, because the rich man has all his income taken away by this budget, and I do not know where the poor man is going to be after the government has taxed his income as this budget proposes to do. There will be wholesale conscription of the property and income of the small retail merchant. The small retailers and some wholesalers also were told to get out of business by Mr. Little and by Mr. Gordon, when Mr. Gordon was speaking in Montreal and Mr. Little in Ottawa and Toronto. Mr. Gordon warned them that they would have to close up because they could not get the materials, and all that kind of thing. If all this regimentation and control were going to do anything to help beat Hitler, there would not be one word of complaint. But they are not.

Great Britain has passed an act which is contrary to this whole budget. They tried

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unsuccessfully to control business over there, but what are they doing now? The House of Lords has passed a bill called the Pre-War Trade Practices Act to put the small retailer and the small wholesaler back to where they were before and give them a chance to live. The legislation was initiated in the British House of Commons and is now law.

I am a Conservative and have never been anything else, but I tell you this, Mr. Chairman, that the financial system of this country has never been tested as it is being tested now. I am a believer in sound money, but there is no such thing as sound money when Hitler is at the gate. Right is might, is the old saying, but might plus right is right. This budget in itself will do quite a bit to shoot holes through the attempt to check inflation, and inflation is a danger; but by using wrong methods we are defeating its uses and objectives.

National currency has been mentioned. I do not believe that the Bank of Canada is doing what it should do in this war. It could handle lots of this control business without any cost to the taxpayer, instead of the prices and other boards opening up offices all over Canada, with a useless duplication of services by a lot of figureheads, because that is what many of them are. I see some of their work in the riding in which I live. You cannot get a prescription refilled at a drug store. I have had throat trouble for three weeks, and I could not get a prescription refilled at a drug store, without a new prescription, simiply because of this control policy in connection with the retail trade. I tried to get information in the Toronto district about this from one of the department store chiefs who are serving two spheres and two masters in helping to administer this control system, but he referred me to the chairman who would not even reply. You cannot get goods delivered now by a store unless you buy a dollar's worth, but often you have to spend $2 to $2.25 on goods you do not want, in order to get deliveries, and a large number of children who used to deliver parcels from drug stores have been put out of work. That is the kind of control and inflation that goes on unchecked, and then you talk about control.

If a committee of ways and means went into this budget they would find, on checking it over, that half or a third of the money that is to be raised by it will not amount to a snap of the finger in beating Hitler.

We could not qualify as a country under the lease-lend bill, under which help is being given to Greece, Australia, part of France and many other countries. Is there any reason why we should not qualify? After

Dunkirk, for two years the British fleet protected the shores of America, and we could have qualified under the lease-lend bill for a large part of the capital expenditure that is being made. If we were to count up what we are spending to protect America's shores, if she is attacked, the defence board's work was very largely wasted.

Then we have useless embassies, and publicity departments in the United States that are not worth a 5-cent piece. Britain put on a publicity campaign for nearly two hundred years to win over the United States, yet before Pearl Harbour she was the worst hated nation in the world by a section of the people in that country. Had it not been for Pearl Harbour, they would be isolationist yet, and they had the protection of the British fleet for two years, or they, as well as Canada would have had to settle with the axis powers long before this. I have a great admiration for the people of the United States, but I do object to one dollar being spent over there on publicity. It is not necessary. I object to any waste of money on useless publicity and information bureaux in Canada and the United States. No reasonable economy is being practised by the government. On the contrary big-stick methods and scarecrow armaments are being used on the people of this country daily by controllers of all kinds, many of whom talk nonsense with useless duplication and waste.

We in the opposition-I speak for myself- might be better employed if we were offering some constructive criticism of this budget. This budget aims at a socialist state. We over here should show a better understanding of our needs and should tell the country that this is not a budget to win the war but to destroy the present basis of our society. The people of Canada would not object, no matter how heavily they were taxed, if the money was going to the war and to beat Hitler. Our hearts may be sound, but our heads must be weak if we do not criticize this budget. In the long run the whole of Canada will suffer severely from this budget- trade and commerce, the farmer, the retailer, the artisan and everybody else-for years to come.

The income tax schedules are not what they should be, and there are many inequalities. The rich man will be reduced to nothing, and the retailer and the wholesaler will be put out of business. As for the ordinary men like the rest of us we shall have to pay the charges. People will have to get rid of their homes because they will not be able to pay the local taxation, heavy interest charges, insurance premiums and all the rest of it, and the result of it will be ruin in the end unless the

Income War Tax Act

taxes are levied on a man's net income. Is it any wonder that people want to give up their property? This system of socialistic control is all wrong, and it should be carefully reconsidered by the ways and means committee that should be set up to revise our annual budget. As I said the other night, it would be all right if this control system were going to win the war, but it is not. It is not the doubled rate I am objecting to; it is the fact that we have these controllers and regimentation and the nationalization of labour.

Mr. Elliott Little has been appointed director of national selective service. Who is he, and what training has he for such a task? He has predicted the closing down of non-essential industries so as to release workers for the armed services and war plants. The House of Commons was not consulted about this. He made the announcement before the Rotary club here in Ottawa. Is the Rotary club the House of Commons before which he can go and give an opinion, and give directions to 250,000 workers? No definition is given by him of a non-essential industiy. Who is going to decide whether these non-essential industries can be dispensed with? How is it going to be done? We are just heading for national bankruptcy, confusion, muddle, delay, duplication and waste, and are only going to bring the war closer to our shores, by such a control policy that no one will be sent overseas.

Is it the war policy of the government to control and administer every walk of life and almost every article or commodity of trade and commerce? If so, it will lead this country to disaster and national bankruptcy and will not help the war effort. It is a funny thing that no one on the government front benches knows how many of these bureaucratic boards there are, what amounts they are spending, the number on their payroll from week to week or month to month, what functions they perform and how it is all working out. If it is necessary to win the war, no one will object, but it is not. I say: beware of this evil, this bureaucracy within our gates, with headquarters at Ottawa. What we are to-day urged to accept as a war necessity, we shall be told tomorrow we must accept it as a necessity of peace days. Therefore the mighty host of bureaucrats at Ottawa, their sisters and cousins and aunts, some in military uniform, if you please, to fight Hitler at home, will be always with us. All I can say of most of their controls is, never were there so many who knew so little about so much. The small independent business -man is being faced with ruin and our people are being faced with the loss of their freedom and independence for which the

democracies are now fighting. In one year Canada has been converted into a totalitarian socialist state without the knowledge of the people or without any authority from parliament. Restraints are being placed upon thrift and upon business being carried on in the traditional policy of free enterprise and individual responsibility. Unless this is checked, it will lead us to trade and commercial ruin, stagnation and, in the end, insolvency amid all these complex controllers and totalitarian maelstroms, with which business is being hamstrung by their overnight social changes and arbitrary conditions which are altogether impossible and foreign to the temperament of the Canadian people and not at all adapted to their circumstances.

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LIB

Ralph Maybank

Liberal

Mr. MAYBANK:

I rise chiefly for the purpose of asking one or two questions with relation to matters in the budget, but before doing that I desire to advert to some of the remarks made yesterday evening by the hon. member for Parry Sound (Mr. Slaght). Anything I might say anent the hon. gentleman's remarks will be critical and not laudatory, and for that reason I am glad that he has just come into the chamber.

It seems to be the fashion for members of the opposition when speaking on the budget to say a few words of faint praise for the Minister of Finance (Mr. Ilsley). If you are a member of the same party as the minister, apparently you should go to great lengths to discuss him and possibly make some laudatory remarks about his forbears or any other thing that might be favourable to him. I shall not follow that procedure, because I feel that perhaps enough has been said already. If the minister really believes it-I fancy he pays no attention to it-he must be endeavouring to decide whether to wear his halo with a slant to the right or a slant to the left.

I would, however, say this about the minister. I never witnessed anything which gave me more pleasure than the manner in which he quickly and without hesitation rose in his place and traded punches with the doughty member for Parry Sound. So far as I am concerned-of course, others may differ-were I the referee, the decision would be given unhesitatingly to the Minister of Finance, in respect of style and matter and everything else in connection with that particular little bout. I have never witnessed any person demolished more naturally, more completely, more effectively than the hon. member was demolished by the minister yesterday evening. It partook of the nature of one of those affairs when Joe Louis dealt with one of the white hopes whom he saw in front of him

Income War Tax Act

for only about thirty-nine or forty seconds; thereafter he had to look down to see him.

I take pleasure in saying this, but I do not say it with any feeling of animosity toward the hon. member for Parry Sound. I have great friendship for him, but he was so far wrong last night and what he was saying was so dangerous that the only possible course open to the minister was to do what he did.

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Subtopic:   INCOME WAR TAX ACT
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SC

Charles Edward Johnston

Social Credit

Mr. JOHNSTON (Bow River):

What parts are you referring to?

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LIB

Ralph Maybank

Liberal

Mr. MAYBANK:

If the hon. member

does not understand me fully, I shall have to explain it by drawing a blueprint for him after the session. In the case of most people it will not be necessary for me to draw a blueprint in order to make myself understood.

I consider that what happened yesterday evening was absolutely necessary. A doctrine of that kind should not be introduced at a time like this, at a time which may prove the most harmful in the history of this country. There is nothing more dangerous than to meddle with our money system at this particular time.

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SC
LIB

Ralph Maybank

Liberal

Mr. MAYBANK:

That may be your

opinion about that. Surely if a person knows that we are in one war with somebody on the outside, he should realize that it is no time to get another one started on the inside. There are always those who are spoiling for a fight, so much so that they will turn round and hit anybody just to have more rows going. As I say, I felt it was necessary for the Minister of Finance to act as he did, and that is the only reason why I am so pleased that he did so.

Probably I shall not go into the merits of the proposals of the hon. member for Parry Sound, but I do wish to draw this to the attention of the committee. Yesterday evening he followed the accepted canons of oratory. He made two or three remarks in order to attract the attention and sympathy of his audience, he carried them along with him while he discussed the sad position of the officer in the army, the married man as opposed to the single man, and so on. He did that in order to bring the crowd under his spell, and then he enunciated his main doctrine.

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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

That is

the creation of atmosphere.

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Subtopic:   INCOME WAR TAX ACT
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July 16, 1942