July 13, 1964

PC

Louis-Joseph Pigeon

Progressive Conservative

Mr. Pigeon:

He changed religions many times.

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LIB

Walter Lockhart Gordon (Minister of Finance and Receiver General)

Liberal

Mr. Gordon:

The hon. member knows more about him than I do. It was my responsibility over 20 years ago, Mr. Chairman, to assist the then minister of finance in negotiating the original wartime tax deals with the provinces, including the province of which very shortly afterwards the hon. member for Burnaby-Coquitlam became the premier.

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PC

John George Diefenbaker (Leader of the Official Opposition)

Progressive Conservative

Mr. Diefenbaker:

Was that the tax rental

agreements?

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LIB

Walter Lockhart Gordon (Minister of Finance and Receiver General)

Liberal

Mr. Gordon:

The right hon. gentleman asks me if it was the tax rental arrangements. It was not what are known as the tax rental arrangements. It was the one that came first. Even in those days it seemed to me there was at least something to be said for keeping an eye on the final results, as well as on the highly complex calculations which supported them. I submit that looked at in that way it must be obvious that the changes

contemplated in the fiscal arrangements with the provinces, which are provided for in this resolution and will be incorporated in the bill to follow, will be highly beneficial to all of them. Every province will gain from the proposals. As I said a few minutes ago, it would be my hope that the tax structure committee of the federal-provincial conference will be able to devise an approach to this whole difficult and aggravating problem that will be a little easier to understand.

In the meantime, while I do not suggest the present formula for equalization is perfect by any means-I am not sure that any such formula could be devised that would be perfect in the full sense of that word-it is one which has been agreed to by the federal government and accepted by the provinces, albeit with some reservations.

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PC

John George Diefenbaker (Leader of the Official Opposition)

Progressive Conservative

Mr. Diefenbaker:

Will the minister allow a question? When did the change take place on the part of the Liberal party which promised that equalization would be determined on the basis of the highest provinces? When did the change take place to have equalization based on the level of the two provinces, because in both elections the promise was that equalization would be determined on the basis of the top province?

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LIB

Walter Lockhart Gordon (Minister of Finance and Receiver General)

Liberal

Mr. Gordon:

I am delighted to have the opportunity to answer that question and, I hope, to settle it in the minds of all hon. members of the committee for all time. The purpose and intention of the proposal by the Liberal party was to equalize up to the level of Ontario, which was generally understood, and which is, the number one in terms of per capita tax revenues. The reason for changing this to the top two, which at the present time are Ontario and British Columbia, is that if you make a careful study of the figures you will see that it could happen that in one year or another British Columbia or some other province might have higher per capita tax revenues than Ontario, in which case the whole calculation would be thrown out of kilter. I have not got all the calculations with me, but I shall be glad to get them and send them to my hon. friend. It was certainly clear that this would result or could result in wide fluctuations from one year to another, which were not contemplated and were never intended.

It seemed, therefore, better, after studying the detailed calculations and after considering the implications, to equalize on the basis of the top two which would presumably

Federal-Provincial Relations include Ontario, at least for a good many years to come, rather than the top one.

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PC

John George Diefenbaker (Leader of the Official Opposition)

Progressive Conservative

Mr. Diefenbaker:

This still does not answer the question. When did the hon. gentleman, having advocated the other course and his leader having done the same-that the proper way was to level on the basis of the top province-finally adopt the course of reason and common sense which he says is now being followed?

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LIB

Walter Lockhart Gordon (Minister of Finance and Receiver General)

Liberal

Mr. Gordon:

I was trying to make the point a little earlier, Mr. Chairman, that one can benefit from close and detailed study. It was for this reason I thought the right hon. gentleman's proposal for a massive study in which all governments would be represented and all political parties, was a rather woolly idea, if I may say that.

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PC

Eric Alfred Winkler (Chief Opposition Whip; Whip of the Progressive Conservative Party)

Progressive Conservative

Mr. Winkler:

Does that mean the Liberal party did not study the matter before putting forward the proposal?

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PC

John George Diefenbaker (Leader of the Official Opposition)

Progressive Conservative

Mr. Diefenbaker:

I do not want to get into a controversy with the hon. gentleman on woolliness, especially after the budget he produced. I ask him, when did his woolly idea of levelling up to the top province change to a basis of levelling to the two top provinces?

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LIB

Walter Lockhart Gordon (Minister of Finance and Receiver General)

Liberal

Mr. Gordon:

First of all I should like to say, as an old sheep farmer, that when I said "woolly" I did not mean it in any offensive sense. It is a term of endearment amongst those who are in this business.

In answer to his particular question, we naturally approached this federal-provincial conference with an open mind and a desire to study and benefit from what we heard there. It was about that time, I think, that we decided this would be a much better approach.

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PC

Eric Alfred Winkler (Chief Opposition Whip; Whip of the Progressive Conservative Party)

Progressive Conservative

Mr. Winkler:

Does the minister's statement mean that the initial promise made by his party was made without any study by the Liberal party prior to the promise being made, which has become the usual thing rather than the exception?

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LIB

Walter Lockhart Gordon (Minister of Finance and Receiver General)

Liberal

Mr. Gordon:

I think that is a presumption that would be a little far fetched, Mr. Chairman.

If I may continue-

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NDP

Francis Andrew Brewin

New Democratic Party

Mr. Brewin:

I wonder if the minister, in the course of his remarks, will answer a question put to him by the hon. member for Burnaby-Coquitlam, as recorded on page 5257 of Hansard. The hon. member referred to the fact that natural resource revenue would be

Federal-Provincial Relations taken into account when computing equalization payments. As I recall it he pointed out that this was in effect penalizing the provinces which are making the maximum use of their natural resources. Will the minister answer that question for our benefit at some stage?

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LIB

Walter Lockhart Gordon (Minister of Finance and Receiver General)

Liberal

Mr. Gordon:

I believe I have answered this question, Mr. Chairman, in more general terms. We were trying to find a formula that would be fair and equitable, and it seemed to us it would be unfair and inequitable if revenues from this particular source were left out completely from the calculations. I believe this is not a new idea. It may have been done in a different way, that is all.

As I said a few minutes ago, it will be one of the purposes of the tax structure committee to try to evolve a formula for equalization that will perhaps suit more people than the present one.

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SC

Bert Raymond Leboe

Social Credit

Mr. Leboe:

May I ask the minister, is it not a fact that this attitude towards the development of resources is going to make it advantageous for some provinces to sit on their resources rather than to develop them, and reap the benefits in payments coming from those provinces that have developed their resources? This seems to me a very wrong approach.

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LIB

Walter Lockhart Gordon (Minister of Finance and Receiver General)

Liberal

Mr. Gordon:

I would not think it would have that effect, no. I believe there is room for a difference of opinion on these matters. Certainly the present formulae are not perfect. I do not believe any will be devised that everyone will claim are perfect. I think it will be the purpose of the tax structure committee, as I have said, to study the point that my hon. friend has just raised and all the others that will be raised during the course of the deliberations of that committee.

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PC

John George Diefenbaker (Leader of the Official Opposition)

Progressive Conservative

Mr. Diefenbaker:

Will the minister then say, if he is not certain now of the efficacy and propriety of what is being done, why he did not wait until this committee reported?

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LIB

Walter Lockhart Gordon (Minister of Finance and Receiver General)

Liberal

Mr. Gordon:

I think that is a very simple question to answer, Mr. Chairman. In order to go into this matter in detail, the committee will take some time. The government believed it was important to meet the points that have been raised by the provinces now rather than in two or three years time.

There are just one or two other points that were raised in the course of the debate upon which I should like to touch. I am not going to try to deal with all of them, by any means. The hon. member for Burnaby-Coquitlam suggested there should be an annual meeting

of federal-provincial finance ministers to discuss and co-ordinate economic and fiscal policies. I agree that this is a good idea. It is an idea that has been accepted by the provinces. The first meeting of the federal-provincial finance ministers was held last November during the course of the federal-provincial conference. It was agreed that they would meet annually. I am hoping that there will be a meeting with the provincial finance ministers some time in the late fall.

The hon. member for Red Deer raised a question about our whole financial system, and as he dealt with it in considerable depth I suggest it might better be discussed when the revisions of the Bank Act are before the banking and commerce committee.

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SC

Bert Raymond Leboe

Social Credit

Mr. Leboe:

I wonder whether the minister would not admit that this is a very suitable time at which to answer these questions and that an answer should not be deferred until some time in the future. Surely the committee could be given answers to the simple questions which were asked. I think they are important to the consideration of the resolution which is before us and the bill which is to follow.

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July 13, 1964