July 18, 1946

LIB

Ian Alistair Mackenzie (Minister of Veterans Affairs; Leader of the Government in the House of Commons; Liberal Party House Leader)

Liberal

Mr. MACKENZIE:

Or by the Liberal government of Canada.

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

-or by the Liberal government of Canada. There is one development in this debate which I was glad to see. I was glad to see members of the Progressive Conservative party, even in their feeble halting and ineffective way, struggling to criticize expenditures.

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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PC

Gordon Knapman Fraser

Progressive Conservative

Mr. FRASER:

We did not have to struggle very hard.

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

The hon. gentieman's contribution was to produce an empty envelope. I join with them, but I do not for one moment admit the government has not done everything within its power under the circumstances to get expenditures down. We have made tremendous cuts in the expenditures; and unless we can get better suggestions than we got from the opposition in this debate, as to where to go from here, we shall have to think of other means ourselves. I do not mind saying that I wish a lot of this pie-in-the-sky business, such as we find in the Progressive Conservative platform, would be cut out for a while now, and I think it will be, inside and outside this house until we get our budgets balanced, especially in periods when our employment and income are high.

Abbott Adamson Jutras Kidd Baker Beaudoin Belzile Benidickson Bertrand (Laurier) Bertrand (Prescott) Bertrand (Terrebonne) Black (Chateauguay-Huntingdon)

Black (Cumberland) Black (Yukon)

Blair

Blanchette

Boivin

Bonnier

Boucher

Bradette

Bradshaw

Breithaupt

Bridges

Brooks

Brown

Cardiff

Case

Casselman

Charlton

Chevrier

Church

Claxton

Cleaver

Cloutier

Cote (Verdun)

Coyle

Croll

Cruiekshank

Daniel

Dechene

Denis

Dion (Lake St. John-Roberval)

Douglas

++NAYS

Messrs:

Jackman

Jean

Kirk

Lafontaine Lalonde Langlois Lapointe Laurendeau Leger Lennard Lesage Little McCann McCubbin McCulloch (Pictou) Macdonald (Brantford City)

Macdonald (Halifax) Macdonnell (Muskoka-Ontario)

McGarry McGregor Mcllraith Mclvor Mackenzie MacKinnon MacLean McMaster MacNaught MacNicol Marier Martin Mayhew Menary Merritt Mitchell Mullins Mutch Nixon Pearkes Picard Power

Raymond (Wright) Reid

Richard (Gloucester)

The house divided on the amendment to the Farquhar Richard (Ottawa East) Robinson (Bruce)amendment (Mr. Maclnnis) which was nega- Fleming Fournier (Hull) tived on the following division: Fournier (Maison-neu ve-Rosemont) Robinson (Simcoe East)YEAS Fraser Fulton Ross (St. Paul's) St. LaurentMessrs: Gariepy SennArchibald McCuaig Gauthier (Nipissing) Sinclair (Ontario)Argue McCullough (Assini- Gibson (Comox- Sinclair (VancouverBentley boia) Alberni) North)Blackmore Maclnnis Gibson (Hamilton SinnottBowerman McKay West) SkeyBryce Matthews (Kootenay Gingues Smith (Calgary West)Burton East) Gladstone StephensonCampbell Moore Glen Stuart (Charlotte)Coldwell Nicholson Golding StirlingFair Probe Gour (Russell) TremblayGillis Queleh Gourd (Chapleau) TustinHamel Raymond (Beau- Graydon ViauHansell harnois-Laprairie) Green W arrenIrvine Shaw Hackett WebbJaenicke Strum, Mrs. Harkness WeirJaques Thatcher Harris (Grey-Bruce) White (Hastings-Johnston Townley-Smith Hazen Peterborough)Knight Wright Henderson WhitmanKnowles Wylie Howe WinklerLow Zaplitny-37. Ilsley Winters-135.

[Mr. Ilsley.)

The Budget-Division

The list of pairs whips.

Clark

Ross (Hamilton East)

Maybank

McLure

Marquis

Maloney

Eudes

Michaud

Gauthier (Portneuf)

Isnor

Healy

Lapalme

McDonald (Parry Sound)

Pinard

furnished by the chief

Desmond

Cockeram

Diefenbaker Dionne (Beauce)

Dorion

Drope

Homuth

Ferguson

Murphy

Hatfield

Charlton

Heon

Daniel

Stokes

is

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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LIB

James Garfield Gardiner (Minister of Agriculture)

Liberal

Mr. GARDINER:

I was paired with the bon. member for Souris (Mr. Ross). Had I voted I would have voted against the amendment to the amendment.

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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PC

William Earl Rowe

Progressive Conservative

Mr. ROWE:

I was paired with the hon. member for Quebec West and South (Mr. Parent). Had I voted I would have voted against the amendment to the amendment.

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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PC

John Bracken (Leader of the Official Opposition)

Progressive Conservative

Mr. BRACKEN:

I was paired with the Prime Minister (Mr. Mackenzie King). Had I voted I would have voted against the amendment to the amendment.

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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PC

Clayton Wesley Hodgson

Progressive Conservative

Mr. HODGSON:

I was paired with the hon. member for York North (Mr. Smith). Had I voted I would have voted against the amendment to the amendment.

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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SC

Anthony Hlynka

Social Credit

Mr. HLYNKA:

I was paired with the hon. member for Rost'hern (Mr. Tucker). Had I voted I would have voted for the amendment to the amendment.

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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SC

Walter Frederick Kuhl

Social Credit

Mr. KUHL:

I was paired with the hon. member for Kings (Mr. Grant). Had I voted I would have voted for the amendment to the amendment.

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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SC

Patrick Harvey Ashby

Social Credit

Mr. ASHBY:

I was paired with the hon. member for Temiscouata (Mr. Pouliot). Had I voted I would have voted for the amendment to the amendment.

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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IND

Herbert Wilfred Herridge

Independent C.C.F.

Mr. HERRIDGE:

I was paired with the hon. member for Bonaventure (Mr. Arsenault). Had I voted I would have voted for the amendment to the amendment.

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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LIB

James Ewen Matthews

Liberal

Mr. MATTHEWS (Brandon):

I was paired with the hon. member for Norfolk (Mr. Barrett). Had I voted I would have voted against the amendment to the amendment.

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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IND

Paul-Edmond Gagnon

Independent

Mr. GAGNON:

(Translation): Mr. Speaker, I was paired with the hon. member for Levis (Mr. Bourget). Had I voted, I would have voted for the sub-amendment.

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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PC

John Bracken (Leader of the Official Opposition)

Progressive Conservative

Mr. JOHN BRACKEN (Leader of the Opposition):

Mr. Speaker, the motion before the house is to go into committee of ways and means to consider the measures by which the government is proposing to raise the funds necessary to carry on the government of Canada. The debate on this motion has come to be known as the budget debate. Whatever else may or may not be discussed in the budget, there are three things that always are; the question of expenditures, the question of taxes and the question of the government's attitude toward its increasing debt and caring for that debt. Any other matter may be raised during the budget debate, but to-night I propose to deal only with two points, because most of the other points have been dealt with by speakers on all sides of the house as well as by members of the party for which I speak.

I wish to refer to two of the points referred to to-night by the Minister of Finance (Mr. Ilsley), namely, the question of dominion-provincial relations and the question of the taxation of cooperatives. Before I do that, I might comment upon the closing remarks a moment ago of the Minister of Finance when he said that if we did not show him how to reduce expenditures, they would have to go and do it themselves.

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

I said we are doing it,

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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PC

John Bracken (Leader of the Official Opposition)

Progressive Conservative

Mr. BRACKEN:

The Minister of Finance says that they are doing it. The Canadian people will have their own opinion about that when they realize that the present budget in a peace-time year provides for the expenditure of $2,700 million, or five and a half times as much as was provided for in any peacetime year before the war. They will have their own opinion when they realize the size of the tax bill which, with the non-tax revenue, is now some $2,400 million, or five times as much as in any other peace-time year. They will give consideration also to the increasing indebtedness which this year is $300 million on current account and $1,000 million on capital account, and they will as well give consideration to the size of the total debt of this country, which now stands at nearly $16,000 million, or more than four times what it was in any peace-time year.

As I said, I propose to deal only with two questions, that of dominion-provincial relations and that of the taxation of cooperatives. In connection with the latter, the Minister of Finance has anticipated one or two of the things I had intented to say. Nevertheless I shall say what I intended to say in the manner I was prepared to say it.

The Budget-Mr. Bracken

The question of dominion-provincial relations was first set out in detail in the British North America Act, 1867. In that act the dominion government was given certain powers and the provinces were given certain powers. The dominion government was given certain responsibilities and the provinces were given certain responsibilities. These powers and responsibilities are set out pretty largely in sections 91 and 92 of the act. Dealing with the powers resting with the dominion, section 91 has this to say:

. . . the exclusive legislative authority of the parliament of Canada extends to all matters coming within the classes of subjects next hereinafter enumerated, that is to say,-

I shall mention just two subsections:

(3) The raising of money by any mode or system of taxation.

In other words, the dominion government is not limited in the field of taxation.

(4) The borrowing of money on the public credit.

The powers of the provinces with respect to taxation and the raising of money are set out in section 92 which provides:

In each province the legislature may exclusively make laws in relation to matters coming within the classes of subjects next hereinafter enumerated; that is to say,-

2. Direct taxation within the province in order to raise a revenue for provincial purposes.

In other words, the provinces are limited to the field of direct taxation and cannot invade the field of indirect taxation. Subsection 3 reads:

3. The borrowing of money on the sole credit of the province.

So much for the relative powers of the dominion and the provinces with respect to taxation.

How were the responsibilities divided? The exclusive powers and responsibilities of the provinces are largely enumerated in section 92. They cover taxation and borrowing, already mentioned, the management and sale of public lands belonging to the province and of the timber and wood thereon; public and reformatory prisons in and for the province, and so on. In order to shorten my remarks, I shall not take the time to read these in detail, since any hon. member can read them in section 92. To summarize the responsibilities of the provinces covered, among many other things, education and social services and caring for the natural resources of the country. I could go on and give the details, but they are there to be read by anyone and I am sure hon. members are more or less familiar with them.

What were the dominion's responsibilities? In addition to the enumerated powers set out in section 91, they were given the general

power and responsibility to make laws for .peace, order and good government. I can summarize the responsibilities of the dominion as set out in section 91 by saying that they had to do with questions of trade and commerce; banking; peace, order and good government; criminal law and so on. A number of other items are set out in detail.

There was joint or double jurisdiction in connection with agriculture and immigration. Section 93 makes education a provincial responsibility, subject to certain remedial powers reserved to the governor in council of Canada. As I said, section 95 makes agriculture and immigration a joint responsibility of the dominion and the provinces.

Wo are thus living to-day under a federal system, a system under which the powers of the two sections are set out specifically and where the responsibilities of each are also set out. The relationship thus set out in 1867 and the other clauses of the act constitute the constitution of Canada.

In the seventy-nine years since then, several things have been demonstrated with respect to the federal system of carrying on our affairs. One is that the advantages of confederation have been inequitably distributed. Confederation tended to centralize business and industry more or less in the centre of the nation. In addition, the national laws tended to benefit.-I am referring now more particularly to the tariff-the industrial sections. The result was that industry in considerable part left the maritimes and developed in the central part of Canada. Agriculture developed in the western part of Canada. And without much in the way of industry the western provinces and British Columbia became largely exporting provinces-.

Since that time, seventy-nine years ago. the responsibilities of the provinces in confederation have increased. At the beginnng there was no government aid to hospitals, no mothers' allowances, not many social services. Social services as we know them to-day were scarcely known seventy-nine years ago, They have multiplied many times since then. Public opinion has demanded them and conditions have made them possible. The responsibility for them fell largely upon the provinces.

But the only source of revenue of the provinces, direct taxation, was never enlarged, and the small subsidies granted to the provinces in the beginning increased only very slowly. The public services which fell upon the provinces were increasing two hundred, three hundred and four hundred per cent per capita, while the subsidies granted to the provinces in 1867

The Budget-Mr. Bracken

scarcely increased at all, and in the early years there was very little resort even to direct taxation.

As a result of these conditions-and it was emphasized particularly during the period of 1930's-certain sections of Canada could not provide a measure of public service on anything like a reasonable standard without imposing excessively heavy rates of taxation on the people of the provinces affected. Under those conditions there arose a demand upon the dominion government to sit in with the provinces and arrange either to take over more of the responsibilities which fell upon the provinces or to raise additional funds and give them to the provinces on the basis of fiscal need wherever it was needed. These demands, of course, had arisen many times -before 1930 and adjustments had been made for the mari-times, the prairies, for British Columbia, in fact for all the provinces. But the question became a major problem in the depression of the thirties, and accordingly the dominion government was prevailed upon to appoint a royal commission, which later became known as the Rowell-Sirois commission, to inquire into dominion-provincial relations. The order in council appointing that commission, P.C. 1908, had the following four instructions for the commission:

(a) to examine the constitutional allocation of revenue sources and governmental burdens to the dominion and provincial governments, the past results of such allocation and its suitability to present conditions and the conditions that are likely to prevail in the future;

(b) to investigate the character and amount of taxes collected from the people of Canada, to consider these in the light of legal and constitutional limitations, and of financial and economic conditions, and to determine whether taxation as at present allocated and imposed is as equitable and as efficient as can be devised;

(c) to examine public expenditures and public debts in general, in order to determine whether the present division of the burden of government is equitable, and conducive to efficient administration, and to determine the ability of the dominion and provincial governments _ to discharge their governmental responsibilities within the framework of the present allocation of public functions and powers, or on the basis of some form of reallocation thereof;

(d) to investigate dominion subsidies and grants to provincial governments.

Let me refer to that commission briefly. Hearings commenced in AVinnipeg in 1937 and continued for more than a year. Eighty-five hearings in all were held across Canada. The commission's report was presented in May, 1940, after two and a half years of study. In January, 1941, more than three years after the commission had started its work, the ten governments concerned met in Ottawa to consider the report. I do not need to remind the house that that conference failed to agree fMr. Bracken.]

on what to do about the matter. Let me only say again that the commission took nearly three years to study the question, and the dominion government, so it is reported, spent something exceeding half a million dollars in providing for it. A voluminous report was presented by the commission. If I may say so, it is the best study that has ever been made of dominion-provincial relations since confederation. The report consists of three published volumes and many exhibits. They and the exhibits submitted in connection with the report are, in my judgment, the best statement of Canadian political and economic problems that has ever been published.

As I said, the conference of 1941 failed. It is no use now going into postmortems with respect to it. It is enough to say that three provinces disagreed to proceeding to consider the commission's report at that time, and the dominion government dropped the matter. Well, it was a problem that could not stay dropped. Before I go on to say what followed, let me indicate to the house what that commission recommended. The commission had made a more exhaustive study of dominion-provincial relations and of the political and economical problems of this country than had ever been made before. What were their findings? A brief summary of them will be found on pages 81 to 110 of book II of the commission's report.

Briefly, the dominion was to do four things: (1) Take over all provincial debts; (2) take over the responsibility for unemployment relief for employables; (3) pay a national adjustment grant to certain of the provinces as recommended by an advisory board; and (4) pay an abnormal emergency grant if made necessary by some abnormal conditions. Those were the duties which the commission would have imposed on the dominion government.

As an offset to that, the provinces were to cease to use the following three forms of taxation: personal income tax, taxes on corporations or corporate income, and succession duties.

As I have said, the dominion government called the provinces into conference in January, 1941. That conference blew up. Since then, there have been three different approaches to this problem. The first of these we now speak of as the wartime tax suspension agreement. It was worked out late in 1941 and agreed to by the different provinces in sessions of their legislatures, most of them early in 1942. The wartime tax suspension agreement was for the period of the war and for a time after the war, and terminates in some -provinces this fall and in other provinces next spring.

The Budget-Mr. Bracken

The government was now faced with what to do when the war-time tax suspension agreements end. The government called another conference last August and presented another proposal. That proposal was modified in several minor respects at different times, and finally the conference on the government's proposals failed once more. Then, as the Minister of Finance said to-night, facing conditions as they are, the government decided to bring in still another proposal, which is the proposal now before us in the finance minister's budget. So that, following the failure of the Rowell-Sirois commission recommendations there has been a continued attack upon this question, and as well a progressive programme of mounting costs in the plans advanced.

Let me give the house a little idea of the different approaches made in these different periods. The implementing of the Rowell-Sirois commission recommendations would have cost the government $40 million. Hon. members may find that statement on page 109 of book II of the report. Forty million dollars to implement the Rowell-Sirois report. The war-time tax suspension agreements cost the dominion for the use of the personal and corporation taxes $86 million a year. Forty million dollars, eighty-six million dollars. The government's August proposal last year was estimated to cost the dominion as a rental payable to the provinces a minimum of $138 million, or, for the year 1947, $185 million. That proposal was amended at different times and, as finally presented in January of this year, it was estimated to cost the dominion $180 million as a minimum, and almost $200 million for 1947. Forty million dollars, eighty-six million dollars, one hundred and eighty-five million dollars, nearly two hundred million dollars.

And that is not all; that is only the contribution of the dominion to the provinces. In the proposals of last August there were not only financial and taxation suggestions made, but also a huge programme of social services and another programme of public investment; and it has been estimated by different persons that the total cost of all these would have been, not $40 million or $85 million, or $186 million, or $200 million, but $600 million.

And even that figure did not include the charges which would fall upon the provinces if these agreements were proceeded with, because there would have been other taxes falling upon them of-some of these

things have to be an estimate-approximately $200 million. So that proposal meant, when eventually completed-it would not all be completed in a year-additional expenditures for this country, both dominion

and provincial, amounting to $800 million a year. That is what the government's 1945-46 proposal with respect to finances and taxes, and the increased social security programme and that of public investment would have cost the people of Canada.

As I have said, the dominion proposals of last year contain three types of activities, finance and taxation, in which the dominion would take three taxes-income tax, corporation tax, succession duty-and give to the provinces, in their final recommendation for the year 1947, almost $200 million a year- $198 million. But, in addition to this, there is a huge programme of social security and also a programme of public investment aimed to try to prevent or to lessen a possible depression. As I said, the proposal was loaded with a social security and a public investment programme as well as financial and taxation features.

Prior to that, the dominion had put into effect a $240 million per annum family allowance programme. Aside from family allowances, in which the dominion admittedly invaded a field which was probably of provincial jurisdiction, the government's August, 1945, proposals so far as dominion expenditure are concerned would add up like this: rental payment for the three taxes, $198 million; old age pensions, cost to the dominion treasury, $217 million; health grants and health insurance, cost to dominion treasury, $163 million; or a total of $578 million. But from that would be deducted the amount estimated as the dominion contribution to old age pensions at present paid of $45 million, leaving these new proposals estimated to cost $533 million.

But, in addition to that $533 million, there were five items of unknown cost in the outline of the dominion proposals. Those five items were as follows: planning grants for public

investment projects; timing grants for public investment projects; grants up to fifty per cent of the cost of national resources service, production and development; unemployment assistance equal to 85 per cent of unemployment insurance benefits; and the recognition of provincial priority with respect to taxation of mining and logging operations. The total programme would cost the dominion government on ordinary account between five and six hundred million dollars. The Financial Post, in its issue of August 11, 1945, estimated that the cost would be not less than $600 million.

The latest statement I have looked at with respect to the estimated cost is from the Minister of National Health and Welfare (Mr. Claxton) at page 234 in the Hansard proceedings of the dominion-provincial conference dated May 3 last. The minister in his state-

The Budget-Mr. Bracken

ment brought the total of enumerated dominion payments up to $527 million; and as I have said, he indicated that there were other items to be added to that figure; independent students have estimated that it would approximate $600 million.

What of the expenditures which this programme would impose upon tihe provinces? The premiers would have to finance their share of the dominion's proposed health services amounting to over $100 million.. There would be additional commitments for a programme of greatly increased expenditures for hospitals, nursing centres and large facilities for the training of medical and nursing personnel. The provinces and municipalities would have to pay eighty per cent of the cost of the dominion's public investment project, the dominion-except in the case of limited classes of work-paying only twenty per cent. If the dominion were serious in putting forward these public investment proposals, it is not unreasonable to assume that they would involve an additional expenditure of between $200 million and $300 million on the part of the provinces. This means a total bill that would be imposed on the taxpayers running to between $700 million and $900 million, or let us say, $800 million, depending upon what degree of seriousness can be attached to the dominion's public investment proposals and how rapidly the programme might be proceeded with.

The dominion was asked how its social security proposals of 1945 were to be financed. It was supposed to be exploring with the provinces the possibilities of financing its share of the cost of the social security programme by some special means other than that of the general tax system now in force in Canada. Later, it became evident that the dominion had fairly clear views on the matter, as far as raising money was concerned-much clearer than were their views as to the projects which the governments were invited to underwrite. In the report of August 29, 1945, of the dominion-provincial proceedings-at pages 9 and 10, will be found this statement by the Prime Minister:

It is intended to meet a part of the dominion's share of the cost of 'the broad extension of social security, included in the dominion proposals by means of direct personal contributions.

So that what is contemplated is some other tax in addition to the taxes which we already have. The dominion wants to finance a substantial part of its social security programme by means of an additional three to five per cent tax on all personal incomes without any exception whatever. True, the rate was not definitely arrived at, but ministers-

notably the Minister of National Health and Welfare-were quoting examples of New Zealand and Australia where the rates are 5 and 7-j per cent on income respectively.

The dominion also proposed that the provinces, to meet their share of the cost of this programme, should levy an individual tax or registration fee or, as some call it, a poll tax on every person of the age of sixteen or over. One province computed that such a levy would amount to $12 per head. Everyone knows that health services cost something, whether they are paid for publicly or privately; and while the government is talking about tax reduction through one side of its month, through the other side it talks about huge projects that mean vastly increased expenditures and taxes.

Let us take the example of a married man with three children, sixteen and over. That family, on the basis of $12 per head registration fee, would pay $60. If that man's income were $2,000 and the dominion rate were five per cent, they would pay another $100, or $160 would come out of that family to finance the dominion health programme-and that is in addition to the present taxation.

What the government did in August, 1945, what it has been doing for some months since, is trying to use the taxpayers' money to bribe and bludgeon the provinces into the surrender of their constitutional rights. It was not the objects sought that were bad; but the dominion's means and methods of trying to accomplish them were, I think, reprehensible. By offering large hand-outs without being too specific about where they were coming from, or the additional taxes they would require, and by vague general assertions that the dominion could make taxes less painful than the provinces, they sought to take from the provinces their great sources of taxation. And, as if it were an afterthought, they added, in effect, "You will finance your share of health commitments by individual taxes or registration fees or a poll tax."

At this time, Mr. Speaker, I should like to say that it was my privilege to attend the closing conference in April or May of this year, and as a witness to that conference I wish to pay a tribute to all those who took part. I believe they were good Canadians. The premiers of the provinces, the representatives of the dominion government, all knew that they were facing heavy tasks. They all knew that they were facing serious problems. They all knew what their various problems were in the different sections of Canada and they stated their positions as well as they knew how.

The Budget-Mr. Bracken

Personally I was proud of those men, proud to be associated with them as a Canadian. They did not all agree. Some provinces felt that there were others more well to do. Those who knew they were in need did not have any difficulty in stating that they would like to get all they could. Those premiers who represented provinces which perhaps in the past have not been so much in need are still the premiers of their provinces. All those men, good Canadians as they were, were still the premiers of their provinces. The dominion officials were here trying to act for the whole country. I repeat, I was proud of those men as I listened to their deliberations. Naturally I was disappointed when the conference failed, but I do not propose now to attach blame to anyone. I think the groundwork of the conference might have been better laid. You cannot bring together men with different points of view in a nation like this and ask them to agree on complicated questions of this kind even after nine months. Why, even the Sirois commission took three years to study the questions submitted to them.

I do not propose to go into a postmortem. What this parliament has to do is to look at the situation as it is now and determine what is best for Canada. The conference failed. As the Minister of Finance has said, he was then faced with the preparation of his budget, and the provinces also were faced with the preparation of their budgets. And so on June 27 the Minister of Finance brought down his budget and submitted this new watered-down proposal. In it he is going to negotiate with each province individually, and he is going to offer the same total amount to the provinces of Canada as he did last summer and winter -$198 million, for 1947, on the basis of $15 a head. On the promise of $15 a head the government asks the provinces to give up to the dominion the sole right to the income tax, corporation tax and succession duties for the next five years, not three years as in the August, 1945, proposal; but the government is leaving out of this proposal the other feature it advanced last summer for social security and public investment. This proposal, which will require the dominion government to pay to the provinces $198 million next year, leaves out the other huge expenditures under the large programmes brought forward last fall. There is nothing in it now with respect to that social security programme-increased old age pensions, health insurance, unemployment assistance and so on-and nothing for public investment.

This means the abandonment, at least foi the time being, by the dominion of that social security programme and the public investment programme. A very proper question at this time is, why does the dominion now abandon its social security and public investment programmes? If they were good programmes they should be put into effect. If they were not good programmes the dominion should frankly say so, instead of trying to make scapegoats of the provinces.

In his budget speech the Minister of Finance indicated a loss in revenue through tax reductions amounting to $266,000,000, to be effective next year. The government is now bemoaning the fact that it cannot make effective tax reductions because of the failure to reach agreement with the provinces. In that respect it is trying to ride two horses going in different directions. One of the reasons put forward in support of its proposals was that they would result in reduced taxation. Think of a government coming forward with a programme the burden of which, through the dominion and provincial taxes, would amount to $800,000,000 a year and then saying, "Put this into effect and we will be able to reduce taxation more than if it is not put into effect. '

In the conference proceedings for Monday, April 29, the Prime Minister is quoted as having said:

In respect to the personal income tax, as now levied, the government is prepared to say that once the dominion proposals are accepted, and the risk of having dominion policies nullified by provincial policies having contrary economic effects is thereby avoided, the government intends to make further reductions in the personal income tax.

Think of it; that proposal, involving as I have shown a burden on the Canadian people when it is fully in effect of $800,000,000 extra, and the government then saying, in effect, "If you sign that we will be able to reduce taxes more than if you do not sign."

Continuing, the Prime Minister said:

In the same circumstances the government also intends to reduce the element of double taxation of corporate income with its tendency to discourage risk-taking enterprise.

As a matter of fact, in the contracts entered into in 1942 with the provinces the dominion government was required to reduce the corporation and income taxes; it had no choice if it was to carry out the terms of the agreement. The Prime Minister made that statement in face of the fact that if the government's programme -were put into effect additional expenditures would be imposed upon the tax payers amounting to some $600,000,000 in dominion taxes and $200,000,000 in provincial taxes, or a total of approximately

The Budget-Mr. Bracken

$800,000,000; #that is, if and when the full programme were put into effect.

The government laments that without the programme we can have tax reductions of only $266,000,000. What, I ask, would the tax reductions be with the programme in effect? Is the money coming out of a magic well? If the programme were put fully into effect, instead of a reduction in taxes of $266,000,000 in 1947 we might look for an increase of at least that amount in dominion taxation, together with an increase of a couple of hundred million dollars in provincial taxation in the near future.

According to the conference proceedings for May 3, at pages 222 and 235, the premier of No\ a Scotia made an answer to this attempt to blame the provinces for the likely failure of the dominion to make substantial reductions in taxes. He said:

I should like to point out that there is more tiian one way of balancing a budget. There is more than one way of lowering income tax. Much has been made of that at this conference. I hat statement has been repeated again and again that the income tax is to be lowered then the dominion proposals themselves-that is the effect of the statement at any rate- must be accepted. And the implication-I do not say that this is the implication desired bv the federal minister-which will spread throughout Canada is that if this conference fails and income tax is not reduced, the responsibility will rest on those nine wicked men from the provinces who came here and refused to enter into an agreement.

That statement was made by the Premier of Nova Scotia, a former colleague of many hon. gentlemen opposite, who sat right over there and who is familiar not only with dominion problems but with provincial problems as well.

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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LIB

Ian Alistair Mackenzie (Minister of Veterans Affairs; Leader of the Government in the House of Commons; Liberal Party House Leader)

Liberal

Mr. MACKENZIE:

Would my hon. friend permit me to intervene on a matter of procedure?

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
Permalink
PC

John Bracken (Leader of the Official Opposition)

Progressive Conservative

Mr. BRACKEN:

Certainly.

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
Permalink
LIB

Ian Alistair Mackenzie (Minister of Veterans Affairs; Leader of the Government in the House of Commons; Liberal Party House Leader)

Liberal

Mr. MACKENZIE:

I could not talk to the hon. gentleman personally because he was on his feet, but I consulted the hon. member for Peel (Mr. Graydon), the hon. member for Rosetown-Biggar (Mr. Coldwell) and the hon. member for Peace River (Mr. Low) as to sitting after eleven o'clock, and would like to move:

That the house be not adjourned at eleven o clock p.m. this day, and that the provisions theretodmg order ^ be susPended in relation

Topic:   QUESTIONS
Subtopic:   THE BUDGET
Sub-subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
Permalink

July 18, 1946