April 21, 1947

?

An hon. MEMBER:

Are you a lawyer?

Topic:   UTISE) COITION
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LIB

Benoît Michaud

Liberal

Mr. MICHAUD:

Consult your parliamen-tarjr guide. We have discussed this particular order in council at least two and a half hours, and I have not heard anyone suggest that it should be revoked or amended. In my opinion a proper discussion of the subject should have included the suggestion of an amendment or the revoking of the order. It is all very well to say that members wish to express their views on the question of subsidies. I suggest that such views should be expressed in the debate on the budget. All we are concerned with in this item is either to leave it as it is or to revoke or amend it. If we have no other suggestions to make we might as well dispose of it now and pass on to the next item.

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CCF

Clarence Gillis

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

Mr. GILLIS:

If you could settle the question of subsidies tonight you could prorogue the house tomorrow morning; the work of the government would have been completed. I am very much interested1 in subsidies. The Minister of Justice stated that there were two

important functions that subsidies perform: one was to avoid inflation, and the other was to act as a means of redistributing income. I agree with him on that, but there is another important function that subsidies can also perform.

In a country like Canada, where you have a complete concentration of most of the major industries in the central part of the country, and most of the markets, since central Canada has the population, we find1 at the same time a flow of trade east and west, where practically everything that is produced has to be marketed in the central markets, so that in my opinion subsidies are necessary. Therefore the third important function that subsidies have to perform is either in eastern or in western Canada. Industries operating in that part of the country will not be economic industries under the present set-up. Some system of subsidies will have to be maintained by the federal government where industry that is essential to the country is uneconomic because of geographic reasons, and the removal of such subsidies deals a death-blow to any industrial set-up east or west.

May I point out to the minister the mess that we are in, both in Nova Scotia and in New Brunswick, in connection with the coal industry. I say, without fear of contradiction, that the removal of the subsidy on Nova Scotia coal, or the refusal of the government to subsidize the wage increase demanded at this time by the mine workers in order to meet the rising cost of living, is responsible for that situation.. If you take the loss in wealth, to say nothing of the loss from human suffering, and the blow it deals to the people, undermining their confidence, in those who are legislating for them, you cannot compute what we have lost in that part of the dominion. The removal of subsidies was the reason in that case. The government subsidies came off on April 15 on fuels imported into Canada, and a. week later there is an announcement by those who sell coal in Canada that coal prices have jumped from $2.75 to $4 a ton, an increase immediately that subsidies were removed to the consumers in central Canada. United States coal today is going into Nova Scotia and is selling at $28 a ton. That is plus freight in that province. A press item today states that United- States coal, plus freight, is selling to the consumer in Nova Scotia at $28 a ton. That is with the subsidies removed. But he who is selling coal in Canada has a way of compensating himself when the subsidy is removed. He immediately announces a price increase to the consumer equivalent to what the subsidy w^as to him. The consumer then

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ia paying the shot. But those in Canada who produce a commodity that was subsidized, when they ask for an increase to compensate for the rising cost of living because of the removal of subsidies and price controls, today have to go out and enter into what is, in effect, anarchy, and fight it out in the street with the boss. That is because of lack of government responsibility.

In my opinion this question of subsidies lies at the root- of our economic problem. I do not think anyone can maintain price controls once that system of subsidies is removed; and I definitely believe that, if this economy is to survive under the present scheme of things, most of the basic industries in this country will have to be subsidized to some extent in order to hold down prices. I am not so much concerned about the secondary industries; I am speaking about the basic industries like fuel, power, agriculture and textiles. In my opinion they will have to be subsidized if prices are to be held down. As the hon. member for Mackenzie pointed out a moment ago, the lower income groups are today not in a position to purchase the commodities which they require at the price they are selling for. Taxing those in the higher brackets and redistributing that income by holding down prices to those in the lower income groups is, in my opinion, the only way to maintain any kind of stable economy under the scheme of things as we have it today.

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LIB

James Lorimer Ilsley (Minister of Justice and Attorney General of Canada)

Liberal

Mr. ILSLEY:

Will the hon. member permit me to say something?

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CCF
LIB

James Lorimer Ilsley (Minister of Justice and Attorney General of Canada)

Liberal

Mr. ILSLEY:

If we were to enter into an extensive system of subsidies such as my hon. friend is advocating, we should have to keep our taxation very high and it would not be on the high-income people alone. There are not enough of them. We should have to go right down into the low-income group. What fails to impress me about the attitude of my hon. friend right now, and the attitude of those around him, is that I have no confidence whatever in their willingness to support this or any other government in the kind of drastic taxation which would be necessary to carry out that subsidy policy.

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CCF

Clarence Gillis

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

Mr. GILLIS:

As far as I am concerned, and as far as the membership of this group is concerned, we do not expect to get something for nothing out of this or any other economy. The answer to the minister's argument is this. Utilize the resources of this country and increase production. That is the complete answer. There has not been enough emphasis placed on increasing production. We are fully [Mr. Gillis.J

aware of the fact that you can only take out of that pool in proportion to what you put into it. But the mam emphasis has not been on production, improving our machinery or developing our resources. The main emphasis has been on getting back as quickly as possible to what existed in 1939. In my opinion the government are retreating and retreating too fast. I am not afraid to pay taxes and I do not think the average workingman in this country is afraid to pay taxes. It is much better to have a man employed, with some kind of decent income, even if you are taxing him heavily, than to have him in the street, to be paying him relief, having him deteriorating at the same time and losing confidence in everything. I do not think people will quibble about taxes, provided that the taxes are put to the proper use. But I do know that in industry in Nova Scotia, the fact that the government took this adamant stand against subsidies is responsible for the fact that the whole economy of Nova Scotia and, to some extent, that of New Brunswick, is tied up at this time. A subsidy of $5,000,000 would have offset the wage increase, would have given all concerned in Nova Scotia an opportunity to go to work for a year. With a proper supervision of the spending of that subsidy by the federal government, if at the end of the year production could not be increased and there were valid reasons for this, then it would be up to us to do something with regard to the rehabilitation of the industry. But on this question of subsidy, I still say that if we can come to an understanding on it and apply that subsidy properly to the basic industries of this country, give our people some encouragement and go out for increased production, there is not any danger of inflation or of wrecking the economy because of the subsidies.

I have never met anyone on the outside who quibbled about maintaining a noneconomic industrial industry which was necessary to the country in order to give the people employment and to put on the market a commodity which was necessary to the people. I have never found anyone who quarreled with that, and I have never found anyone who quarreled with paying taxes either. It is not the taxes that I am afraid of. As long as people are in income tax brackets, they have an income. What I am afraid of is getting back to the place where we have not sufficient income to pay taxes on it. It is much better for us to have people working, producing and building themselves up as citizens of the country than to get back to this system of relief. I am seriously suggesting-and this is my main reason for

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rising tonight-that the federal government should immediately reconsider the question of subsidy as far as Nova Scotia industry is concerned and getting it back into operation.

I suggest that the government supervise the spending of any subsidies that may be put into force there; have a test there for a year at least and if, at the end of the year, there is not efficiency there, if the resources cannot be made at least fairly economic, then we should do something about getting the people into some other industry in which they can make some contribution to the national life of Canada.

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SC

Victor Quelch

Social Credit

Mr. QUELCH:

In view of the remarks

made by the hon. member for Cape Breton [DOT] South, I rise to say a few words at this time.

I agree with him absolutely when he says that the prosperity of the nation in the future will depend to a large extent on the payment of subsidies, that is, under a system of private enterprise, in order to maintain the production of the country at its maximum level and to maintain the demand of the people against that production, there will have to be a system such as that referred to by the Minister of Veterans Affairs as a compensatory system. A compensatory system is described very well by Stuart Chase in his book "Where will the Money Come From" where he advocates subsidies in order to maintain the effective demand of the people. I have heard several ministers state that subsidies cannot be paid without maintaining price control or price ceilings. I would say that depends, first, upon the purpose of the subsidies; and, second, upon the condition of production at the time the subsidy is paid; that is to say, it will depend upon whether goods are scarce or whether goods are surplus. If goods are scarce, then you will have to maintain a price ceiling. If, on the other hand, your production is surplus, the subsidies can be paid without any price ceiling being maintained by rigid controls.

May I explain what I mean? During the war a very large percentage of our production was shipped overseas, with the result that the money paid out on that production became a demand against the production left in the country, and that purchasing power became a great stress upon the price structure within the country. The government therefore desired to prevent the prices of goods from rising, and for that purpose put into effect price control. In addition, in order to make it possible for industry to pay their costs under that price control, the government subsidized industries where the costs were greater than could be met under the price ceilings. If the government had merely said to the industries concerned, "We will pay you a subsidy to make up for the increased costs, provided that you do not raise your prices," what would have been the result? In all probability some industries would have said, "To heck with your subsidies. We will increase our prices to an extent greater than the subsidies. Therefore we will recover our cost plus a profit, to an extent we could not recover it under your subsidy." In view of the fact that goods were so scarce at that time, after the subsidized goods had been sold the industries which had raised their prices would also have been able to sell their goods. That is why I say that when goods are scarce you will have to maintain price ceilings as well as subsidies.

What is to be the situation in the future? It will not be a question of reducing the demand against goods in short supply. The problem we shall face in future will be to increase the demand against expanding production, because we shall not be exporting fifty per cent of our production in the future and without bringing back imports in return. The total production of the country will be available to the people, plus the imports brought here in exchange for our exports. Just the other day Mr. Ruml issued a statement in which he said we shall probably have a depression on April 15, 1948. The analysis on which he based that statement is interesting. It supports 100 per cent the statement made by the governor of the Bank of Canada in 1946, to the effect that the great problem which will be facing this country in the near future will be lack of effective demand.

Mr. Ruml points out four reasons -why demand w'ill fall off at that time. He points out that today we have full employment. We have not quite full production because of strikes, etcetera, but we have a full demand against that production. The reason is that at the present time we are building up inventories. Those goods art not yet on the market, but the money paid out for building up those inventories is a demand against available production. In the second place, a large amount of money is being paid out for reconversion purposes; that is, to reconvert factories. That money is also a demand against available goods, because goods are not coming from those factories yet. Then he points out that at the present time a large proportion of our production is being exported with no goods being brought back in return under export credits. This means that money is being paid out in the production of goods that are not available for consumption in Canada; that is to say, the money paid out for the production

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of goods which have been exported becomes a demand against the goods remaining. The fourth reason he points to is that today we still have a large amount .of savings built up during the war, which are a demand against out present production.

He points out that by 1948 the condition will be rapidly changing. Inventories will have been built up, and the goods will be coming on the market. Reconversion will be largely completed; the factories will be completed, and goods will be flowing from them. He points out that we cannot expect to continue to export goods abroad without bringing back imports in return, and that the savings carried over from the war will have been largely spent. Therefore he points out that by 1948 our production will be increasing in relation to demand; there will be a falling off of demand, so he prophesies that by April 15, 1948, people will say, "This is not a recession; it is a depression." He admits that very likely the government will take steps immediately to change that situation, and I am hoping that the government of this country will be prepared to do likewise. However the government knows very well that, once you allow a country to start on the road to depression it is not easy to stop it, because, once people lose confidence, it is very difficult to restore it.

So, Mr. Chairman, we have .suggested that it is possible to maintain demand through the use of subsidies, and that in order to maintain those subsidies it will not be necessary to have price ceilings. We say the government can meet with industry and say, "If you are prepared to produce at a fair profit we will pay you a subsidy." That is to say, the government will set up a commission whose duty it will be to examine the relationship between demand and supply from day to day, week to week and month to month. If over a period of three months, say, they find that demand is lagging behind supply at the rate of perhaps ten per cent, so that demand is only ninety per cent of supply, then through the commission the government would say to industry, "We will pay you a subsidy of ten per cent on condition that you reduce your prices by ten per cent in order to restore the balance between demand and supply." If any industry refused, obviously the industries that did agr.ee would be able to undersell the one that did not by ten per cent; and in view of the fact that the situation will not be the same as it was during the war, but one in which production is available, then an industry which refused to reduce its prices would have a great deal of difficulty in selling its goods in competition with goods which were being subsidized and sold at a lower price.

That is why I say in future, when production is expanding more rapidly than effective demand is being maintained, subsidies can be paid without the necessity of maintaining price control. It has been argued in this house that you cannot pay subsidies without increased taxation. During the war that was true; but the purpose in maintaining subsidies during the war was to maintain price control and thereby reduce the danger of inflation. Taxation also helped to reduce the danger of inflation; but now, after the war, it is necessary to take steps to safeguard the country against deflation, and the purpose of the subsidies would be to increase demand in relation to supply. The minister himself has said that at the present time the saving in subsidy will be no greater than the cost in taxation. Therefore, if you are going to try to increase the demand by subsidies, obviously you cannot pay for those subsidies by taxation, because you will not be increasing the demand in relation to supply but merely taxing people in order to pay the subsidies. When that situation develops; when we have to expand the purchasing power of the people in order to maintain demand against production, then obviously subsidies will have to be paid by national money, which, of course, will not be obtained by taxation.

I think that must be obvious, and that applies to the remarks of the hon. member for Kamloops. Obviously he is still thinking of the situation that existed during the war, but that will not be the situation henceforth. The great problem we are going to face in this country will be the difficulty of maintaining an effective demand against our production. Before the war, we used to try to do that by maintaining a favourable balance of trade. It is generally recognized today, however, that if we want to have good relations with other countries in future we shall have to be prepared to accept the goods of other nations in return for our exports. Other nations will not be prepared to go into debt just in order that we may dump our unemployment problem on their doorstep. So I would suggest that in future, in order to maintain prosperity in this country, we can release the rigid price controls we have had in the past, maintain subsidies at the necessary level to maintain effective demand against our production, and finance those subsidies by national money.

P.C. 9870 agreed to.

On P.C. 7475.

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LIB

James Lorimer Ilsley (Minister of Justice and Attorney General of Canada)

Liberal

Mr. ILSLEY:

This requires an amendment along the same line.

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PC
LIB

James Lorimer Ilsley (Minister of Justice and Attorney General of Canada)

Liberal

Mr. ILSLEY:

These are the amendments to which I consented yesterday with respect to the wartime prices and trade board regulation. I move:

That the following be inserted in the schedule to the act in the column entitled "amendments" so as to pertain to order in council P.C. 7475 of 26 August, 1942, as amended:

"Section 6(1) is deleted and the following substituted therefor:

6(1) Xo director, officer, clerk or employee of the corporation and no person acting on behalf of or under the authority or supervision of the corporation shall be liable for any act or omission in the exercise or performance or purported exercise or performance, in good faith and on reasonable grounds, of any power, discretion, authority or duty conferred or imposed by or under these regulations."

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Amendment agreed to.


LIB

James Lorimer Ilsley (Minister of Justice and Attorney General of Canada)

Liberal

Mr. ILSLEY:

I move:

That the following be inserted in the schedule to the act in the column entitled "amendments" so as to pertain to order in council P.C. 7475 of 26 August, 1942, as amended:

"Section 6(2) is deleted and the following substituted therefor:

6(2) Xo proceedings by way of injunction, mandatory order, mandamus, prohibition or certiorari, shall be instituted against the corporation or any director, officer or employee thereof or any person acting under the authority of the corporation for or in respect of any act or omission of itself, himself or any other person in the exercise or purported exercise of any power, discretion or authority or in the performance or purported performance of any duty conferred or imposed by or under these regulations or otherwise heretofore conferred or imposed by the governor in council."

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Amendment agreed to. P.C. 7475 as amended agreed to. On P.C. 5518.


PC

Edmund Davie Fulton

Progressive Conservative

Mr. FULTON:

Would the minister be

agfeeable to accepting a small amendment which I hesitate to mention, but which I believe would clear up what might otherwise be a certain laxity in the wording? I refer to paragraph 8 at page 43 of the consolidation. This paragraph deals with offences, and subparagraph 2 states:

(2) Every person is a party to and guilty of an offence under this order who (a) actually commits it; (b) does or omits any act for aiding any person to commit the offence.

To meet the purpose I have in mind, I move the following amendment:

That the following be inserted in the schedule to the act in the column entitled "amendments" so as to pertain to order in council P.C. 5518 of 16 July, 1943, as amended:

"Section 8(2) is amended by deleting paragraph (b) and substituting therefor: .

(b) does or omits any act for the purpose of aiding any person to commit the offence."

This means that the act would have to be committed with the intention of aiding in the offence. It would mean that no person who committed the act, not realizing the consequences of it, would be guilty. In other words, it is to make sure that the intention element is present.

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CCF

Stanley Howard Knowles (Whip of the Co-operative Commonwealth Federation)

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

Mr. KNOWLES:

I would take it that that is implied by the present wording.

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LIB

James Lorimer Ilsley (Minister of Justice and Attorney General of Canada)

Liberal

Mr. ILSLEY:

I do not see anything wrong with it. I believe there is some similar wording in the criminal code. I am content to accept it.

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Amendment agreed to. P.C. 5518 agreed to. P.C. 6497 agreed to. On P.G. 34/4433.


PC

Donald Methuen Fleming

Progressive Conservative

Mr. FLEMING:

It would seem that P.C. 34/4433 is to be effective temporarily, in view of the fact that it is included in this schedule. Is this not a matter which might probably be dealt with by permanent legislation, because recently we had a bill on this same subject before the house?

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LIB

James Lorimer Ilsley (Minister of Justice and Attorney General of Canada)

Liberal

Mr. ILSLEY:

Would the hon. gentleman state his point again?

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April 21, 1947