May 30, 1961


The house in committee on Bill No. C-88, to amend the Army Benevolent Fund Act- Mr. Churchill-Mr. Flynn in the chair. On clause 1-Interest.


PC

Henry Frank Jones (Parliamentary Secretary to the Minister of Veterans Affairs)

Progressive Conservative

Mr. Jones:

Mr. Chairman, this bill has been considered very carefully in the Veterans Affairs Committee. Many items were discussed in the committee which I think settled some of the problems that were raised in the house when the bill was before us on an earlier occasion. A request had been made to extend the provisions of the fund to Newfoundland veterans but that was dealt with in the committee by pointing out that those who contributed to this fund were the only ones who were entitled to share in the fund.

The fund arose as a result of various activities of the Canadian army in the second world war and it is those veterans of that particular army who are entitled to the benefits of the fund. R.C.A.F. veterans, for example, cannot make use of this fund. Neither can navy veterans use the fund nor army veterans of the first world war. As I pointed out when this matter was before the house on a former occasion, the moneys in the fund were derived from the regimental funds of army units, from auxiliary services, from Bronco, from the navy, army and air force institutes and from various miscellaneous sources, all of which funds resulted, as I have mentioned, from the sale of comforts and so on to the soldiers of the Canadian army.

There are certain Canadian funds in existence from the first world war. To my knowledge only three are left now, those in Ontario, Manitoba and New Brunswick. Originally such funds existed, I believe, in nearly every province in the country but as the moneys in these funds were used up the administrations closed their doors and the funds ceased to exist.

There is still a good deal of money left in the fund we are considering now and the purpose of the bill is explained fairly adequately in the explanatory notes accompanying the bill. Without going into a clause by clause discussion of the bill at the moment, I might point out that it has been thought that the interest rates should be increased as set forth in the bill to bring them in line with interest rates paid on similar funds held by the government of Canada.

Second, the purpose of the bill is to make an adjustment in the way the salary of the secretary is fixed in order that this matter may be removed from the statute and the

Army Benevolent Fund Act salary fixed by the board itself. I understand the secretary has not received any increase in salary for a number of years and it is thought that to have his salary made statutory is not a convenient way to deal with it.

In the standing committee it was suggested by the Canadian Legion that the interest rates should be increased still further than is set forth in the bill. When you increase interest rates on this or any other fund, I suppose it is always possible to suggest that the rate should be increased still further but the figure that has been selected in this case has been chosen on the basis of the principles which have existed for the setting of the interest rate on this fund in times past, particularly in 1952 and also in 1947 when the fund was originally established. Therefore I think we had better stick to the original principles for the setting of these interest rates, and the activities of the fund, will, of course, be tailored in accordance with the amount of money available.

I think that is all I can usefully say at the present time. As I mentioned, the bill was discussed very thoroughly in the standing committee and we are bringing it forward now for consideration in committee of the whole house.

Topic:   ARMY BENEVOLENT FUND ACT
Subtopic:   AMENDMENTS TO INCREASE RATES OF INTEREST, PROVIDE FOR ADMINISTRATIVE CHANGES, ETC.
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LIB

James Moffat Forgie

Liberal

Mr. Forgie:

Mr. Chairman, as the parliamentary secretary has said, this matter was discussed very thoroughly before the veterans affairs committee and the only subject of controversy at the present time is the rate of interest to be paid on the fund. The fund does not belong to the taxpayers of Canada or to the government but rather to the army veterans of world war II, and the same careful consideration should be given to the investment of these funds as the government or any other organization gives to the investment of funds. Before the veterans affairs committee the parliamentary secretary said, as found on page 313 of the proceedings of the committee:

The amendment to the act is a straightforward operation to increase the interest rate by one half per cent on each of the two categories mentioned in the bill. This increase brings it in line with the general type of interest paid by the government to funds of a similar character. I think that is all that needs to be said about the interest factor.

With that statement I do not agree because if the parliamentary secretary will refer to page 326 of the proceedings of the veterans affairs committee-

Topic:   ARMY BENEVOLENT FUND ACT
Subtopic:   AMENDMENTS TO INCREASE RATES OF INTEREST, PROVIDE FOR ADMINISTRATIVE CHANGES, ETC.
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PC

Henry Frank Jones (Parliamentary Secretary to the Minister of Veterans Affairs)

Progressive Conservative

Mr. Jones:

On a point of order, Mr. Chairman, I think it is not customary to read from the proceedings of committees of this house when we are dealing with a matter in the house itself.

Army Benevolent Fund Act

Topic:   ARMY BENEVOLENT FUND ACT
Subtopic:   AMENDMENTS TO INCREASE RATES OF INTEREST, PROVIDE FOR ADMINISTRATIVE CHANGES, ETC.
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PC

Jacques Flynn (Deputy Speaker and Chair of Committees of the Whole of the House of Commons)

Progressive Conservative

The Chairman:

Do I understand that the committee has reported? The committee has reported the bill and therefore I do not see how this rule would apply in the present case. It seems to me that the discussion in the standing committee with respect to this bill would be relevant to the discussion in this committee.

Topic:   ARMY BENEVOLENT FUND ACT
Subtopic:   AMENDMENTS TO INCREASE RATES OF INTEREST, PROVIDE FOR ADMINISTRATIVE CHANGES, ETC.
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CCF

Herbert Wilfred Herridge

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

Mr. Herridge:

On the point of order, Mr. Chairman, that is quite correct. The committee dealt with the bill and reported it back to the house and in the past we have followed this practice when the work of the standing committee has been concluded.

Topic:   ARMY BENEVOLENT FUND ACT
Subtopic:   AMENDMENTS TO INCREASE RATES OF INTEREST, PROVIDE FOR ADMINISTRATIVE CHANGES, ETC.
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LIB

James Moffat Forgie

Liberal

Mr. Forgie:

I want to bring into focus the question of the interest rate payable on the fund. I think there are two courses open. One is for the fund administered by the army benevolent fund committee to be invested by them. The other is that the government should pay the same rate of interest on the fund that they paid to borrow money in the conversion loan which falls due in 1983. At the present time the prevailing rate of yield on conversion loan bonds is 5.14 per cent. If these moneys were invested at 5.14 per cent the fund would be able to carry on, as was originally planned when the act was passed in 1947, for a period of 50 years at which time the fund would be exhausted.

The Canadian Legion made the following recommendations before the veterans affairs committee:

The Canadian Legion, therefore, believes the government must accept that the minimum rate at which money can be obtained in the open market is somewhere between 4J per cent and 5 per cent, and that this should be acknowledged by establishing a rate such as 41 per cent as the minimum to be paid by the receiver general to the army benevolent fund in respect of the balance which is available to the government at all times. We believe that by increasing the rate to 41 per cent per annum it would mean that the fund would have available more adequate means with which to meet the original intent of this legislation.

There is no doubt about it, Mr. Chairman. If the 4J per cent rate were to prevail across the board in relation to these moneys, there would be a considerable increase in the return on the moneys but it would not be adequate to take care of this fund for the full period of 50 years. I am suggesting, therefore, that the yield that should be obtained from this army benevolent fund should be the same as that obtained from the conversion bonds which are yielding about 5.14 per cent. These were the last figures I had, and they may have changed fractionally since then.

Let us look at the remarks of Mr. Chad-derton, as they are recorded on page 314 of the evidence of the veterans affairs committee. He had this to say:

We started with $9,200,000. Today we have left $6,500,000. So we have spent in cold cash from the fund, we have depleted the fund, in other words, in the amount of $2,700,000. In addition, we have had revenue through interest of $3,500,000. So the total amount now spent is $6,200,000. We operate this fund on an actuarial plan, which envisaged 30 years of full operation from 1947. The act states that we must remain in business for 50 years. The actuarial plan provides for a full period of operation of 30 years with a small residue to take care of the remaining 20 years. This, Mr. Chairman and gentlemen, offers a very serious problem to the army benevolent fund. I have already noted that we have left today only $6,500,000, but in accordance with this actuarial plan, we should have $7 million. So we have had to overspend to the tune of $500,000.

We had a new actuarial plan drafted at the end of the last fiscal year. The figures which the department of insurance gave us were such that we would have to reduce our expenditure for welfare grants and administration to $450,000 a year. Even with the proposed increase in interest in the bill before the parliamentary committee today, we can increase our expenditure to only $470,000 a year, even if we should get this increase in interest. The actual expenditures have averaged over the past 10 years $530,000 a year. We are facing a very serious problem, and our board sees one of two alternatives; either they must cut down on the amount that we spend each year and leave deserving cases out in the cold, or secondly, we must reduce the remaining 17 years of operation of the fund. Our board would not wish to do either of these things, because we have operated from the start on the principle that the veteran who is in trouble today is just as much entitled to assistance as the veteran who was in trouble at the start of the fund. And by the same token, if a veteran is in trouble 17 years from now, he should still have the availability of the army benevolent fund.

I asked Mr. Chadderton the following question as recorded on page 319 of the evidence:

Let me ask you another question: Do you feel that a higher rate of interest could be obtained if this fund were placed in the hands of a committee of the army benevolent fund, and that they should be allowed to invest this fund as they saw fit? You recall that it is not government money. You have already stated it. This money belongs to the veterans. Would it not be advisable to transfer to that committee from the government, or the receiver general, or the consolidated revenue fund, or whoever does the investing of the army benevolent fund?

Topic:   ARMY BENEVOLENT FUND ACT
Subtopic:   AMENDMENTS TO INCREASE RATES OF INTEREST, PROVIDE FOR ADMINISTRATIVE CHANGES, ETC.
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PC

George Louis Chatterton

Progressive Conservative

Mr. Chadderton:

Topic:   ARMY BENEVOLENT FUND ACT
Subtopic:   AMENDMENTS TO INCREASE RATES OF INTEREST, PROVIDE FOR ADMINISTRATIVE CHANGES, ETC.
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CCF

Herbert Wilfred Herridge

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

Mr. Herridge:

I am rather hurt, Mr. Chairman, to see the parliamentary assistant rising to close the debate on this clause.

Topic:   ARMY BENEVOLENT FUND ACT
Subtopic:   AMENDMENTS TO INCREASE RATES OF INTEREST, PROVIDE FOR ADMINISTRATIVE CHANGES, ETC.
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PC

Henry Frank Jones (Parliamentary Secretary to the Minister of Veterans Affairs)

Progressive Conservative

Mr. Jones:

The debate is not closed when I rise to reply to an hon. member.

Topic:   ARMY BENEVOLENT FUND ACT
Subtopic:   AMENDMENTS TO INCREASE RATES OF INTEREST, PROVIDE FOR ADMINISTRATIVE CHANGES, ETC.
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CCF

Herbert Wilfred Herridge

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

Mr. Herridge:

I was just going to congratulate him on his first opportunity to pilot a bill in the house.

This bill did receive very careful consideration by the standing committee on veterans affairs. It is a rather simple bill and is only concerned with interest rates. It was surprising, therefore, the interest which was shown in the administration of the fund. We received an excellent explanation of the administration of the fund from Mr. Chadder-ton, the secretary. He explained the various aspects of the fund, the forms of expenditure and things of that sort. I think it is quite fair to say that all members of the committee, regardless of party, were impressed by his explanation of the administration of the fund over the years. He explained the way grants were made to veterans. We found that there were even lady veterans now getting assistance on occasion from the fund for the purpose of assisting them in coping with circumstances over which, in the majority of cases, they had little control.

I think it is safe to say we were all convinced that the administration of the fund was sound, humane and in the interests of the veterans it was intended to serve. The trustees of this fund certainly should be commended for the work they have carried on throughout these years. We also heard some interesting representations from the Canadian Legion. Their brief showed a good knowledge of the administration of the fund and the financial aspects of the fund, as explained by the previous speaker. I am not going to take the time of the committee to deal with the interest question in full because he covered the situation quite fully in his remarks, and in his quotations from the record and from Mr. Chadderton's explanation to members of the committee.

90205-6-356

Army Benevolent Fund Act

After hearing the representations from a representative of the Canadian Legion and after hearing Mr. Chadderton's explanation of the financial condition of the fund, the intended life of the fund and the responsibilities there were in connection with the years ahead, I made a motion, seconded by the hon. member for Lanark; and the committee recommended that the government give consideration to the recommendations of the Canadian Legion in this respect which were, in brief, to provide for an interest rate of 4f per cent in order to ensure that the fund would last over the period of 50 years and meet the circumstances it was expected would have to be met during that period. That motion was adopted by the committee after some discussion, although I must say that I agree with the hon. member who spoke previously. During the debate on second reading I think I suggested that the interest rate should be 5 per cent and I think the hon. member suggested a similar figure, in order to meet this situation. These funds belonged to the veterans whom they are intended to serve and for whom they are intended to provide grants under certain circumstances.

I must say that I am very sorry that the government has not seen fit to accept the recommendation of the committee which sprang from the recommendations of representatives of the Canadian Legion which we considered were sound, responsible and in the interests of the veterans whom the fund was intended to serve. As members of the opposition we are not in a position to move an amendment to this clause when it comes before the committee, but in this case we think that the government should have responded more favourably to the recommendation of the standing committee on veterans affairs in this respect.

Topic:   ARMY BENEVOLENT FUND ACT
Subtopic:   AMENDMENTS TO INCREASE RATES OF INTEREST, PROVIDE FOR ADMINISTRATIVE CHANGES, ETC.
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PC

Henry Frank Jones (Parliamentary Secretary to the Minister of Veterans Affairs)

Progressive Conservative

Mr. Jones:

I should like to thank both of the hon. members for the contributions they have made to the discussion on this matter. I might say that serious consideration was given to the views that they and other hon. members expressed in the committee and also to the views of the Canadian Legion with regard to this matter of interest rates. The arguments that were advanced then and have been advanced here are, of course, the same arguments that could have been advanced in 1947 or 1952 when this bill was originally introduced and then amended. On those occasions it is always possible, just as it is possible now, to pick out a type of security and say that this security yields a higher rate than does the security on which interest is being paid by the government under this legislation. However, after the most careful consideration of the point raised it was thought that we should

Army Benevolent Fund Act stick to the original principle which was involved in the setting of the rates of this fund so that continuity could be carried on. That is not the only reason, of course. But the rates as set bear a relation to rates on funds held by the government from other sources and on which the government pays interest rates. I think perhaps it might be useful to recall to the members of this committee that this fund came first, and then the uses of this fund came second. It was not the other way around. When this fund was originally set up, a plan for assisting veterans was not envisaged and then money supplied for that purpose. It happened in a contrary way. The fund existed, drawn from the sources that I have already referred to; and because those funds existed, it was then determined that those funds should be used for the purposes developed by the army benevolent fund.

Topic:   ARMY BENEVOLENT FUND ACT
Subtopic:   AMENDMENTS TO INCREASE RATES OF INTEREST, PROVIDE FOR ADMINISTRATIVE CHANGES, ETC.
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LIB

James Moffat Forgie

Liberal

Mr. Forgie:

May I ask a question? Who determined how this money should be spent?

Topic:   ARMY BENEVOLENT FUND ACT
Subtopic:   AMENDMENTS TO INCREASE RATES OF INTEREST, PROVIDE FOR ADMINISTRATIVE CHANGES, ETC.
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PC

Henry Frank Jones (Parliamentary Secretary to the Minister of Veterans Affairs)

Progressive Conservative

Mr. Jones:

It was determined by parliament in 1947. It was determined by the parliament of Canada, by this House of Commons.

Topic:   ARMY BENEVOLENT FUND ACT
Subtopic:   AMENDMENTS TO INCREASE RATES OF INTEREST, PROVIDE FOR ADMINISTRATIVE CHANGES, ETC.
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LIB

James Moffat Forgie

Liberal

Mr. Forgie:

Not by the veterans?

Topic:   ARMY BENEVOLENT FUND ACT
Subtopic:   AMENDMENTS TO INCREASE RATES OF INTEREST, PROVIDE FOR ADMINISTRATIVE CHANGES, ETC.
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PC

Henry Frank Jones (Parliamentary Secretary to the Minister of Veterans Affairs)

Progressive Conservative

Mr. Jones:

The purposes are quite similar to the purposes of the R.C.A.F. benevolent fund and of the navy fund also. The purposes came second; the fund came first.

Again I thank hon. members for their contributions both in committee and here to the discussion of this matter. However, I wish to assure them that, after very careful consideration, we feel that a fair and equitable rate of interest is one that is based on the policy which has been carried forward from the time of the inception of the army benevolent fund. Accordingly, I hope the increase which is recommended by the bill will receive the support of the members of the House of Commons.

Topic:   ARMY BENEVOLENT FUND ACT
Subtopic:   AMENDMENTS TO INCREASE RATES OF INTEREST, PROVIDE FOR ADMINISTRATIVE CHANGES, ETC.
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LIB

Herman Maxwell Batten

Liberal

Mr. Batten:

I must say that I am particularly disappointed that the government has not seen fit to accede to the recommendation and suggestion made by the Canadian Legion. This money does not belong to the government. It is money that has been provided by the veterans over a period of time and for particular purposes. It has been provided for the aid which this fund can give to veterans. Because the money is not government money and because it is being held by the

government, it seems to me that the government should give to this fund an interest rate which would normally be given to money which is borrowed by the government.

I think the suggestion made by the Canadian Legion was a reasonable one. At this particular time when the fund is having just a little bit of trouble in following the actuarial plan which was set up for it, I feel that this is one way of helping the fund to carry on with the good work being done. I feel that this recommendation should have been accepted. I agreed wholeheartedly with the recommendation in committee; and even at this late stage I suggest to the parliamentary secretary that maybe it is not too late to give some active and favourable consideration to this suggestion.

Topic:   ARMY BENEVOLENT FUND ACT
Subtopic:   AMENDMENTS TO INCREASE RATES OF INTEREST, PROVIDE FOR ADMINISTRATIVE CHANGES, ETC.
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?

Some hon. Members:

Carried.

Topic:   ARMY BENEVOLENT FUND ACT
Subtopic:   AMENDMENTS TO INCREASE RATES OF INTEREST, PROVIDE FOR ADMINISTRATIVE CHANGES, ETC.
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LIB

Chesley William Carter

Liberal

Mr. Carter:

May I call it 10.30, Mr. Chairman?

Progress reported.

Topic:   ARMY BENEVOLENT FUND ACT
Subtopic:   AMENDMENTS TO INCREASE RATES OF INTEREST, PROVIDE FOR ADMINISTRATIVE CHANGES, ETC.
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BUSINESS OF THE HOUSE

May 30, 1961