March 14, 1944

WAR SAVINGS STAMPS

ANNOUNCEMENT OF RESULT OF FOOD INDUSTRY'S FEBRUARY DRIVE


On the orders of the day:


LIB

Douglas Charles Abbott (Parliamentary Assistant to the Minister of Finance)

Liberal

Mr. D. C. ABBOTT (Parliamentary Assistant to the Minister of Finance):

On behalf of the Minister of Finance I should like to announce the most successful result of the food industry's February war savings stamp drive. The food industry established for themselves an objective of $2,000,000. They have obtained total sales of $3,055,188, being fifty-three per cent in excess of their objective.

Never before in the history of war savings have so many stamps been sold in a single month. The success of this campaign has been a stimulant to the war savings effort. I am confident that its impetus will be an important factor in emphasizing the need for greatly increased and continuing sales of war savings stamps throughout the year. I cannot speak too highly of the efforts of the thousands of people who did so much to make this campaign a success. They have made an important contribution to our war financing.

Topic:   WAR SAVINGS STAMPS
Subtopic:   ANNOUNCEMENT OF RESULT OF FOOD INDUSTRY'S FEBRUARY DRIVE
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PENSIONS

ARREARS DUE TO OLD AGE PENSIONERS AND CERTAIN WAR VETERANS


On the orders of the day:


NAT

Douglas Gooderham Ross

National Government

Mr. D. G. ROSS (St. Paul's):

Will the Minister of Pensions and National Health endeavour to speed up the back payments which are due to old age pensioners and burned out veterans, whose pensions I think were increased last January? I have had many inquiries in this connection.

Hon. IAN A. MACKENZIE (Minister of Pensions and National Health): Of course I am only concerned directly with those in receipt of the war veterans' allowance. The old age pensioners come under the Department of Finance, but I shall be glad to direct the attention of the parliamentary assistant to the Minister of Finance (Mr. Abbott) to the question.

Industrial Development Bank

Topic:   PENSIONS
Subtopic:   ARREARS DUE TO OLD AGE PENSIONERS AND CERTAIN WAR VETERANS
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INDUSTRIAL DEVELOPMENT BANK

PROVISION OF ADDITIONAL CREDIT FACILITIES FOR FIXED AND WORKING CAPITAL


The house resumed from Monday, March 13, consideration of the motion of the Minister of Finance for the second reading of Bill No. 7, to incorporate the Industrial Development bank.


NAT

Harry Rutherford Jackman

National Government

Mr. H. R. JACKMAN (Rosedale):

Mr. Speaker, it has long been the opinion of some that there was a need in Canada for an industrial development bank or some similar institution which would advance intermediate credit to small businesses. But while there may have been a need, such an institution never got under way, and I believe this house may be interested in some of the reasons why a bank of the kind never flourished in this or any other country. While one may advocate an industrial development bank, nevertheless one should look at the proposal very critically.

In Canada there has always been plenty of money both for long term investment and for working capital, as well as for intermediate credit if that was a desirable form of credit to advance to industry. When the parliamentary assistant to the Minister of Finance (Mr. Abbott) outlined the need for the proposed bank he set out, if I may say so, very sketchily the details or reasons why that bank should be incorporated at the present time, and particularly why it should come under the Bank of Canada. The main purpose he suggested was to help small industries. There was no suggestion on his part, beyond a mere expression of probabilities in the future, that investment dealers had not supplied sufficient permanent capital, or that there has been an over-centralization of commercial banking to the extent that credit was not forthcoming to small industries which might have deserved better treatment in regard to working capital. He did not say, nor does the preamble contain any suggestion, that this bill was designed primarily to create employment in the postwar period, though I suspect that this may be one of the chief reasons behind the bill, and also the reason it has received support from so many quarters in this house. Should a loss be sustained in the operation of this bank, though at the same time the bank may help create employment, it may very well be' that the loss will be counted small in view of the greater gain. Then it has been thought by some that this bill aims to prevent a depression by avoiding the under-investment of savings which, according to some theories, initiates a downward trade cycle. We find

nothing in that regard in the preamble, but it could be read into the bill, and I should kks to know from the parliamentary assistant whether or not that consideration was in the mind of the government in bringing down the measure at this time.

I have just suggested, Mr. Speaker, that there were reasons why this type of credit institution did not get going previously; because there always has been the same need though perhaps not in the same degree. We find that these institutions were considered in the Macmillan report, which dealt.also with the types of credit obtained by industries in various other countries. In Germany, for instance, we found that the banks were hand in glove with industry; that before a new company was formed the banks provided the money, stated what the capital should be, and eventually sold the securities to their depositors. In France there was also a close tie-up between the banks and industry, and there was some tie-up in the United States. In Great Britain, however, the connection between the banks and industry was not nearly as close as in the other countries I have mentioned; and the Macmillan report of 1932 recommended that there should be a closer connection, that an intermediate credit bank or an industrial development bank should be created, particularly for the purpose of increasing foreign trade.

I have always had a personal interest in these intermediate credit banks, which, as I say, never really got going. Apparently the only way they could proceed was to start in a small way, prove themselves worth while and, if they made a profit, expand and serve a greater need. But that did not come about. One small company was formed in the city of London for the purpose of supplying intermediate credit, but the experience of that company, according to the last information I had, which was before the war, was not such as would justify its expansion. It was found that if you lent $50,000 or perhaps $250,000 to a small company, you virtually had to become a partner in that industry in order to watch the loan. It was not like a commercial loan, which would come back to you within a year or so; it was an extension of credit for from five to twenty years, and you had to become almost a partner in the business in order to make sure that the money would be returned to you without loss. It has always been desirable to help the small business .man, not only from an altruistic point of view but because, in the view of business men and bankers, the small business is simply one that hopes to become large. One difficulty in connection with extending

Industrial Development Bank

intermediate credit to a small industry has been that if it issued bonds or stocks the investing public were not interested in them because there were not enough of the bonds or stocks outstanding to create a market on the exchanges or through the investment dealers, so that it was almost impossible to resell the issue after it was purchased in the first place by an investment dealer.

Are present conditions very different from the conditions which existed before the war? To-day we have a great number of new factories. Small factories have grown large; in fact it is said that the industrial capacity of this country is approximately one-third larger than it was in 1939. Existing plants engaged in the production of civilian goods will require modernization and expansion after the war. They will need to make use of some of the new techniques developed during the war, and they will require fresh capital with which to buy new machinery. Again, if we are to maintain anything like our present employment we must develop our foreign markets to the fullest extent possible; and the development of those markets, together with the extension of credit to our foreign customers, may Well mean that a bank of this kind will have to advance credits which might not be easily forthcoming from private investors or any other credit institution under the set-up that exists to-day. The preamble states that it will be the purpose of this bank to extend credit to companies which may reasonably be expected to prove successful if a high level of national income and employment is maintained, but if those conditions prevail there will be no need for the government to establish a credit institution such as that set up under this bill. Money will be forthcoming literally in an avalanche if we can promise the maintenance of anything like the national income we have to-day. Even if it is 75 per cent or 80 per cent of it, there can be no question that the public will be more than willing to provide all the money that industry requires. Certainly the $100,000,000, which is the total of assets envisaged by this bank when it begins operations, will be a mere drop in the bucket as compared with the money which will be forthcoming if the conditions laid down in the preamble of the bill are true, and are really the conditions precedent to bringing into being the operation of this bank.

Furthermore before the government embarks upon any such legislation as this we should know not only our whole post-war programme, but more particularly what our post-war taxation is going to be. At the present time no corporation pays less than forty per cent of

its earnings in taxation, even though those earnings be actually less than they earned in pre-war days. Then, should the earnings exceed the pre-war base, the average of 193639, the excess profits tax comes in and one hundred per cent of earnings above that base are taken away.

The purpose in imposing these taxes was the exact opposite of the purpose of this bill, and the exact opposite of the purpose of our post-war programme. Namely it was to throttle any expansion in civilian production. Labour was frozen, except in regard to war industries. War industries offered higher wages and took labour, away from civilian industry-and quite properly-and that is how our war production got started. But if we are to look forward to civilian production going ahead-and we hope that civilian production will be the major form of production in the post-war period-then we must remove the hand from the throat of business, and reduce taxes, so that there may be some incentive and also some compensating reward for those ventures which prove unsuccessful, because business is more often unsuccessful than it is successful.

The need for extension of credit, such as this bill envisages, however, has been aggravated by the tax policy of which I was speaking. Because of the heavy incidence of the corporation and excess profits taxes, no company has been allowed to build up its working capital position, whereby it pays for its inventory and supplies, and pays its weekly wage bill before the goods are sold. Then there have been many small companies, some of which were just starting up and did not expect to make very much money, if any, during the early days, but, as obtains in a nursery, expected a period of five or seven years' credit before they woud get any return on their capital. All those companies, realizing that they could not go through the period of the war, which might be four, five or six years, threw up the sponge and sold out to other companies which had large organizations and could maintain themselves.

So that there has been a mortality among young, new and growing companies, and this condition has been aggravated by the incidence of war taxation. Moreover, not only is there Canadian money available for industrial development after the war, but we shall have United States and British money looking for expansion in Canada. We have here the advantages of imperial preference, and a relatively bomb-proof country. I predict there will be no scarcity of venturesome money if we have fair taxation legislation in Canada.

Industrial Development Bank

If there is need for intermediate credit, plus the economic justification for it, there will be private money in bountiful supply.

Let us assume the need for this institution. What of the method? We find that our chartered banks, our commercial banks, as of January 31, 1944 had deposits amounting to $4,344,000,000-and from that sum I omit the $600,000,000 government deposits. The loans against that total of $4,344,000,000 amounted to only $1,285,000,000. In other words, there was over three times as much money in our chartered banks to be lent as business was willing to take. If we go to the banks with any reasonable kind of proposition they will welcome us with open arms. If we go to pay off a loan, one which is considered reasonably good, the banks dislike it, and would much prefer that we borrow money, because they are simply plagued with money at the present time, and this sum of $100,000,000 as against the $4,344,000,000 of deposits is so small that it is not even a drop in the ocean.

There is no likely shortage of commercial funds facing the country now, nor may I say will there be in the post-war period. Furthermore we have the action of the Bank of Canada. Truly, it may only be a gesture, but the fact is that only recently it did reduce the rediscount rate from 2J per cent to 1^ per cent. This indicates that there is plenty of money not only now but, in all likelihood, for the post-war period. Certainly that is the inference to be drawn from the bank's action. And it can be done; that is, the commercial banks can rediscount at the rate of li per cent, making available to business more credit. Yet the government comes to us and says there is a need for this industrial development bank because there may be a shortage of adequate funds in the post-war period.

Topic:   INDUSTRIAL DEVELOPMENT BANK
Subtopic:   PROVISION OF ADDITIONAL CREDIT FACILITIES FOR FIXED AND WORKING CAPITAL
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LIB

Douglas Charles Abbott (Parliamentary Assistant to the Minister of Finance)

Liberal

Mr. ABBOTT:

Would the hon. member suggest that the banking system should lend money for ten years at li per cent?

Topic:   INDUSTRIAL DEVELOPMENT BANK
Subtopic:   PROVISION OF ADDITIONAL CREDIT FACILITIES FOR FIXED AND WORKING CAPITAL
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NAT

Harry Rutherford Jackman

National Government

Mr. JACKMAN:

I suggest that the commercial banking system should not lend money for ten years, and I also suggest that the industrial development bank should not lend money for ten years either. As I will show later in my remarks, there may be another set-up much more desirable than the one proposed in the bill.

Topic:   INDUSTRIAL DEVELOPMENT BANK
Subtopic:   PROVISION OF ADDITIONAL CREDIT FACILITIES FOR FIXED AND WORKING CAPITAL
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LIB

James Layton Ralston (Minister of National Defence)

Liberal

Mr. RALSTON:

Is that the hon. member's opinion? Is that just my hon. friend's personal view?

Topic:   INDUSTRIAL DEVELOPMENT BANK
Subtopic:   PROVISION OF ADDITIONAL CREDIT FACILITIES FOR FIXED AND WORKING CAPITAL
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NAT

Richard Burpee Hanson

National Government

Mr. HANSON (York-Sunbury):

Let him go on with his speech. We are not butting in with you.

Topic:   INDUSTRIAL DEVELOPMENT BANK
Subtopic:   PROVISION OF ADDITIONAL CREDIT FACILITIES FOR FIXED AND WORKING CAPITAL
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LIB

James Layton Ralston (Minister of National Defence)

Liberal

Mr. RALSTON:

Is that the view of my hon. friend?

Topic:   INDUSTRIAL DEVELOPMENT BANK
Subtopic:   PROVISION OF ADDITIONAL CREDIT FACILITIES FOR FIXED AND WORKING CAPITAL
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NAT

Richard Burpee Hanson

National Government

Mr. HANSON (York-Sunbury):

There

is no cross-examination here.

Topic:   INDUSTRIAL DEVELOPMENT BANK
Subtopic:   PROVISION OF ADDITIONAL CREDIT FACILITIES FOR FIXED AND WORKING CAPITAL
Permalink
LIB

James Layton Ralston (Minister of National Defence)

Liberal

Mr. RALSTON:

Is that the view of the Progressive Conservative party?

Topic:   INDUSTRIAL DEVELOPMENT BANK
Subtopic:   PROVISION OF ADDITIONAL CREDIT FACILITIES FOR FIXED AND WORKING CAPITAL
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NAT

Gordon Graydon (Leader of the Official Opposition)

National Government

Mr. GRAYDON:

Keep politics out of this business.

Topic:   INDUSTRIAL DEVELOPMENT BANK
Subtopic:   PROVISION OF ADDITIONAL CREDIT FACILITIES FOR FIXED AND WORKING CAPITAL
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March 14, 1944