March 21, 1957

?

An hon. Member:

And the effort to buy a few votes.

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CCF

Frederick Samuel Zaplitny

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

Mr. Zaplilny:

If it were based on the cost of living index, then taking the increase from 1949 to 1957 alone the old age pension would have had to be increased to not less than $50 a month, as a matter of fact to a little over $50 a month. If it were based on the increase in the gross national product the old age pension should be $75 a month. But it is based on nothing but this type of lobbying and chiselling going on behind the scenes. That is how they have arrived at $6 a month.

Another matter which is a great disappointment to the taxpayers of Canada generally,

The Budget-Mr. Zaplitny particularly those in the lower income groups, has to do with the exemption levels. The present exemption levels of $1,000 for a single person and $2,000 for married persons have been in existence for quite a number of years. During that time the cost of living has gone up steadily year after year. If any logic whatsoever is to be applied to the existing exemption levels, in other words if they were based on any logic or justice when they were set at $1,000 and $2,000 on the basis of the cost of living at that time, then certainly in establishing any sort of justice today we should take into consideration the increase in the cost of living, and the exemption levels for single and married persons should bear some relation to that.

I do not know what the exact figures would be. They could have been $2,500 and $1,500 or $3,000 and $1,500, but no one can argue that an exemption level of $1,000 for a single person, which was considered logical and just four or five or six years ago, is still logical and just today. By leaving the exemption figures at the same levels the minister is actually dipping his hand into the pocket of the taxpayer to the extent that the cost of living has increased through inflation.

If the minister wanted to do anything at all to help the small businessman, who is up against a real problem these days, in my opinion the easiest way he could have done so would have been to increase the personal exemption level, because the average small businessman is running a family establishment. The average small grocery store or any other small establishment is a family business. It is not a huge corporation. It is not run in the same way as a corporation. It is a family business in which the husband, the wife and quite often some of the adult children lend a hand. The easiest and surest way in which the minister could have provided some relief for the small businessman from the taxpaying point of view would have been to raise the exemption level and give these people the opportunity to benefit to that extent, but nothing whatever was done.

I want to say something about the whole question of inflation. Most of the debate up to this point has revolved around the question of inflation. First of all, I think the word "inflation" is not an accurate description of what is going on. We are told there are too many dollars chasing too few goods, but no one in the debate so far, either on the government side or in the official opposition, has taken the trouble to tell us what the goods are that they describe as being too few. In other words, of what goods are we in short supply in this country? What kind of goods are being chased by too many dollars? No one has said.

The Budget-Mr. Zaplitny

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LIB

Walter Edward Harris (Minister of Finance and Receiver General; Leader of the Government in the House of Commons; Liberal Party House Leader)

Liberal

Mr. Harris:

I did in my budget speech.

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CCF

Frederick Samuel Zaplitny

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

Mr. Zaplitny:

Perhaps the minister did, and perhaps he will indicate which shortages he had in mind.

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LIB

Walter Edward Harris (Minister of Finance and Receiver General; Leader of the Government in the House of Commons; Liberal Party House Leader)

Liberal

Mr. Harris:

Read it.

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CCF

Frederick Samuel Zaplitny

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

Mr. Zaplitny:

If I remember correctly

there was some reference to steel and building materials, but I recall no reference to anything else. What is actually going on is not inflation in its theoretical sense. What is really going on and what is causing the trouble today is profiteering. It is because too much is being taken out for too little service rendered. When you look at the figure of the consumer debt, which has now reached the figure of something like $3 billion in this country, certainly it does not indicate that those people who owe the consumer debt of $3 billion are the ones who possess too many of those dollars which are theoretically supposed to be chasing too few goods, because if they had too many dollars they would not be borrowing them; they would be spending them instead. But people are spending money they do not have.

Then when you look at the other side of the picture and you look at the profits of the huge corporations in this country you find that the record since 1946 has been almost unbroken, year after year, with increases of 30 per cent, 40 per cent, 30 per cent, 25 per cent. Year after year the huge corporations have been taking money out of the hands of the people at a faster and faster rate. So on the one hand you have profiteering, with huge accumulations of profits. On the other hand you have a $3 billion consumer debt. Surely it can now be said, in the words of the famous statesman of England who applied it to a different situation, that never have so many owed so much to so few.

Here you have a huge mass of the people owing $3 billion, and a small group of corporations increasing their profits by leaps and bounds. That is the kind of situation that is going on. That is the real thing that is causing the hardship. It is not a question of too much money chasing too few goods. It is a question of not enough money in the hands of the people who need it chasing goods which are in the hands of the people who have too much money to start with. That is your situation. If the government are going to do anything effective about it, they are going to have to take steps other than those they are taking.

What are the steps they are taking now? They are increased interest rates which slap everybody across the board, whether they deserve it or not.

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LIB

William Alfred Robinson (Deputy Speaker and Chair of Committees of the Whole of the House of Commons)

Liberal

Mr. Deputy Speaker:

Order. I am extremely sorry to interrupt the hon. member, but it is my duty to advise him that his time has expired.

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LIB

Allan MacPherson Fraser

Liberal

Mr. A. M. Fraser (St. John's East):

Mr. Speaker, in rising to take part in this debate I should like at the very outset to add my congratulations to those which have already been expressed to the Minister of Finance for bringing down this excellent budget. I should like to congratulate him first of all on the courageous action he has taken in the measures adopted to combat inflation, which is the greatest danger point in our economy at the present time. I think the measures he has taken are all the more to be commended because they have been taken at this particular time.

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?

An hon. Member:

What measures?

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LIB

Allan MacPherson Fraser

Liberal

Mr. Fraser (St. John's East):

The minister has decided to use approximately half the surplus that he would otherwise have had in order to reduce the public debt. At the same time, however, the minister has found it possible to reduce taxes and to increase certain social security benefits. I am sure these measures will be welcomed across the country, particularly the reductions in sales taxes and excise taxes which will be of benefit to the housewife, and the increases in the social security benefits in the form of old age pensions, disability pensions, veterans allowances, family allowances and others. These will afford real relief to those who need that relief most.

Furthermore, I think it should be pointed out that many of these increased benefits will go almost immediately into the money stream for purchasing consumer goods, and consequently will not drive up to any marked extent any inflationary demand for capital goods, which has been one of the principal causes of the present inflation. It will also be noted by the house that some of these benefits will not come into effect immediately but will come into effect later in the year, by which time there is reason to believe that some part of the inflationary pressures will have moderated somewhat.

There is one particular measure to which I should like to refer at a little greater length, namely the tax postponement provision with regard to retirement annuities. This is a measure which I think has commended itself to the entire country. This provision will provide needed relief for the professional and commercial classes, for the small businessman. At the same time it will provide a direct encouragement to private saving and is therefore definitely anti-inflationary. That may perhaps help to answer the question

proposed from the other side of the house a moment or two ago as to what measures have been taken. That is one that could be mentioned, among others.

I should now like to turn to another aspect of the minister's speech. I was glad to notice his promise of co-operation with the recently-appointed royal commission on the revision of the financial terms of union with Newfoundland, a commission whose appointment was provided for under section 29 of the terms of union concluded in December, 1949. At this point I should like to congratulate the Prime Minister and the government on the appointment of three such distinguished Canadians to be the members of that commission. They are all men eminently qualified for the highly responsible task which has been entrusted to them. We in Newfoundland have the utmost confidence in their ability, and we look forward with keen anticipation to their report.

Perhaps I might add that we in Newfoundland feel that an upward revision of the financial terms of union is urgently required if Newfoundland is to maintain the standard of public services which it has established. The Newfoundland provincial government has undertaken a program of expansion in social services and public works which is of great dimensions, having regard to the resources of the province. A great deal of progress has been achieved in the past few years since we entered union, but a great deal remains to be done before we can attain the average Canadian standard of public services.

Newfoundland is in many ways a special case because of the scattered nature of our population, the difficulties of communication, the overhead in connection with education, medical services, the provision of roads, and various other public services. Consequently the provision of an improved standard-and it has been greatly improved-has required heroic measures of taxation.

The taxes in Newfoundland are very high. Our gasoline tax, for example, is 17 cents a gallon. There is a sales tax of 3 per cent on all articles including foodstuffs. I commend these taxes to the attention of the house, because they show the steps our provincial government has had to take in order to raise our provincial services to a level which is still far from being what we would desire to have it.

Perhaps I might bring this point home if I were to point out that if the same rates were applied in Ontario, for instance, it has been estimated that the gasoline tax would bring in an additional revenue of about $50 million annually, and that the sales tax would bring in an extra revenue of $150 million annually. In this connection I was glad to hear the

The Budget-Mr. A. M. Fraser minister's comments on the recent statement made by the provincial treasurer of Ontario. As the minister has said:

Every dollar of federal revenue comes from Canadian taxpayers and every dollar paid in stabilization or equalization payments is contributed by Canadian taxpayers.

Newfoundland's contributions to the federal treasury are much greater than might appear at first sight because of sales made in Newfoundland of goods produced on the mainland. Part of the corporation taxes paid by mainland companies, whose sales include the Newfoundland market, is due to profits made by those companies on sales in the Newfoundland market. This is true also of the personal income taxes and succession duties paid by the proprietors of these firms and their staffs. Part of these is due to the business which they do in Newfoundland. Federal excise taxes and sales taxes are paid on goods produced on the Canadian mainland and sold in Newfoundland, but when the proceeds from these taxes come into the federal treasury they come not from Newfoundland but from the provinces where the goods originate. The same is true of customs duties on goods entering other provinces from abroad and subsequently sold in Newfoundland.

I wonder if the house always appreciates that Newfoundland has become Canada's fastest growing market. Even prior to union, Newfoundlanders bought a good deal from Canada. They bought a great deal also from other parts of the world, particularly from the United States and the United Kingdom, because in those days the Newfoundland consumer could buy in the cheapest market. Now, his freedom to do so has been limited to some extent by the Canadian tariff system. In the year 1947-48, just before union, Newfoundland exported to Canada goods to the value of $11 million, but imported from Canada goods to the value of $55 million. So even before union Canada enjoyed a very favourable balance of trade with Newfoundland in the ratio of almost five to one. In those days, of course, separate trade statistics were kept for Newfoundland. Since union that practice has been discontinued, so I cannot quote official figures to show the direction of Newfoundland's external trade today. But there can be no doubt that our imports from Canada have greatly increased. A reliable, perhaps even a conservative, estimate has placed them as high as $150 million a year. Now, no doubt part of this increase has been due to the improvement in Newfoundland's prosperity which has been continuous ever since 1940 or 1941 and has accelerated since union. Our purchasing power is now greater, and consequently we buy more.

The Budget-Mr. A. M. Fraser

Part of it is due also to a marked diversion of Newfoundland purchases, since union, from other countries, notably the United States, to the Canadian mainland. Unfortunately, however, there has been no corresponding increase in Newfoundland's sales to the mainland. I admit that is perhaps inevitable in the economic circumstances because the Newfoundland and mainland economies are competitive rather than complementary. This is especially true of two of Newfoundland's three stable exports, namely fish and newsprint, in which we compete with Canada. The only important exceptions are iron ore and, to a lesser degree, fluorspar. I think part of the reason is due to this competition, but I think it is partly due also to high freight costs.

I was, therefore, pleased to hear the minister's announcement of the government's decision to increase the subsidies on outgoing freight from all the Atlantic provinces from 20 per cent to 30 per cent. This is a step in the right direction and it will undoubtedly improve somewhat Newfoundland's competitive position. But of course, this increase applies only to outgoing freight. Welcome as it is, it would be a much greater boon to the people of Newfoundland if the government could see its way to making a similar upward adjustment of the subsidy on incoming freight. Newfoundland suffers a great deal from high freight charges. She is at the end of the line, and moreover has to import almost all of her consumer requirements. It is these factors that force up the cost of living in Newfoundland and limit the purchasing power of the dollars of our Newfoundland people. Lower incoming freight rates are absolutely essential, in my opinion, if Newfoundland is to have equality of opportunity with the rest of Canada. That is one of the reasons why I welcome the minister's assurance that the government is going to make a fresh and comprehensive examination of the transportation problems of the Atlantic provinces. I trust that when this thorough survey is completed, the result will convince the government of the need to increase the subventions in incoming freight.

The recent action of the government in increasing the freight subventions so as to enable the Atlantic farmers to obtain cheaper supplies of western feed grains has been enthusiastically received in Newfoundland. I wish to thank the government for that very fine step. I hope that before too long a similar increase in subsidies will be granted on all incoming goods.

There is another reason, too, why I look forward to this survey and it is because I hope it will lead to an improvement of our railway services. I referred a few minutes ago

[Mr. Fraser (St. John's East).!

to the greatly increased volume of imports from the mainland of Canada into Newfoundland. Now, much of the increased volume comes across our railway system in Newfoundland. This increased volume has placed an intolerable burden on our narrow gauge single track railway. The more I study this problem, the more I am convinced that Newfoundland's transportation difficulties can never be satisfactorily solved until we have a standard gauge railway. The Canadian National Railways has just reported a substantial operating surplus. I believe now is the time when sympathetic consideration should be given to providing a standard gauge railway in Newfoundland, thus removing what I consider to be the greatest single obstacle to Newfoundland's progress.

In conclusion, may I refer just for a moment or two to one or two matters in connection with my own riding. I hope that when the transportation survey is made it may lead the government to consider doing something to improve the transportation facilities between Newfoundland and Bell island, which has been aptly called an island within an island. Bell island, as hon. members are well aware, is a very important industrial centre on the Atlantic seaboard. It has immense iron mines and is a community of 12,000 people. Unfortunately, the communications with the mainland of Newfoundland have been far from satisfactory. If I may, with all respect, I should like to propose to the government that it might consider, in co-operation with the provincial government, the extension of the trans-Canada highway, beyond St. John's to Portugal Cove, Portugal Cove being the terminus on the Newfoundland mainland for the ferry service to Bell island. If it were possible, I should like to ask the government to give consideration to the possibility of co-operating with the provincial government to provide a better ferry service between Portugal Cove and Bell island, which is a great and growing community providing some of our industrial sinews. It is, I think, very necessary and timely that these problems should be considered, in view of the forthcoming survey of transportation problems, as a whole.

Before I sit down, Mr. Speaker, I should like once again to congratulate the minister upon the very fine budget which he has brought down. It has been given several names, some complimentary and others the reverse. I think it is, in a way, every man's budget because it has brought benefits or will bring benefits to everybody. It is a sound, sensible and businesslike budget. I like best to think of it as the budget of "golden mean",

striking a proper balance between debt reduction, tax relief, and progressive improvement of our social services and other public services.

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?

Mr, Donald M. Fleming (Eglinton):

Mr. Speaker, the budget is always a subject of major interest in a session, and not least of all in a pre-election session. This year, a desperate government, well aware of the political erosion it has suffered in the last two sessions as a result of its haughty contempt for parliament and its unbridled lust for power, has staked all its chances on the budget. It is the kind of budget that might be expected under those circumstances.

It is a budget full of pretence. It claims to be anti-inflationary, according to the words of the parliamentary assistant. It is nothing of the kind.

It is a delusive budget. It seeks to make people think that they will be taxed less when the fact is that they will be required to pay more in taxes. It seeks to make people think that the government is holding the line against inflation when it is not.

It is a cynical budget. It contradicts what the government has been saying and doing.

It is an opiate budget. The government openly boasts that the public has a short memory and can be made to forget the past as well as the present welter of the government's own contradictions.

It is a transparent budget. Its pose cannot hide its timing and purpose in this election year. It is the latest example of cyclical budgeting, strictly on the election cycle.

It is an illusory budget. It proposes changes, large in number but small in individual extent in every case, and seeks to create the impression of importance by their mere multiplicity. The banquet table is long. It is well dressed. The best silver and china are used. The lackeys are well-trained. But the fare is thin. The guests have left unsatisfied.

Typically, this government unctuously takes full credit for the accomplishments of the Canadian people, reflected in the increases in the gross national product, production and savings. These are created by the industry, thrift, skill and enterprise of the Canadian people, not by this government.

It is typical also that this budget bears no relationship to the previous budgets introduced by the same Minister of Finance. It is the product of a hit-and-miss approach. There is no long-range policy, no fixed objective in the government. There has been no forward planning, no thinking ahead. The horizon of this budget and of the government is set on a day in June and not beyond that. Therefore, this budget is circumscribed by

The Budget-Mr. Fleming expediency; therefore it is partisan. The Prime Minister can admonish business in Canada, as he did at Hamilton last Monday evening, to plan far ahead. This government plans three months ahead.

And now, sir, a word about the budget changes. What was intended to be the trump card in this budget, of course, consists of the increases in the social security payments, but I draw the attention of the house to the fact that these proposals are actually not part of the budget at all; they are simply the dressing that has been added to the budget. They are not in the budget proposals at all.

Why was the Minister of National Health and Welfare (Mr. Martin) not permitted to announce these increases in the social security payments, as might have been expected? Was he too modest, too retiring, too coy, too self-effacing? Why was it that he shunned the limelight on budget night? Did he, when he took a look at the crowded galleries, turn to the Minister of Finance and say, "No, you go ahead, my colleague; you make those announcements"?

The government has been indifferent to the growingly serious plight of those dependent upon pension payments, and as the value of those payments has steadily melted under the hot rays of inflation condoned by the government and intensified by its own policies. These good people have waited long for redress at the hands of the government. They would still be waiting but for the extremities in which this moribund government finds itself. These good people are in fact still waiting. They will wait, according to the government's proposals, for some months yet; for many of these increases do not become effective until July 1, and others not until September 1 next.

Sir, there is no justification for this further deferment. We call upon the government to bring in at once legislation to make these increases effective now. We offer to co-operate in expediting the passage of legislation at this session to make these increases effective forthwith.

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LIB

Walter Edward Harris (Minister of Finance and Receiver General; Leader of the Government in the House of Commons; Liberal Party House Leader)

Liberal

Mr. Harris:

That is the way you fight inflation.

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PC

Donald Methuen Fleming

Progressive Conservative

Mr. Fleming:

And these have nothing to do with the budget as such, and the bills could be proceeded with even though the government never permits the budget debate and the consequent bills to follow their full normal course. There is no need for any further delay in the introduction of such measures to increase those payments and to make them effective now. As a matter of fact, such bills could have been

The Budget-Mr. Fleming introduced weeks ago. They did not need to wait for the budget because they have nothing whatever to do with the budget. I wish to make this abundantly clear, Mr. Speaker. If this parliament is dissolved without these belated increases being fully enacted and made fully effective the full responsibility for that fact will rest upon the shoulders of the government.

The other sugaring of the budget pill was intended to be what are called the tax reductions. One needs to spend but little time on this subject, indeed, Mr. Speaker, because the so-called reductions are so minor in nature. Indeed, any of the proposals that have the effect of lessening the burden of taxation upon the people were, I think, well described by an eminent tax authority in Canada who was quoted in the press of last Friday as saying that these constitute "mostly modified technical changes". Technical changes, indeed, sir, and these very widely scattered! We approve of most of them. Indeed, we are responsible for nearly all of them by our efforts and our advocacy in this house session after session.

In general, these modifications come too late and are too little. But let us see them in their true perspective because then we shall most accurately estimate their true value. They mean, or would mean, in a full 12-months' period but $128 million, according to the estimate of the Minister of Finance. They will mean but $55 million in the present fiscal year, and they will amount to less than that in this present calendar year. But take them on the basis of the present fiscal year. They amount to the handsome figure of 1 per cent of the tax bill the people of this country are being called upon to pay this year. One per cent, sir! That cannot be seriously considered as a tax reduction. Let us understand this. All that the minister has done in that regard is simply to introduce certain technical modifications.

Sir, let us go farther in relation to these technical modifications. The Minister of Finance will still collect more money in taxes this year than ever before, $21 million more than last year. The tax load that the Canadian people are being called upon to bear this year is an all-time record.

Now, let us just briefly look at some of the specific modifications that have been proposed. First of all, of course, there is the proposal to reduce the excise tax on such things as chewing gum, but the Minister of Finance has done nothing to reduce the sales tax on clothing, boots and shoes, the necessities of life. They escaped his notice while he reduced the tax on such things as

bubble gum. A sort of Marie Antoinette mentality is exhibited here on the part of the Minister of Finance. The government has overlooked the necessities and has concentrated on some of the things which in the view of many people do not rank as necessities. Remember that Marie Antoinette when the hungry populace of Paris were storming the gates of the palace and she was told that the people were without bread made the answer, "Let them eat cake." So the Minister of Finance, apparently with a similar mentality, says that the people can go on paying the same high sales tax on their clothing and on their boots and shoes; let them be satisfied with the reduction being made in their chewing gum.

There is the proposed elimination of the sales tax on certain prepared foods and confectionery. We have been demanding this for years. This has been raised by some of us in the opposition session after session. This proposal is indeed a most gratifying victory for our efforts. I ask the house to recall that whatever has been done in this respect has been done in the face of government resistance expressed session after session. So we do not offer any thanks to the government for opposing our proposal for so long. Indeed we are distrustful of its deathbed repentance.

The same applies to such other proposals as the deduction from taxable income of annuity contributions on the part of selfemployed persons. The government's record on this subject has been one of long and unabated resistance. I think I was probably the first one in this house to introduce this question. I looked up the record and found that on April 10, 1953 I first raised this question in the house. I did so again on May 18, 1954 and during every session since.

Others have done the same. This is the fifth session during which this subject has been raised, and the government up until now has adopted an attitude of hostility and resistance. You will remember what the former minister of finance, Mr. Abbott, said when I raised the question first on April 10, 1953. This was his comment, to be found at page 3704 of Hansard of that year:

The difficulties, the inequities, still appal me.

That is the attitude which the government has taken up until now when we are on the eve of an election. As my colleague, the hon. member for Dufferin-Simcoe (Mr. Rowe), intimated the other night during the budget debate, we may well thank Providence that we do have elections from time to time to arouse the government to face up to what appear to them to be such appalling difficulties and inequities until they reach the eve

of an election. We hold the government responsible for the long delay in putting into effect a sound idea, Conservative idea. This government has cynically held back. How can parliament trust them at any time in the future when they offer their objections to sound proposals?

Then there is the minute proposal for infinitesimal assistance to municipalities in the elimination of the tax on certain municipal purchases.

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PC

William Earl Rowe

Progressive Conservative

Mr. Rowe:

Not one cabinet minister left.

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PC

Donald Methuen Fleming

Progressive Conservative

Mr. Fleming:

No, there is not one cabinet minister now left in the House.

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PC

William Earl Rowe

Progressive Conservative

Mr. Rowe:

The hon. member for Fort William (Mr. Mclvor) is still here.

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PC

Donald Methuen Fleming

Progressive Conservative

Mr. Fleming:

This indeed is an infinitesimal measure of delayed and needed relief which again smacks of a deathbed repentance. I trust the electors will see to it that the Minister of Finance wishes that he had repented more and sooner.

Then there is the proposal for what is called the "standard deduction", the $100 deduction for charitable donations and medical expenses. The house should understand the real reason for this proposal. It is put forward by the government solely for the purpose of relieving the Department of National Revenue of the clerical checking of vouchers and receipts. What strikes me is that this kind of proposal is going to hurt charitable institutions because the man who gives nothing to charity will be entitled to precisely the same deduction as the man who does give up to $100 per annum to charities, church and other worthy causes.

Then there is the proposal to increase the permissible earnings of dependents under the Income Tax Act. I wonder why the minister has proposed nothing in connection with the wife of the taxpayer.

I welcome the return now of one cabinet minister to the chamber.

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?

An hon. Member:

Here is another one.

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PC

Donald Methuen Fleming

Progressive Conservative

Mr. Fleming:

That makes two; things are

looking up.

I come now to the failure of the government to provide needed tax reductions.

When I refer to ministers I do not include the voluble parliamentary assistant to the Minister of National Defence (Mr. Hellyer), who is not a substitute.

We submit that tax reductions in the case of persons with small incomes are needed, particularly those with small fixed incomes. The house has recognized the need of increases in social security payments. Those in receipt of small incomes who are finding

The Budget-Mr. Fleming the burden of taxation very heavy under the pressures of rising costs of living are also entitled to consideration. If the idea being put forward by the Winnipeg Free Press is sound, that there should be no tax reductions, then surely they ought to be claiming at the same time that there ought to be increases in taxes for the same reason. Let me give you the opinion expressed on this budget and on the need of tax reductions by Mr. R. M. Sedgwick, Junior, secretary of the Canadian Tax Foundation, who in last Friday's paper, was quoted as saying:

The government could have gone a little further without getting into trouble over inflation.

I commend that to the Minister of Finance. Indeed it is an understatement. A measure of tax reduction for persons on small incomes could have been brought about within next year's estimated surplus. That could have been done and still left money to provide for fiscal adjustments for the benefit of the provinces and municipalities.

We wish to see a balanced budget because we believe in balanced budgets. When the minister is budgeting for a surplus of $152 million next year, if the margin of error in his calculation is as great as it was this year then I say that the taxpayers of this country, particularly the group I speak of on small fixed incomes, are going to need even moie some measure of tax relief.

If savings will help to defeat inflation then we say the people should be allowed to save out of their own money. This government does not trust the people with their own money. They seem to think they have a higher claim upon the money of the people than the people themselves who have sweated to earn it. We have had another repetition of overtaxing by the government. This overtaxing is for what purpose? It is not to save; it is not to increase savings in Canada; it is overtaxing for the purpose of spending. We of Her Majesty's loyal opposition say: Trust the people. We believe that the people are more intelligent and responsible in the use they make of their own money, than is the government in the use it makes of the money it takes from them.

Then there is the matter of indirect taxes. If inflation expresses itself in high prices then surely the government ought to have reduced the sales tax on those necessities of life to which I referred earlier, such as boots, shoes and clothing.

When I refer to the need for a reduction in excise taxes let me remind the house of the experience of this country two years ago when the government brought in a then belated measure of reduction in the tax on motor cars and found that the yield in the following year from the reduced rate of tax

The Budget-Mr. Fleming was greater than had been the yield from the higher tax the year before.

Before I leave this subject of indirect taxes, sir, may I say that I regret greatly to hear the Minister of Finance say, in effect, that the recommendations in the report of the sales tax committee headed by Mr. Kenneth Carter are apparently about to be embalmed. Its recommendations are evidently to be absolutely ignored, the report is to be shelved. I for one deplore that treatment of an important report by several very eminent persons.

And now, sir, a word about the surplus. The surplus for the present fiscal year is the direct result of overtaxation. I do not need to repeat what I said in this house yesterday on the subject. The people of Canada were overtaxed last year, and in the present budget the people of Canada are going to be overtaxed this year. Yesterday we discussed the government's action in salting away $100 million in its "piggy banks" in order to hide the true surplus-a true surplus that is not less than $382 million and which is probably a good deal more than that. We of Her Majesty's loyal opposition demand more careful budgeting; secondly, we demand a balanced budget; and, thirdly, in the matter of debt reduction we say that debt reductions should be carefully and systematically planned, not left to be dealt with by the hit-and-miss method which this government employs.

As to next year's surplus, let me say that the Minister of Finance has estimated it will be $152 million. We had better measure that against his record this year, for this year he budgeted for a surplus of $112 million and arrived at a surplus of at least $382 million. Since he is budgeting this year for a surplus of $152 million, then on the same absolute basis of error the surplus can be expected to amount to $422 million. If it is worked on a proportional basis, then it could be expected to amount to something over $518 million- and it could be that much if the minister or his successor in office so wished.

And now, a word on the subject of inflation. We have inflation in Canada today. We have had the elements of it for some time. It is all a question of degree. The Minister of Finance has been very coy about using the word "inflation". He showed a great reluctance, during the session last year, about using it; particularly in the debate we had on the eleventh day of August last year one would think that word had a plague attached to it. Well, sir, one can test the existence of inflation in Canada on the basis of the simple fact that in the lifetime of the Liberal government the Canadian dollar has depreciated in value by one-half. That has been reflected in what amounts to defrauding persons of part of their

savings, the value of their insurance, the value of their bonds and the earnings of those on fixed incomes. The minister's parliamentary assistant (Mr. Benidickson) was a little more frank when he spoke the night before last and said this was "an anti-inflationary budget". He was wrong about the budget, but he did recognize the existence of the danger, and that is something new.

I ask these questions, Mr. Speaker. How has this condition arisen? Could it have been prevented or moderated by government action? What does the government now propose in order to combat or curb it?

We have heard much, sir, about the so-called "eight best years". These are supposed to be the years since the present Prime Minister (Mr. St. Laurent) took office. There are several facts about these eight years that might well engage the attention of the house. I do not begin with the fiscal year 1948-49, because the Prime Minister came to office in the middle of that year. I begin with April 1, 1949, and I bring these figures down to March 31 this year. The government in those eight years has collected from the Canadian people $32,103 million. It has expended $31,345 million. It has built up in the net form of so-called surpluses, usually as a result of overtaxation of the people, $758 million. In that eight-year period the consumer price index has risen from 100 to 120.3 in January of this year, and the purchasing power of the Canadian dollar has correspondingly been reduced from 100 cents to 83 cents.

The gross bonded debt (exclusive of treasury bills) of provincial governments from 1949 to the end of 1954, which is as far as the figures now go, increased from $1,955 million to $2,552 million, and Canada's foreign indebtedness has increased by leaps and bounds. I leave out of consideration the forms of equity investment, but I draw to the attention of the house the fact that Canada's net foreign liabilities rose from $3.7 billion at the end of 1949 to $7.8 billion in 1955, and that figure will undoubtedly rise to well over $9 billion by the end of 1956 when the figures become available.

Now, sir, in the face of that situation and that record, let us ask what are the means by which governments can tackle the problem of inflation. The minister said in his budget speech, "The fiscal policy of the government has worked toward restraint." Sir, the government cannot justify that claim. No such claim or statement on the part of the government will bear close examination. The minister is right to recognize that there is a responsibility upon the government, but I say that that responsibility has not been discharged.

Inflation is indeed a pitfall for a minister of finance because it adds to his revenues. Many a minister of finance likes it for that reason.

The people of this country, and we in this parliament, had a right to expect this government to set an example, to practise what it preaches. Of the panaceas which are offered, let us consider two-the matter of savings and the matter of reducing expenditure.

On the matter of savings, the minister said in his budget speech, "I earnestly hope that Canadians will themselves save more and invest it profitably in their own future." That, sir, was sound advice. But high taxes make saving on the part of the people difficult. The government believes it can spend the people's money best. We do not.

"Father knows best" is the epitome of the attitude adopted by the government and supported by their followers in this house. The expression was actually used by a Liberal member in a speech in this house last year. We say: let the government do some of the saving it calls upon the people to do; let it set an example.

On the other aspect, expenditure, care is needed in the matter of spending if the desired goal of saving is to be achieved. Again, the government ought to be setting an example. The government this year is proposing to spend more money than any government has ever spent before in this country except in the one year of peak expenditure during the war in 1943-44. And if the government continues in the way it has been going on in the past it will, no doubt, before the end of the year exceed even the expenditure of that year. The Governor of the Bank of Canada has appealed for the curtailment of expenditure, but his recommendation has gone unheeded by the government. I am not saying, of course, that some large government expenditures are not necessary; we have been dealing with some of them here today in what we have approved in recognizing the need of the pensioners to some additional increase because inflation has destroyed, in part, the value of their pensions. But there is a great deal of government expenditure that could be, under careful examination, reduced.

And so I say in conclusion on this subject: let the government first cast out the beam from its own eye and then it will see clearly to pull out the mote from the eye of the individual Canadian.

And I may add this-that the Minister of Finance, as far as we are concerned, is not going to hide behind the policy of the Bank of Canada. He is going to bear his own responsibility.

The Budget-Mr. Fleming

On this subject of expenditure, sir, while I hesitate to spend any time on matters of a personal nature I think I must say something in reply to statements made concerning myself and my position in this house by the parliamentary assistant to the minister two nights ago. The parliamentary assistant in his speech on March 19 was completely wrong and muddled in his thinking, but I will say that so far as his presentation of that muddled effort is concerned it was an able effort and I told him so at the time. But I regret that in the closing moments of that able effort he spoiled it by the aspersion he cast upon the hon. member for Greenwood (Mr. Macdonnell). That was unworthy of the parliamentary assistant. Everyone in this chamber knows that the hon. member for Greenwood is incapable by nature of stabbing anyone in the back. Speaking now not as a political adversary but as a friend of the parliamentary assistant I must say that I regret that he marred an otherwise capable speech by an aspersion of that kind.

Let me come now to what the parliamentary assistant had to say about myself. As found at page 2495 of Hansard of March 19, he said:

Time after time I have heard him claim that he never advocates extra expenditures, that he is one of those who are economy minded and who are constantly urging the government to reduce its expenditures.

What were the examples he gave, intending apparently to put me in a different light? Well, sir, it is quite evident that the muddled parliamentary assistant sees no difference between expenditures on the one hand and tax reduction and capital investment programs and transfer payments on the other. They all look alike to him somehow or did the other night. The instances he referred to were these. First of all, he referred to my advocacy of an increase in the exemptions under the Income Tax Act. Yes, I have advocated increases in the exemptions. This party has. Last year i urged the Minister of Finance (Mr. Harris) at least to take a step in that direction. Sir, these are not expenditures. When we advocate this we are advocating reductions in taxes, not expenditures, but the parliamentary assistant evidently did not understand that.

The next example he gave was assistance to the unemployed. We have said it is inadequate and we stand by that charge. If the government had not attempted to throw that burden on the provinces and municipalities, had not attempted to shirk its own responsibility, had not retreated from its own 1945 proposals, if it had measured up to its duty it would thereby have lightened

The Budget-Mr. Fleming the tax burden upon the provinces and in that way not have increased the total burden of expenditure but assisted in holding it down.

The third instance he gave was my advocacy of federal assistance in the development of the Beechwood project in'New Brunswick. I have advocated federal participation and I shall continue to do so. I shall continue to deplore the fact that the government has wasted opportunities there and I shall denounce the government at every opportunity for its obstinacy and blindness in failing to participate in that project which would have brought such general benefit to the Atlantic area. But the parliamentary assistant does not distinguish between capital investment on the one hand and government expenditure on the other.

The fourth example he gave was my advocacy of aid to the municipalities. Well, sir, apparently he does not understand the effect of the transfer payments. I simply mention that it seems to me that to lighten the burden on the municipalities is a contribution to total reduction of taxes in Canada.

Finally, his last reference was to our fiscal relations with the provinces. I have said and I repeat that it will be a healthy thing and a contribution to the reduction of total government expenditure if the federal government will not continue to grasp the lion's share of the revenue from the joint fields of taxation, denying to the provinces their share of that revenue that is needed if development in the provinces is not to be stifled.

In short, Mr. Speaker, the parliamentary assistant was all jumbled up. He evidently did not know or did not see the difference between expenditure on the one hand and tax reduction, capital investment programs and fiscal adjustments with the provinces and municipalities on the other. All I can say is that the next time he goes agun-ning I hope he will come back with more game.

I have this further word to say about the provinces. If the minister would approach the problem of inflation in Canada constructively and seriously he must regard the total scene in Canada, including the provinces, municipalities and business in general. It is no help in seeking to combat the forces of inflation to force the provinces and municipalities into courses which are leading to increases in costs which the minister should be aiming to help them to reduce. The stiff-necked, unyielding and blind attitude that the minister and the government have taken to the needs of the provinces has been reflected in rising costs to them.

It is a narrow and partisan approach that has characterized the federal government in regard to dominion-provincial fiscal relations.

The provinces are suffering today the crippling effect of the federal government's grab-all policy. Many of them have now become obliged in consequence of these policies to increase taxes or arrest the very development which is sustaining the federal government's revenues. The federal government enjoys a swollen surplus today while the provinces and municipalities, lacking the revenues they need to discharge their constitutional responsibilities, are now compelled to increase both debt and taxes.

What would that estimated surplus of $152 million do for the provinces if the federal government would enter into a new and fairer fiscal deal with them or if it were used in partnership with the provinces in aiding the development of resource? Such a new tax deal would be anti-inflationary. The provinces and the municipalities, according to the minister's own statement in his budget speech, were forced in 1956 to borrow $772 million through the sale of net new bond issues, and that borrowing was 68 per cent greater than 1955.

Sir, we hold the federal government responsible for the tax increases which certain of the provinces have been compelled to impose. We hold the federal government responsible because they are retaining the lion's share, far beyond their needs, of the revenues from the joint fields of taxation.

I have not time to mention three subjects of importance more than to say this, that the budget does nothing for agriculture which needed special attention.

Then there are the maritime provinces. As far as the maritimes are concerned, the minister has suddenly discovered the maritime provinces. The government has acted hitherto as though it was unaware of the existence of the maritime provinces. The budget proposals in this regard are dressed up. What they mean in essence is that the maritime provinces are to be asked to accept more promises and these promises all wrapped up with conditions. The people of the Atlantic area so far as this government is concerned over its 22 years of history are the most promised people in all creation. The government has shown its indifference and unsympathetic attitude to the problems and the needs of the Atlantic area.

Sir, the other night the minister finished the presentation of his bubble gum budget with a peroration of a political nature, a highly partisan effort. It was an interesting flight of fancy. It was indeed an exercise in

fiction. Baron Munchausen at his best never excelled it. I ask the house to look at the facts, the true record of this government. Parliament degraded and humiliated, bent to the will of the government and its promoter friends; the people of Canada bearing a crushing tax burden, condemned to pay a record tax total this year; Canada with a record trading deficit last year of $848 million; a record deficit of $1,400 million on international current account; its trading eggs increasingly placed in one basket, the United States; a record trading deficit with that country in 1956 of $1,298 million; agriculture, the basic industry of this country, excluded from the vaunted national prosperity; the provinces and municipalities denied the revenues necessary to meet their heavy and important constitutional responsibilities and obliged to increase taxes while the federal coffers are filled to overflowing; federal-provincial relations in probably their most difficult condition in our history, with more sand in the constitutional machinery poured there by this federal government than ever before; monopoly thriving under government protection whether in air transport, television broadcasting or a good many other things; confusion on the part of the government in not knowing whether it supports free competitive enterprise or whether it regards socialists still as merely "Liberals in a hurry"; a stealthy weakening of our institutions under this government; a government stooping to divisive appeals to maintain itself in office; a government publicly affronting and denouncing the best friends this country has overseas; the ownership of our resources passing to a hitherto unparalleled degree into foreign hands; a government floundering in the welter of its own incompetence, error, contradictions and arrogance! These are the fruits of this government; and in the words of Holy Writ, ye shall know them by their fruits.

Topic:   THE BUDGET
Subtopic:   ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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LIB

Stuart Sinclair Garson (Minister of Justice and Attorney General of Canada)

Liberal

Hon. Stuart S. Garson (Minister of Justice):

Mr. Speaker, we have just listened to a speech which in the severity of its polemics and the extravagance of its language is quite up to the par that we usually expect from my friend the hon. member for Eglinton (Mr. Fleming).

Topic:   THE BUDGET
Subtopic:   ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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March 21, 1957