April 13, 1959

PC

John George Diefenbaker (Prime Minister; Secretary of State for External Affairs)

Progressive Conservative

Right Hon. J. G. Diefenbaker (Prime Minister):

Mr. Speaker, I have had various departments communicated with in order to ascertain what foundation, if any, there is for the press dispatch referred to by the hon. gentleman, and I have been unable to find anything to substantiate the substance of the report.

Topic:   IMMIGRATION
Subtopic:   KLAUS FUCHS
Sub-subtopic:   REPORTED REQUEST FOR ADMITTANCE TO CANADA
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HIGHWAYS

MONTREAL


On the orders of the day:


PC

George Harris Hees (Minister of Transport)

Progressive Conservative

Hon. George H. Hees (Minister of Transport):

Mr. Speaker, on Thursday last the hon. member for Laurier asked me a question arising from an article in La Presse to the effect that the main highway running along the waterfront in Montreal adjacent to the border and within the jurisdiction of the Montreal harbour commission is to be closed. In answer I am glad to report to him that it is not the intention to close the waterfront road to which my hon. friend referred. This road is located inside the harbour limits, and by reason of the fact that a considerable number of persons having no business in the harbour have been utilizing it, congestion and serious inconvenience to port traffic and railway operations have been created. To alleviate this condition, which is detrimental to the welfare and efficiency of the port, the imposition of restrictions upon unwarranted traffic is now proposed.

I might add that the article in La Presse says, among other things:

A few days away from the opening of the seaway, the decision of the national harbours board appears fully justified.

Also, on Thursday last the Gazette commented in an editorial, "The move is a logical one."

Topic:   HIGHWAYS
Subtopic:   MONTREAL
Sub-subtopic:   STATEMENT ON REPORTED CLOSING OF MAIN ROAD ALONG WATERFRONT
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THE BUDGET

ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE


The house resumed, from Thursday, April 9, consideration of the motion of Hon. Donald M. Fleming (Minister of Finance) that Mr. Speaker do now leave the chair for the house to go into committee of ways and means.


L L

William Moore Benidickson

Liberal Labour

Mr. W. M. Benidickson (Kenora-Rainy River):

Mr. Speaker, the fairly lengthy budget speech which we heard the other night buried a number of important facts, I think, within the superlatives in the address. One's immediate reaction was that some of the rhetoric and semantics fairly shouted for further investigation, and one is indeed quite grateful

for the interval of two or three days before dealing with some of the important matters referred to then.

There have been rather substantial increases in the public relations and personal staff of the Minister of Finance, and after the event they endeavoured to see that summaries were provided to the C.B.C. and the press that would give the impression that the budget had substantially avoided the little man in its tax bite; but I was amused to find in this city of Ottawa on the following day something that is rather extraordinary. The two Ottawa papers do not always agree, but we find that they had almost exactly the same headline. The Ottawa Journal said "Every Pocket Hit", and the Ottawa Citizen varied it very little and said "Budget Hits Every Pocket". After a bit of digestion I think that is what is understood to be the result of the budget.

Certainly the increase in sales tax hits everyone, and a substantial portion of the new taxes to be levied comes from that source. I was somewhat surprised that this would be the tendency of the Minister of Finance, because he certainly was a very severe critic of the merit, so far as the little man is concerned, of placing special emphasis on tax raising from this source. Indeed the Minister of Finance, on the occasion of his last opportunity to discuss fiscal and monetary matters when on this side of the house, complained on March 21, 1957 that the minister of finance of that time had done nothing to reduce the sales tax on clothing, boots and shoes, etc. He went on to say, as found on page 2555 of Hansard:

If inflation expresses itself in high prices then surely the government ought to have reduced the sales tax on those necessities of life-

Yet this is the source of tax revenue that seems to be chiefly relied upon in this budget.

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

Donald Methuen Fleming (Minister of Finance and Receiver General)

Progressive Conservative

Mr. Fleming (Eglinlon):

Chiefly?

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

William Moore Benidickson

Liberal Labour

Mr. Benidickson:

In dollar volume. My hon. friend anticipates increased annual revenue of $352 million, and I think he will find that a very exceptional portion is from the sales tax.

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

Donald Methuen Fleming (Minister of Finance and Receiver General)

Progressive Conservative

Mr. Fleming (Eglinlon):

About one-quarter.

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

William Moore Benidickson

Liberal Labour

Mr. Benidickson:

I am referring to the

over-all tax on purchases for old age pensions as well as excise taxes.

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

Donald Methuen Fleming (Minister of Finance and Receiver General)

Progressive Conservative

Mr. Fleming (Eglinlon):

About one-quarter.

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

William Moore Benidickson

Liberal Labour

Mr. Benidickson:

I think he will also agree that the tax on corporations is generally regarded as being passed on fairly quickly to the consumers, and I propose to have something to say about that, too. The Minister of Finance, in comments since Thursday night,

13, 1959

The Budget-Mr. Benidickson has been called an Indian giver. Well, Mr. Speaker, I think the Indians in the part of northern Ontario from which I come could learn quite a bit from the present Minister of Finance, because the arithmetic is pretty simple. Actually he has taken back $2 for every $1 he gave in tax reduction in the preelection budget or the baby budget of 1957.

But that is not the entire story. I think a great number of people who have had economic reverses during the period that my hon. friend has been in charge of the treasury will agree with the secretary of the trades and labour council, who said:

Most of the minor tax reliefs granted before the election of 1958 were eliminated in Thursday's budget without restoring the level of economic prosperity that existed at that time.

We have had a very quick reaction as to the inflationary squeeze that can develop from further imposts on consumer expenditures such as were so prominent in the budget. Even the press was wrong. The following morning the headlines said "Fags Up 2 Cents." That, of course, seemed to be the nearest figure to the actual amount of the tax increase, but we all know that within a matter of hours the giant in the field said "Oh, well, we have increased operating expenses, and as a manufacturer our increase must be 3 cents." We quickly got a very similar reaction from other manufacturers. Canadian General Electric said their costs were rising. Westinghouse reacted in the same way and said that as a result of the new tax set-up they would have to reprice their goods. No one will deny that as a result of the repricing the consumer will end up paying out of the gross national product about which the minister speaks a great deal more than the actual dollar value of the taxes referred to in the budget.

I am sure there were a great many who were surprised that the minister had actually increased the purchase tax with respect to automobiles. I am sure the ministers from the Ontario constituency, the hon. Minister of Labour, as well as the hon. members from Essex constituencies would be very surprised; because we recall the great enthusiasm with which hon. members opposite greeted the announcement of a 2.5 per cent decrease in the purchase taxes on automobiles announced by the Minister of Finance in December, 1957. Statements were made that this amounted to a 25 per cent reduction of the excise tax formerly at 10 per cent. Well, put on that arithmetical basis the minister has taken back 40 per cent of the value of any reduction he made at that time.

It has been said that perhaps early today we will hear from the treasury benches, and that perhaps the spokesman will be the

The Budget-Mr. Benidickson Minister of National Revenue (Mr. Nowlan). I recall that he participated very early in the budget debate last year, and I recall that one of the many statistics he used to buttress his arguments related to automobile production. Fortunately there has been some slight increase in the sales of automobiles in Canada as compared with last year. The statistics to the end of March indicated that the increase in the sales of automobiles and trucks combined amounted to 12 per cent. However, other members will have read, as I have, that the increase in the same period of 1959 in the United States amounted to 70 per cent. This extra purchase tax, therefore, is going to be felt very importantly in these constituencies where I think unemployment of late has been of unusual prominence.

There are a few items in the budget press releases that I feel are not properly understood by the people of this country. I suggest that one such item is the actual increase in the tax take which results from this budget. Prominence was given, of course, only to the estimated value of the extra tax revenue that would come from the new rates, but what was overlooked was the fact that because of the extra expenditures and the extra revenues, the total tax take predicted by the minister for the coming year is not up $245 million but is to be up $640 million. The minister felt justified in telling the house and the country he expected an increase in the gross national product, and he expected that might amount to $2.2 billion. But I am sure any reasonable person today, with recovery not bouncing, would be wondering whether or not a proposal to take $640 million by federal taxes alone out of this expected increase in the gross national product is likely to aid or abort recovery.

I said the other night that you get figures in a debate like this that have a bright side, and if they are unduly exaggerated or overemphasized there is a duty to present as well some of those that are distressing and not quite so cheerful. I want to point out, with respect to the gross national product, that the minister has qualified his estimate in exactly the same words that he qualified his estimate last year. He said, and his assumptions are very important, that assuming normal crops, stable prices and no untoward external events, he predicted this year a 7 per cent rise. We recall the figures with respect to the minister's prediction of last year. He predicted an increase of two per cent, and it turns out that in dollar values the increase was 2.5 per cent. However, his white paper on financial results points out that 80 per cent of that increase came from inflated prices, so this is something to which we have to

give consideration when he estimates an increase in the gross national product.

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

Richard Albert Bell

Progressive Conservative

Mr. Bell (Carleton):

Did the hon. gentleman not suggest last year that 2 per cent was optimistic?

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

Lester Bowles Pearson (Leader of the Official Opposition)

Liberal

Mr. Pearson:

And so it was.

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

William Moore Benidickson

Liberal Labour

Mr. Benidickson:

I want to point out that based on his assumptions the minister proved to be wrong. Actually, the white paper establishes that Canada's living standards underwent a slight decline in 1958. Living costs outpaced small gains in wages, reducing real earnings for the first time in recent years. My hon. friend can calculate that from the white paper itself, I think on page 5, where it states that 80 per cent of the 2.5 per cent increase was due to inflationary prices.

I said the other night, and I think it is worth emphasizing, that in looking at this all-important figure of the gross national product it is very difficult to be as optimistic as one would want to be because of two particular elements that are essential to a steady rise in the gross national product. One of these elements is exports; the other is capital investment. Since the budget speech we have received the most recent issue of the Financial Post, a very reliable newpaper indeed. The Financial Post of April 11, 1959, has this to say about these elements:

Exports are giving more indications of receding from last year's high levels. In February, for example, Canadian goods sold abroad were off 11 per cent, after taking into consideration seasonal influences. It is unlikely that the full year will be down this much, but it is still hard for many producers to see any sudden upsurge in foreign demand for most Canadian source-related products.

This year's statistics, available only for the first two months, actually show that the trade deficit of this country is three times that reported last year. With respect to capital spending, another all-important element in the gross national product, the same issue of the Financial Post has this to say:

There is still no sign of a turnaround in capital spending by business. Year-to-year decrease for Canada for 1959 will be about 5.5 per cent. In the United States, by contrast, business plans call for 1959 outlays over 4 per cent higher than last year's.

I suggest to the minister that there is certainly no significant "oomph" in figures of this kind. In addition to that, in the private sector, according to the latest report I have from the A. E. Ames brokerage firm, reporting on corporation borrowings to March 23, it is stated that corporation borrowings in Canada, indicating capital investment intentions, are down 76 per cent, or are $48 million this year instead of $207 million last year.

Now, at this stage I am not going to belabour the question of what is the real deficit, either in the accounts of 1958-59 or 1959-60. However, I am going to point out again that as a result of some rather slick bookkeeping, the minister is still successful in planting this figure of a deficit of $617 million rather than the real figure of $835 million. I say to the minister that if it was his intention to keep these expenditures from the defence account out of the current budget he required to do more than simply make a speech about it as he did on budget night in June last. Actually I think he will find that he saw to it that not only were those proposed defence expenditures in full put in the blue book of estimates, but that they were included in appropriation bill No. 5 as part of the budget at the gross amount, $1,630 million.

But I am afraid that some of this type of arithmetic is not over with. We all noted that again this year there appears prominently a figure of this kind. When the minister estimates the deficit for the forthcoming year at $393 million surely it is obvious that, contrary to practice for quite a number of years, he has no intention of including in the expenditures for this year a fairly closely calculable item of $42 million, namely the expected deficit in the old age pension fund. He did not say positively that this would be recovered even within the following year; he said it might take two or three years to recover that amount. But the point is that that is to be a borrowed item. In accordance with the practice of past years one would have expected that it would have been included in the budget in the normal way.

I said the other night that one of the obvious indicators of decreasing financial confidence in the competence, understanding and real intention and determination of this government to cope with what I agree were fairly massive, wide dimensional problems, was the steadily declining prices offered for federal bonds. The minister spoke again on Thursday to the body politic; but while the patient realizes that he cannot change his physician for a couple of years yet, he did not seem to be any more convinced that he was getting the right treatment. Because actually, following the minister's statement with respect to mammoth increases in expenditures, borrowings, debt and taxes, federal securities weakened again the day after the budget. The latest budget, no more than other financial statements, I submit to the minister, therefore has not succeeded in convincing the country that they know what are the intentions of the minister and the administration in these all-important matters.

13, 1959

The Budget-Mr. Benidickson

That indeed is the charge we have made against this administration, but I did not expect it to come from the chief journalistic supporter in Toronto of the Conservative administration. However on Saturday, after examination of the budget, the Toronto Globe and Mail had this to say:

The present government at Ottawa has not yet arrived at a fiscal policy. It is simply struggling to raise money for a 12-month period-the money needed to meet its cumulative commitments, and the predetermined expenditures of its various departments.

We have said before that the budget deficit of last year was not planned but merely happened. We say again that the new taxes and the important deficit for this year are again the result of a long series of unco-ordinated decisions. I know the minister would like us to believe otherwise. He would like us to think these were part of an over-all financial plan. However, I think the record is against him. For too long, in matters of this kind, the ministry has not been planning ahead. Its decisions have been on a hit or miss basis, and the minister has had no choice but simply to pick up the chips for the bungling and bumbling that has involved only hindsight and not foresight. The big thing is that the ministry continues to keep the country in the dark as to its real intentions. As a result we have continued confusion and uncertainty. That is why the country lacks confidence financially in the administration.

As we know, from the very beginning we have had conflicts among important people in the ministry as to what is the real plan and intention of this government in matters of fiscal policy. During the election campaign of 1957 the Minister of Finance was just as vigorous and almost as vocal as was the Prime Minister when he told the people, and convinced them, that it was possible to increase old age pensions, make larger payments to the provinces and municipalities, cut income taxes, cut automobile taxes and do all these things on a balanced budget. That is obvious from a great number of quotations that are available to us. In Vancouver in 1957 the Prime Minister said:

The Liberals say they cannot increase pensions and reduce taxes. Give us a chance and we will show you.

Of course we all know with what indignation and withering scorn he was able to make assertions of that kind, but the point I want to make is this. Even after six or seven months of the responsibility of office was there any indication on the part of the Prime Minister that as a result of being on the other side of the house he had found out some of the facts of life with respect to financial policy, or that he was more knowledgeable or realistic in matters of that kind?

The Budget-Mr. Benidickson On the contrary, Mr. Speaker, we find this. Six or seven months later, after statements of this kind that might be excused to some extent in an election campaign, the financial critic the hon. Mr. Sinclair on this side of the house asked the Prime Minister about his much vaunted assertion he had made so frequently, namely that a $500 million reduction could be made in taxes with $120 for each man, woman and child in the country, and so on, and why were the financial proposals of the Minister of Finance in December so meagre in comparison.

We find this. On January 20, 1958, as reported at page 3523 of Hansard, the Prime Minister was asserting that he had done a great deal, and this is the dialogue:

We have reduced taxes-

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

James Sinclair

Mr. Sinclair:

How much?

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

John George Diefenbaker (Prime Minister; Secretary of State for External Affairs)

Progressive Conservative

Mr. Diefenbaker:

They say how much, Mr. Speaker.

Topic:   THE BUDGET
Subtopic:   ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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April 13, 1959