April 25, 1950

THE BUDGET

ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE


The house resumed, from Monday, April 24, consideration of the motion of Hon. Douglas Abbott (Minister of Finance) that Mr. Speaker do now leave the chair for the house to go into committee of ways and means, and the amendment thereto of Mr. Macdonnell (Greenwood), and the amendment to the amendment of Mr. Coldwell.


PC

Frank Thomas Stanfield

Progressive Conservative

Mr. Frank T. Stanfield (Colchester-Hants):

Mr. Speaker, when eleven o'clock came along last evening I was attempting to make a few observations with respect to freight rates as they affect the maritime provinces.

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LIB

Elie Beauregard (Speaker of the Senate)

Liberal

Mr. Speaker:

The hon. member seemed to be in doubt last night as to whether it would be in order to discuss freight rates at this time. I believe the question is before the courts and therefore would be sub judice.

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PC

Frank Thomas Stanfield

Progressive Conservative

Mr. Stanfield:

Coal mining is one of the essential industries in Nova Scotia, and along with steel it has a great deal to do with the economic prosperity of the people living in that province. Quebec and Ontario provide the markets upon which we must depend to dispose of the coal not used in the maritimes. In late years the government has been good enough to provide subventions to permit us to bring our coal to Montreal and Toronto and Ontario and Quebec in general.

We are faced with many disadvantages in mining coal in Nova Scotia. There are approximately 12,000 coal miners in Nova Scotia, and they produce approximately

6,750,000 tons of coal per year. There are perhaps another 1,000 miners in New Brunswick. In Alberta they produce something like 12 million tons of coal, and they employ approximately 9,500 miners. It will be seen that a miner in western Canada produces about twice as much coal as the miner in Nova Scotia. Most of the coal used in Ontario and Quebec is brought in from the United States. A miner in the United States produces from eight to twelve tons per day.

That is the obstacle we have to overcome in Nova Scotia. Our mines are deep and they run under the sea. In some mines they have to pump three tons of water for every ton of coal brought to the surface. The miners and companies in Nova Scotia realize that new mines will have to be opened and that many other mines will have to be mechanized if they are to compete in the Ontario and Quebec markets with United States coal.

I ask the minister and every hon. member of this house to give their best consideration to the providing of sufficient subventions

The Budget-Mr. Stanfield so that we can bring as much as possible of our coal to Ontario and Quebec. I believe that last year 18 million tons of coal were brought in from the United States to Ontario and Quebec, roughly three times as much as is produced in the maritime provinces. If Nova Scotia could manage to dispose of another five or six million tons of coal in those provinces it would mean a great deal to the mining centres and to the economic life of our province as a whole. I hope that when the time comes the minister and the government as a whole will give every consideration to devising means of moving as much Nova Scotia coal as possible to the central regions of Canada to displace United States coal. We all live together in this country, and we all hope that we can get aloftg as a single unit.

I should like to correct a statement made by a Liberal member that the Cuban market was lost by the action of a Conservative statesman from Nova Scotia, the late Hon. E. N. Rhodes. That statement is not correct. In the early twenties the Liberal government, through the great energies and hard work of the late Senator Logan and a few other Liberals, brought about the West Indies treaty. By that treaty we stopped buying a great deal of our sugar and other products from Cuba, and as a result the Cubans cut off our markets.

I think I can safely say that the Cuban market was of greater value to the maritimes than the West Indies market, although we did and do appreciate the West Indies market. I simply wanted to correct the observation made, I think by the hon. member for Annapolis-Kings (Mr. Elderkin), that it was through the actions of the Conservatives that our Cuban market was lost. I assure the house that the Conservatives had nothing whatever to do with it; they were not in power in Ottawa when the West Indies treaty came into effect.

Nova Scotia-and perhaps this applies to the maritime provinces generally-was interested in the English market. If we are going to have the same degree of prosperity in the maritimes as prevails in the rest of Canada it seems to me that we must retain the English market, as well as develop the United States market to the fullest extent that we possibly can. Any other market that we may reach is of secondary importance.

It is true that last year our exports to Great Britain amounted to $700 million, which is a lot of money. In the case of the United States I believe the figure was $1,400 million, practically twice as much as to Great Britain. With 150 million people living to the south of us naturally our exports to that

I860 HOUSE OF

The Budget-Mr. Stanfield country are bound to increase, and the market there is bound to become more and more important to us. There are certain things, however, that the United States market will not buy from us. They do not want our apples, pit props, wheat, cheese and a lot of other things. Therefore the retaining and developing of the English market is certainly of great importance, not only to the people of Nova Scotia and the other maritime provinces, but also to the people of Canada generally.

Because of a shortage of dollars on the part of the British, exports from the maritime provinces to Great Britain have been hard hit. In fact we have lost many of the markets altogether, such as those for apples, pit props and long lumber. I believe that some long lumber will be shipped from the maritimes this summer to Great Britain, but it is a very small amount compared with what it used to be. The loss of these markets is a serious blow to a great many people. I realize that the shortage of dollars required by England is not an easy thing to overcome. Evidently she is buying newsprint, aluminum, lead, zinc and many manufactured commodities rather than the food supplies, lumber and raw materials that she used to purchase in the old days. If the people of Nova Scotia are to be prosperous, they must have that market for many of their commodities. We all hope that the Minister of Trade and Commerce (Mr. Howe) and the Minister of Agriculture (Mr. Gardiner) can recover these markets for the maritime provinces. If we do not, the people of that region will have to find something else to do. Goodness knows we have had enough shifting of population in Nova Scotia without having to start it all over again.

In the days of the wooden ships everything was prosperous. We then had the days when people could not live on small farms any longer and had to leave the back settlements. They went to the larger towns of the United States, to western Canada and elsewhere. If we have to start again to regroup many of our industries in the maritime provinces, it is going to be a pretty tough proposition.

There is another development that I think could be very well carried a lot further in Nova Scotia and the maritimes generally. I refer to the tourist industry. We perhaps have not enough good accommodation to attract many United States people to Nova Scotia to spend their vacations there. It is true we have a great many more summer resorts than we had a few years ago, and the accommodation is improving all the time. We have good roads, and our scenery is as fine as you will find anywhere. I feel that the government of Nova Scotia is more interested in

improving accommodation for tourists than it is in building better highways at the present time. It has been suggested at different times that rather than spend money in Nova Scotia on the trans-Canada highway it would be preferable if the money could be used to develop tourist resorts and hotels in all the counties of the province. It would pay handsome dividends by way of returns to our people, and greatly enlarge our tourist trade. It would also increase our supply of badly needed United States dollars.

I believe it is correct to say that the state of Minnesota alone has a larger tourist trade than all the provinces of Canada combined. We have just scratched the surface of this industry so far as the maritime provinces are -concerned. I believe the Minister of Resources and Development (Mr. Winters) would be well advised to give his best attention, in co-operation with the governments of the maritime provinces, to increasing our tourist traffic.

I had intended to say something as to the forests of Nova Scotia, but I shall leave that for discussion under the estimates or at some other time. I wish to thank you, Mr. Speaker, and, through you, thank the house for its kind attention.

Topic:   THE BUDGET
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LIB

James Hendrick Rooney

Liberal

Mr. Rooney:

Will the hon. member permit a question concerning Nova Scotia coal?

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PC

Frank Thomas Stanfield

Progressive Conservative

Mr. Stanfield:

Yes, if I can answer it.

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LIB

James Hendrick Rooney

Liberal

Mr. Rooney:

Some years ago I brought to Toronto the first coke made in Montreal from Nova Scotia coal. Around that time the government had made provision for the subsidizing of a coking plant in the city of Toronto to use a certain amount of Canadian coal. The subsidy was to be payable at the rate of five per cent for twelve years, or, in other words, sixty per cent of the total capital investment. I am drawing on my memory, and this is quite a few years ago, but I pictured at that time that we might have a fleet of small boats running from Montreal during the summer to bring Nova Scotia coal to Toronto, thus cutting down the freight charge and allowing the coal to compete with other coals -available in the city of Toronto. I was interested in the hon. member's address, and I was wondering if this would not be a proper thing to do in order to help the sale of Nova Scotia coal in Ontario.

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PC

Frank Thomas Stanfield

Progressive Conservative

Mr. Stanfield:

That would be a hard question for me to answer, since I am not a coal expert. But I am sure that if any way could be found by which more Nova Scotia coal would be used in Toronto, it would be greatly appreciated, not only by the miners but by all the people of Nova Scotia.

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SC

Ernest George Hansell

Social Credit

Mr. Hansell:

How about Alberta coal?

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PC

Frank Thomas Stanfield

Progressive Conservative

Mr. Stanfield:

That is good coal, too, but we in Nova Scotia have to look after ourselves once in a while.

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CCF

Hazen Robert Argue

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

Mr. H. R. Argue (Assiniboia):

Mr. Speaker, I desire to participate in this debate in order to make a few comments on two announcements made recently by the Minister of Trade and Commerce (Mr. Howe).

I refer to the announcements made by the minister as to the government's wheat policy for the coming year. While I was at home during the Easter recess many farmers told me they were disappointed indeed that the government had seen fit to drop the initial price of wheat for this crop year by 35 cents a bushel. I should say the farmers to whom I spoke were not only disappointed; they were even angry to think that the price was being reduced particularly because of the fact that for the last few years as a result of the government's price control and stabilization policy, they had taken a lower price for wheat.

I believe the wheat policy of the government announced for this year can be criticized on two main grounds: first, that the initial price is too low, and second, that a floor price should have been set .for the three-year period instead of being established from one year to the next. Over the years the farmers of western Canada have fought hard to obtain a wheat board to market all their grain. They have fought hard, too, for an initial price which would bear a fair and proper relationship to their cost of production. The farmers were first successful in having a wheat board established to handle the 1919-1920 crop. After that they did not get another wheat board until 1935, when it was established on a voluntary basis. From that time until September, 1943, well into the war years, the initial prices paid were indeed low. In 1936 and 1937 this government, which claims now to believe in the wheat board as the sole marketing agency, wrote into the act a clause which provided that if on the Winnipeg grain exchange wheat rose 2J cents a bushel or more above the initial price, the wheat board was not to be allowed to accept delivery of farmers' grain.

I am afraid that even now this government is not convinced that the wheat board should be maintained as part of the permanent peacetime wheat policy. Let me quote from the remarks of the Minister of Trade and Commerce at page 1732 of Hansard of April 20 last.

Although there are some signs of a tendency to get back to a basis of private trading, we still find that a majority of our customers prefer to settle

The Budget-Mr. Argue their grain problems with an official agency, and if that continues to be their preference, it is obvious that we should maintain the wheat board to deal with them in that way.

The only thing I can take from that statement is that if in the next few years our wheat customers decide to buy their wheat through private trading institutions, this government will consider opening the grain exchange and putting the wheat board back on a voluntary basis. So the farmers are disturbed not only because the initial price for wheat is too low, but also because of that statement by the minister, which means that the government may not maintain the wheat board on a permanent basis.

The reduction of 35 cents a bushel in the price of wheat beginning August 1 in my opinion is a very serious drop, particularly when considered with the fact that in the coming year there will not be a further large payment from the wheat board. It is obvious that there will be a terrific drop in the purchasing power of the farmers of western Canada, and that decrease in purchasing power may well mean serious economic difficulties for all parts of Canada.

During the spring and early summer of 1949, just before the election, the farmers of western Canada received a total of $213 million in wheat board payments. This year, as I have said, the initial payment is to be reduced by 35 cents a bushel. If there is an average crop of 300 million bushels of wheat the income of the farmers will drop by an additional $100 million, which will mean a total drop of more than $300 million in western farm income potential over the next twelve months. I know one has to deduct from that figure any final payment that may be made from the wheat pool account. I do not think any such payment will be more than five cents a bushel; that would be my estimate. One must also deduct the participation payment of 40 cents a bushel on barley and 10 cents on oats. Even considering that, however, I say that as a result of the wheat policy now adopted by the government the income of western farmers will drop by at least $200 million during the coming year.

Looking at the reduction in farm income on another basis, one might compare the effective price farmers will receive for wheat. In the spring of 1949, when the initial price was increased, the farmers received $1.75 a bushel. They were then paid 20 cents a bushel for each of the three previous crop years. On the average, for the one crop year it meant in effect a price of $1.75 a bushel plus another 60 cents in participation payments, making the total effective price $2.35 a bushel as related to the single crop year. The initial payment now is to be $1.40 a bushel, which

1882 HOUSE OF

The Budget-Mr. Argue means an effective drop of 95 cents. If we are to maintain full employment and prosperity in Canada I believe every section of the nation must continue to be prosperous, but this reduction in the price of wheat will mean a definite deterioration in the standard of living of the people of western Canada. In my opinion that cannot help but reflect itself in a lessening of economic activity throughout the nation with consequent increasing unemployment.

Farmers are disappointed that the initial price has dropped 35 cents a bushel, because they felt that the government's much advertised policy would be carried out, a policy whereby the farmers were asked to forgo the highest prices in order to avoid taking the lowest prices at a later date. According to the figures available in the wheat board report, and after doing some calculating on the basis of those figures, one can establish that farmers have made a huge sacrifice because of the government's wheat policy. For the 485 million bushels of wheat sold to Britain in the first three years under the British agreement, the average price amounted to $1.71 per bushel, or 68 cents per bushel less than the average price received for class II wheat during the same three-year period. In other words, the farmers thus made a contribution of $332 million.

Into the domestic market during the same period went 204 million bushels of Canadian wheat at an average price for the three years of $1.61 per bushel, or 78 cents per bushel less than the price received for wheat sold to countries other than Britain. Through the government's policy of maintaining cheap bread for the consumer the farmer contributed $159 million. According to the wheat board report, and calculations I have made on the figures contained therein, the farmers contributed a total of $492 million up until July 31 of last year, because of the government's wheat policy.

Even now I do not think the farmers would complain about that huge sacrifice if they thought they might have an opportunity of recouping their losses in the future. Since there is a danger of a drop in international wheat prices, the government has looked at the international wheat agreement, ascertained the lowest possible price in the agreement, and then set the initial price to the farmer at 14 cents per bushel below the international agreement floor price. It is no wonder therefore that the farmers, having contributed almost $500 million in that three-year period, are disappointed to find the government setting such a low initial price for wheat. Under the international agreement the floor price for wheat for the coming year

is $1.40 per bushel in United States funds. The Canadian wheat farmer will receive $1.40 in Canadian funds. If he received the international agreement floor price he would obtain an initial price of $1.54 in Canadian money for this year's crop.

There is no guarantee that the initial price will be maintained even at this level for the two crop years covered by the international wheat agreement. If our floor price falls in the next three years at the same rate as the international floor price falls, after two years the farmers will receive 20 cents per bushel less or an initial price of $1.20 per bushel basis Fort William. I make the statement now, Mr. Speaker, and I believe I can prove it, that, on the basis of the farmers' costs of production, the $1.40 per bushel for wheat this year places the farmer in no better position, and perhaps in an even worse position, than he was in the period of 1935-39 before the war. I have before me the eleven-factor index published by the dominion bureau of statistics, which shows the farmers' costs of production. Into that eleven-factor index go all the important items of farm cost, namely, farm implements, building materials, gasoline, oil, grease, feed, fertilizer, binder twine, seed, hardware, taxes, interest rates and farm wages. That index is calculated on the basis of 1935-39 equals 100.

The last available publication of that index is for the month of January, 1950, and shows that the index stood at 196-3. In other words the farmer's costs of production in 1950 are almost twice his costs of production in the 1935-39 period. If I were speaking to an audience of farmers in western Canada, I would not have to quote those statistics to prove that farm costs have doubled. Almost every time one meets western farmers to discuss the price of wheat, farmers will say that their costs have doubled since the immediate pre-war period. The farmer will now receive $1.40, basis Fort William, for No. 1 northern wheat. Considering that the western farmer does not receive No. 1 grade for all his wheat we can safely assume, that the average grade is approximately No. 2 northern. Taking the handling charges into consideration, the average price the farmer will receive will be $1.20 per bushel at his local elevator.

I made the statement that, on the basis of costs, the farmer now will be no better off than he was before the war. In 1935, 1936, and 1937, the wheat board paid an initial price of 87J cents per bushel. In 1938, under this government, the price was reduced to 80 cents per bushel. In 1939 the initial price was further reduced to 70 cents per bushel, but the mean average

initial price paid by the wheat board from 1935 to 1939 works out at 82 J cents per bushel. If one assumes that the farmer gets the Fort William price less 20 cents a bushel, then on that basis the farmer received 62J cents per bushel as an average initial price for the 1935-39 period. If one then relates the initial price to the farmer under the present policy to the cost of production index published by the bureau of statistics, one finds that today the initial price for wheat is only worth 61 cents a bushel to the farmer on the basis of pre-war purchasing power. On the basis of purchasing power, therefore, the initial price for wheat for the coming year will actually be a cent and a half per bushel less than in the 1935-39 period.

I hope the farmers' costs of production go down, but I doubt if they will go down very much. One does not see the price of farm implements or gasoline dropping 22 per cent with the 22 per cent drop in the initial price of wheat. Owing to the freight rate increases the prices of most commodities the farmers purchase have recently gone up, and no doubt will go up again if another freight rate increase is granted. In addition the purchasing power of the farmers' net income is not nearly as great as it was before the war. We all know there has been a steep increase in the urban cost of living, but the urban cost of living index in January of this year was 161, whereas the farmers' cost of living index during the same month was 175-3. In other words, the farmers' cost of living index this year is some 14 points higher than the cost of living index for people living in the city. Considering the fact that the purchasing power of the new initial price of wheat is placing the farmer in a position no better than his position in the late 1930's, and further considering his very high cost of living one can readily see that the new initial price adopted by the government is going to place the farmer in a very serious economic situation.

As I have said before, the initial price is not even for the full three-year period. I believe the government are making a mistake in dropping the initial price of wheat 35 cents a bushel, for another reason.

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LIB

James Garfield Gardiner (Minister of Agriculture)

Liberal

Mr. Gardiner:

That is not the price of

wheat.

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CCF

Hazen Robert Argue

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

Mr. Argue:

The Minister of Agriculture cannot talk himself out of the 35 cent drop.

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LIB

James Garfield Gardiner (Minister of Agriculture)

Liberal

Mr. Gardiner:

That is the initial payment; that is not the price at all.

The Budget-Mr. Argue

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CCF

Hazen Robert Argue

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

Mr. Argue:

Initial payment-let the minister call it what he wishes. When the farmer goes to the elevator this fall and takes in a load of grain he will know what to call it.

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LIB

James Garfield Gardiner (Minister of Agriculture)

Liberal

Mr. Gardiner:

Surely, and will know that you are all wrong.

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CCF

Hazen Robert Argue

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

Mr. Argue:

Nonsense. In my opinion the government, at a time when world prices are still high for wheat, is saying to every country in the international wheat agreement "our producers are prepared to accept an initial payment which is 14 cents a bushel less than the floor price under the international wheat agreement."

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LIB

James Garfield Gardiner (Minister of Agriculture)

Liberal

Mr. Gardiner:

That is not correct, either.

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April 25, 1950