September 11, 1950

LIB

Clarence Decatur Howe (Minister of Trade and Commerce)

Liberal

Mr. Howe:

As I have pointed out several times, the only reason for exercising control under this bill would be a shortage of supply arising out of defence purchasing. If there were to be a shortage in the supply of oil across the country it might be necessary to exercise distribution control at some time in the future under the provisions of this bill, but why decide that there is going to be a shortage of oil when there is no indication of it at this time?

Topic:   PROVISION FOR CONTROL AND REGULATION OF PRODUCTION, DISTRIBUTION AND USE OF ESSENTIAL MATERIALS AND SERVICES
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Title agreed to. Bill reported.


LIB

Elie Beauregard (Speaker of the Senate)

Liberal

Mr. Speaker:

When shall the bill be read a third time?

Topic:   PROVISION FOR CONTROL AND REGULATION OF PRODUCTION, DISTRIBUTION AND USE OF ESSENTIAL MATERIALS AND SERVICES
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PC

George Alexander Drew (Leader of the Official Opposition)

Progressive Conservative

Mr. Drew:

Next sitting.

Topic:   PROVISION FOR CONTROL AND REGULATION OF PRODUCTION, DISTRIBUTION AND USE OF ESSENTIAL MATERIALS AND SERVICES
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LIB

William F. Carroll

Liberal

Mr. Carroll:

Mr. Speaker, may I say something on the third reading?

Topic:   PROVISION FOR CONTROL AND REGULATION OF PRODUCTION, DISTRIBUTION AND USE OF ESSENTIAL MATERIALS AND SERVICES
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LIB

Elie Beauregard (Speaker of the Senate)

Liberal

Mr. Speaker:

When the bill is called for

third reading the hon. member will have an opportunity to speak.

Topic:   PROVISION FOR CONTROL AND REGULATION OF PRODUCTION, DISTRIBUTION AND USE OF ESSENTIAL MATERIALS AND SERVICES
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MAINTENANCE OF RAILWAY OPERATION ACT

ORDER IN COUNCIL EXTENDING TIME FOR NEGOTIATIONS

LIB

Louis Stephen St-Laurent (Prime Minister; President of the Privy Council)

Liberal

Right Hon. L. S. St. Laurent (Prime Minister):

With the permission of the house

I should like to revert to motions in order to table an order in council. Newspapers have carried the report that both the railroads and the negotiating committee for the railroad operatives have asked for an extension of the thirty to forty-five days as the time for negotiations, which they say cannot be completed within the period of thirty days. Their request was received by the government and has been acquiesced in, and I wish to table the order in council extending the period for an additional fifteen days.

Topic:   MAINTENANCE OF RAILWAY OPERATION ACT
Subtopic:   ORDER IN COUNCIL EXTENDING TIME FOR NEGOTIATIONS
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CCF

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

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

Mr. Knowles:

Will the Prime Minister (Mr. St. Laurent) say from what date that time is dated? In other words, what are the dates of the extended period to which the order in council refers?

Maintenance of Railway Operation Act

Topic:   MAINTENANCE OF RAILWAY OPERATION ACT
Subtopic:   ORDER IN COUNCIL EXTENDING TIME FOR NEGOTIATIONS
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LIB

Louis Stephen St-Laurent (Prime Minister; President of the Privy Council)

Liberal

Mr. St. Laurent:

I do not want to be too definite about that. My recollection is that the bill was assented to on the 30th of August. Thirty days would extend to the 29th of September, and this adds fifteen days to the period of thirty.

Topic:   MAINTENANCE OF RAILWAY OPERATION ACT
Subtopic:   ORDER IN COUNCIL EXTENDING TIME FOR NEGOTIATIONS
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CONSUMER CREDIT

TEMPORARY PROVISION FOR REGULATION

LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Hon. Douglas Abbott (Minister of Finance) moved

the second reading of Bill No. 4, to make temporary provision for the regulation of consumer credit.

He said: Mr. Speaker, I think perhaps I had better make a brief statement on this measure. When I was presenting the tax proposals to the house the other day, I referred to certain indirect measures that might be necessary to support the government's anti-inflationary fiscal policy. One of these, as I indicated at that time, would be a bill to enable the government to restrict the volume of consumer credit. This bill is now before the house for second reading.

Its purpose is to give the government authority to restrain spending by limiting the amount of credit available to consumers for the purchase of goods. Under ordinary circumstances, as the house will appreciate, this is not a matter with which the federal government would concern itself. But our own experience and the experience of other countries during world war II has shown that the expansion of consumer credit can add substantially to inflationary pressure and to the demands for essential materials and thus frustrate national policy and counter-inflationary action in other fields. This is a risk we cannot run and we are, therefore, seeking authority now to regulate consumer credit in the interests of sound credit and currency policies, so that the necessary measures can be put into effect when required without delay.

While the government would probably have asked for this authority as a precautionary measure in any event, recent trends do, in fact, show a very considerable expansion in the volume of consumer credit. Hon. members may have noticed a recent bulletin by the dominion bureau of statistics showing the volume of lending by finance and acceptance companies. According to the published figures, the total volume of instalment financing of consumer goods by finance and acceptance companies in 1949 exceeded the volume in 1948 by 55 per cent. It is significant too that the balances outstanding with these companies at the end of 1949 had increased by 65 per cent over the total at the end of 1948.

Consumer Credit Act

Topic:   CONSUMER CREDIT
Subtopic:   TEMPORARY PROVISION FOR REGULATION
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PC

Agar Rodney Adamson

Progressive Conservative

Mr. Adamson:

Can the minister give the total?

Topic:   CONSUMER CREDIT
Subtopic:   TEMPORARY PROVISION FOR REGULATION
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LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Mr. Abbott:

I have the details which I can give in committee, if my hon. friend wishes.

Topic:   CONSUMER CREDIT
Subtopic:   TEMPORARY PROVISION FOR REGULATION
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PC

Agar Rodney Adamson

Progressive Conservative

Mr. Adamson:

Just the total figure now.

Topic:   CONSUMER CREDIT
Subtopic:   TEMPORARY PROVISION FOR REGULATION
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LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Mr. Abbott:

I wonder if the hon. member would allow me to complete my brief explanatory statement. Then I would turn up the figure, which I have on my files.

More recent trends are shown in another bureau of statistics bulletin dealing with retail trade. Between the first quarter of 1949 and the first quarter of 1950, cash sales by retail stores went up by 4 per cent. Between the same two quarters instalment sales, on the other hand, went up by nearly 27 per cent. In the first seven months of 1950, financing of sales of new passenger cars, which are included in the total of retail instalment sales, increased by 104 per cent as compared with the same period of 1949.

Part of the explanation for the recent expansion of consumer credit lies, of course, in the increased availability of goods that are ordinarily purchased on credit. But even when allowance is made for this factor, the remaining expansion is very substantial and indicates quite clearly that consumers are to an increasing extent buying on credit rather than out of current income or past savings.

In the bill now before the house, authority is sought to regulate three types of credit transactions. First is instalment selling, the kind of transaction with which all members are, I am sure, familiar. This is the most important form of consumer credit and the one which usually shows the greatest fluctuation.

The second type is the charge account. Ordinarily the volume of goods purchased under charge accounts does not change rapidly but it is necessary to take powers to regulate the payment of charge accounts, otherwise this device might be used to circumvent and frustrate restrictions imposed on instalment sales.

Finally it is necessary to take powers to regulate the repayment of loans which are made to finance the purchase of consumer goods. Such loans have the same effect as instalment credit and must be treated in the same manner.

Since the purpose of the legislation is only to restrict the volume of consumer credit the authority is limited to regulation of the financing of goods purchased on credit either under an instalment plan or under a charge account and to regulation of the repayment of loans related to the purchase of goods. Hon. members may recall that the principal means

of accomplishing the necessary restriction of consumer credit during world war II was to require minimum down payments and to limit the terms of payment for the balance outstanding. This proved to be an effective method of control and it is likely that it would be followed again if the necessity arises.

I shall not at this stage attempt to give a full account of the administration of the consumer credit regulations during world war II but it may interest hon. members to know that while total sales of retail stores increased by 36 per cent between 1941 when the consumer credit regulations came into effect, and 1945, instalment sales declined in the same period by 41 per cent. Not all of this drop in instalment sales can be attributed to the regulations for there was of course a sharp drop in the production of the kinds of goods usually sold on instalment. But the regulations did have a restraining effect upon the demand for particular kinds of goods and by limiting the amount of financing available they did reduce the quantity of money competing for the limited quantities of goods available during wartime. The whole operation was carried out, I think it is fair to say, in a smooth and efficient manner by a relatively small staff.

I also should make it clear that, under the legislation, the government can designate the consumer goods or classes of consumer goods to which the restrictions shall apply, and can vary these from time to time, thus giving the flexibility required to meet changing circumstances.

With this flexibility it will be possible to direct the restrictive measures where they can be most helpful to the national effort. It will be possible, for example, to apply the restrictions first and most severely to the financing of those consumer goods, the manufacture of which competes most directly for labour and materials with the defence program, thus supporting other direct and indirect measures to curtail civilian consumption. In other words, the regulation of consumer credit can be used not only as a general anti-inflationary device but also as a selective weapon to support the national effort.

In many ways I would have preferred to bring in a bill which set out specifically the restrictions that may have to be imposed. For reasons which I feel sure the house will understand, this is not possible-and, indeed, in my opinion would be most inadvisable. It would be a mistake, I think, to set out in legislation specific restrictions which may or may not have to be put into force at a later date and which might encourage the public to indulge in anticipatory buying on credit.

To some extent, though not, of course, entirely, the need for regulation of consumer credit depends upon the actions of sellers and buyers themselves. Under present circumstances, attempts by sellers to high-pressure customers into buying by offering easier terms will only add to the inflationary pressures and make restriction inevitable and urgent. Similarly, I hope that consumers will, in their own individual interests, as well as in the common interest, think twice before incurring additional debts for the purchase of consumer goods, which they might be able to avoid.

Regulation of consumer credit, as I have said, is one part of the government's program to counteract the inflationary tendencies generated by rising defence expenditures. By itself, such regulation would be of value in restraining excessive demand. Combined with a pay-as-you-go policy of government financing and with other supporting measures, it can make an even more effective contribution to the stability and strength of the national economy.

I believe the hon. member for York West (Mr. Adamson) asked about the dollar value of retail financing of consumer goods. The figures I have here show that in 1948 the retail financing of consumer goods by finance and acceptance corporations amounted to $122,522,000; in 1949 it was $190,574,000, an increase of 55J per cent. The balances outstanding with finance and acceptance companies on consumer goods paper at the same date, at the end of 1948 amounted to $70,451,000, and at the end of 1949, $115,977,000, an increase of 64-6 per cent.

Topic:   CONSUMER CREDIT
Subtopic:   TEMPORARY PROVISION FOR REGULATION
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CCF

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

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

Mr. Knowles:

Does the minister know if these figures would include borrowing from the banks for the purpose of consumer purchase?

Topic:   CONSUMER CREDIT
Subtopic:   TEMPORARY PROVISION FOR REGULATION
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LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Mr. Abbott:

Subject to correction, and when we are in committee I shall verify it, I would think that the statement as given to me covers the financing with finance and acceptance companies, not the bank loans which may have been made by individuals in order to pay for consumer goods.

Topic:   CONSUMER CREDIT
Subtopic:   TEMPORARY PROVISION FOR REGULATION
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September 11, 1950