April 18, 1950

CCF

Joseph William Noseworthy

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

Mr. Noseworthy:

So has unemployment.

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LIB

James Sinclair (Parliamentary Assistant to the Minister of Finance)

Liberal

Mr. Sinclair:

Then he went on to deal with the question of excess profits. That has been used by his party on every possible occasion, and I should like to refresh his memory of what the people he used to idolize, the British Labour government, have done about excess profits. I cannot use better words than were used in 1945 by Hugh Dalton, then chancellor of the exchequer, and one of the great men of the Labour party school of thinking, because after all he was professor of public finance at the London School of Economics. He removed the excess profits tax from British industry a year before we had even started to do so in this house. I want to read some of the remarks he made.

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CCF

Major James William Coldwell

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

Mr. Coldwell:

There is a profit control in effect in Great Britain now.

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LIB

James Sinclair (Parliamentary Assistant to the Minister of Finance)

Liberal

Mr. Sinclair:

Listen to me; you have had your say. You were objecting to the Minister of National Health and Welfare (Mr. Martin) interjecting into your speech. The words I will quote are not my words. They are the words of a man who was at that time chancellor of the exchequer in a Labour government. Speaking in the budget debate in the British House of Commons on the 23rd of October, 1945-we removed our excess profits tax in 1947-Mr. Dalton had this to say: This tax, E. P. T., at the rate of 100 per cent, is the perfect tax for a short war, but as the war period lengthens, and still more as we enter upon the post-war period, it becomes less and less satisfactory in its general character and incidence. The rate of standard profit in relation to which the excess for taxation purposes is calculated is based on a certain year, and as the date of that standard

Price Control

profit recedes, the tax becomes less and less equitable, as between different businesses, and in particular, falls with increasing and unjust severity, as the years go by, upon businesses with a low standard. Moreover, once the standard profit has been earned, this tax encourages extravagant and wasteful outlay, and even downright dishonesty, since if this expenditure were not incurred it would be the treasury and not the owners of the business who would take the money. Under those conditions this tax works against incentive and against efficiency.

He goes on for another two columns and then he says he is going to reduce the tax from 100 per cent to 80 per cent. Then he comes back to the house the following year, and on April 9, 1946, he announced the total repeal of even the 80 per cent tax. Mr. Dalton refers first of all to his remarks of the previous year. He said:

I said then the ''E.P.T., at the rate of 100 per cent, is the perfect tax for a short war"-and I believe that still . . .

Then he goes on with his quotation from his previous year's speech as follows:

". . . but as the war period lengthens and, still more, as we enter upon the post-war period, this tax works against incentive and against efficiency."

He then goes on to say:

Further reflection has not weakened my opinion on this matter. I now propose to repeal E.P.T. as from 31st December next.

The excess profits tax was repealed in Great Britain a year before ours was. For the very reason that the excess profits tax does work against incentive the British did exactly the same thing as we did. Our standard rate for corporation tax was 18 per cent plus the excess profits tax. As you know, the standard tax has now been raised to 38 per cent, 33 per cent federal and 5 per cent provincial in eight of the provinces, and 7 per cent in Ontario and Quebec.

The excess profits tax is a great thing to use out in the country to whip up a country audience to make them believe that if the C.C.F. were in power they would reimpose it. The British government removed that tax a year before we did for the very reason that far from being a source of income it was actually holding back industrial development in that country.

I come now to the matter of stabilization of the cost of living. I am quite sure that most members of the house have had fewer letters about the cost of living in the last year than at any other period since the end of the war. The hon. member referred to the point in the Liberal convention platform of August, 1948, which had to do with trying to hold the cost of living at that level. In August, 1948, the cost of living index in Canada stood at 157-5. Today, as the hon. member pointed out, it is 163-7. This last figure, as the hon. member mentioned, includes the increases

resulting from the last measure of rental decontrol. Therefore we have a rise of six points in a year and a half. When we remember the actual increases in the cost of the great bulk of commodities we must import from other nations, which go into the products used by our people and which naturally affect the cost of living; when we remember also that wages and salaries have not stood still since 1948: then I think the people of this country who are reasonably minded will say that is not a bad record.

That is especially so when we compare it with the records of other free countries, not other countries which have been subsidized by that great American generosity known as Marshall aid. In that regard I might remind the hon. member of the words of the deputy prime minister of Great Britain, Mr. Herbert Morrison, who at the trade union convention a year ago said it was because of the very generous Marshall aid that they had been able to hold their cost of living at such a level. That is due also in part, of course, to the great aid that has been given by this country, aid we do not at all regret having given but aid we do not like having flung back in our teeth as evidence of how successful Britain has been in holding down the cost of living.

I do not think we need again go over this question of rents. We have had two full discussions of that subject, one last session when the Minister of Finance (Mr. Abbott) announced further increases under the policy of decontrol, increases which occasioned great debate in this house at that time and which were also debated from one end of the country to the other, and the other this spring when before Easter the minister announced that the federal government was going to ask for control over rents for only thirteen months more. At that time he reminded the house not of what Mr. Justice Rand had said but of what the Supreme Court of Canada said, that in their opinion we had only the right over orderly decontrol from the war emergency, and that otherwise the provinces had the right to control rentals. Two of the provinces have assumed that obligation; and it may well be that if next January there are still localities in this country which need rental control, the provinces will step in and administer such controls in those areas.

Then the hon. member went along to the sales tax, which is second only to the excess profits tax in popularity as a whipping boy as far as he is concerned. Once again I am not going to quote any Liberal or Conservative in public life; I am going to quote the Labour chancellor of the exchequer in Great Britain. I am only repeating what I put on

record a year ago, when hon. members were attacking the federal sales tax. It is true that we have a federal sales tax, but it is also true that this tax has very little effapt on the cost of living index, since almost all food items and all building construction items are exempt from the federal sales tax, as well as from other taxes. However, here again is Mr. Hugh Dalton speaking to the British House of Commons, which of course includes Labour and Conservative and a few Liberal members, and also I think preaching the gospel to his socialist followers all over the world. This was at page 2204 of British Hansard for 1946:

There is an old-fashioned saying that indirect taxation is worse than direct taxation. I have never believed it; I always thought it a slipshod way of talking and thinking. I used to tell Lord Snowden that I did not believe it.

He goes on to explain the various levels of the sales tax in Great Britain, and it is very heavy. Then he continues:

But in the next few years, and I expect for considerably longer, it will, in my view, be advantageous to retain a tax on purchases, exempting wholly from the tax certain of the more necessary commodities-

Our range of exemptions is much wider than the British range.

-gradually extending the range of untaxed articles-

We have done that in every budget we have brought down, and even the budget brought down just before Easter contains further exemptions.

-and lowering the rate on a number of other articles-

The hard fact is that we need the revenue from sales tax to support our present federal expenditures.

The hon. gentleman was good enough to recall that we had removed special excise taxes in the last budget. The tenor of his speech was to the effect that there was great alarm in the country over this mounting cost of living. Hon. members who are actually in daily contact with their constituents, and hon. members who have just returned from their homes, I think will appreciate as I do that this is one of the things least discussed at the moment by our people. They know that this levelling out process is pretty well over, that we have gotten away from this false freezing of our economy that we had to carry out in time of war by rental controls, by wage controls, by price controls and so on. As we have gotten away from it and have allowed our economy to act freely, we have finally come to this level of about 162 or 163; and during that period our wage levels have risen correspondingly.

Price Control

So I say to hon. members that the objective of the party in 1945, an orderly decontrol and a departure from those special administrations and boards, price fixings, subsidies and so on, back to the condition where our economy is that of a buyers' and sellers' market, has been fairly well realized, and I say this government has no reason not to be proud of the work it has done in this respect in the last five years.

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CCF

Robert Ross (Roy) Knight

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

Mr. R. R. Knight (Saskatoon):

Mr. Speaker, I know the hon. member for Coast-Capilano (Mr. Sinclair) wanted to be fair and state the facts correctly, even if it meant losing an argument. So I am going to read him a word or two from this little book, which incidentally is an official handbook of the Labour party in Great Britain. While I do not think the situation in Great Britain at the moment has very much to do with the amendment that has been moved, I do want to put on record the facts with respect to the taxation of profits in Great Britain. I am not going back as far as my hon. friend went; I am going to give facts which are current.

Profits tax: the tax on distributed profits was raised from 5 per cent to 12J per cent in the 1947 budget.

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PC

John George Diefenbaker

Progressive Conservative

Mr. Diefenbaker:

What are you reading from?

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CCF

Robert Ross (Roy) Knight

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

Mr. Knight:

I just described it. It is a speakers' handbook of the Labour party for 1948-49, and I presume is an official document.

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PC

Gordon Knapman Fraser

Progressive Conservative

Mr. Fraser:

That would not be an election handbook, would it?

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CCF

Robert Ross (Roy) Knight

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

Mr. Knight:

Well, I take it that even my hon. friend would use facts in promotion of his own cause during an election campaign.

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PC

Gordon Knapman Fraser

Progressive Conservative

Mr. Fraser:

But some parties do not use them.

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CCF

Robert Ross (Roy) Knight

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

Mr. Knight:

As far as I am concerned I try to stick to the facts.

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LIB

James Sinclair (Parliamentary Assistant to the Minister of Finance)

Liberal

Mr. Sinclair:

If the hon. member would permit me-

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CCF

Robert Ross (Roy) Knight

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

Mr. Knight:

Price Control

That was said in the British House of Commons on April 6, 1948. Then there are some quotations from Hugh Dalton, who was mentioned by the hon. member for Coast-Capilano, which I am sure do not bear out the contentions of my hon. friend. I do not intend to read them. In rising I did not expect to do more than put these facts on the record, but before concluding let me say that if the hon. member for Coast-Capilano is so fortunate as to have constituents who do not feel the pinch of the cost of living in these days, I personally am not in that favourable position. During the Easter recess I heard the moans coming from these householders who were having difficulty in making ends meet. I think the cost of living in this country is one of the most serious things with which its citizens are faced at the moment.

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LIB

James Sinclair (Parliamentary Assistant to the Minister of Finance)

Liberal

Mr. Sinclair:

The hon. member questioned the veracity of the authorities I quoted, so perhaps I should have the right to put him straight. I quoted from the official report, British Hansard, on excess profits, while the hon. member is quoting from Labour party propaganda. The hon. member is referring to a different thing, the ordinary corporation taxes. When the British had a 5 per cent tax, we had an 18 per cent tax. The British tax is now 25 per cent and our tax is 38 per cent, showing we do tax corporations more than the British.

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CCF

Robert Ross (Roy) Knight

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

Mr. Knight:

I am not concerned with the tax situation in Britain; I am worried about taxation in Canada. This amendment relates to the situation in Canada, and nowhere else. On that basis, it should be adopted.

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LIB

James Sinclair (Parliamentary Assistant to the Minister of Finance)

Liberal

Mr. Sinclair:

That is a different story.

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LIB

Humphrey Mitchell (Minister of Labour)

Liberal

Mr. Mitchell:

I was paired, Mr. Speaker, with the hon. member for Waterloo South (Mr. Homuth). Had I voted, I would have voted against the amendment.

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LIB

Paul Joseph James Martin (Minister of National Health and Welfare)

Liberal

Mr. Martin:

I was paired, Mr. Speaker, with the hon. member for Cape Breton South (Mr. Gillis). If I had voted, I would have voted against the amendment.

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PC

Lewis Elston Cardiff

Progressive Conservative

Mr. Cardiff:

I was paired, Mr. Speaker. Had I voted, I would have voted against the amendment.

Motion (Mr. Fournier, Hull) agreed to, and the house went into committee, Mr. Dion in the chair.

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DEPARTMENT OF CITIZENSHIP AND IMMIGRATION

April 18, 1950