July 13, 1964

LIB

Walter Lockhart Gordon (Minister of Finance and Receiver General)

Liberal

Mr. Gordon:

With respect, it seems to me that since this whole question will be gone into in detail in the context of the revision of the Bank Act and the Bank of Canada Act, and in the light of the report of the royal commission on banking and finance, these more fundamental questions could be dealt with better at that time, as well as in a more orderly way.

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SC

Bert Raymond Leboe

Social Credit

Mr. Leboe:

I do not like interrupting the minister, but in my opinion it is scarcely enough to say that these questions can be dealt with in a more orderly way on some future occasion. It should not be difficult for a department to provide answers to them, and I think the real point at issue is whether or not the minister wants to give the information. I suggest to the hon. gentleman that in all fairness to the committee these questions should be answered, and not put off until some future date.

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LIB

Walter Lockhart Gordon (Minister of Finance and Receiver General)

Liberal

Mr. Gordon:

I am afraid I did not feel that some of the questions were related to the subject matter of the resolution. I was about to say that the hon. member for Red Deer had, for example, suggested there should be an entirely new system of taxation in Canada. Before commenting on that proposal I should like to have the benefit of the report of the

royal commission on taxation which has been studying this very question in great detail for the past two years.

Several other members made interesting contributions to the debate, including the hon. member for Pontiac-Temiscamingue. I hope they will forgive me if I do not comment on their observations individually. I point out there will be another opportunity to deal with these matters on the second reading of the bill.

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PC

Marcel Joseph Aimé Lambert

Progressive Conservative

Mr. Lambert:

Before the minister resumes his seat, may I remind him that I did raise a particular point. It had to do with natural resource revenue and what I felt was an unfair lumping together of capital moneys and annual revenues. It affects the province of Alberta more than any other.

I was at great pains the other night to set out the situation and I should like the minister to give me some explanation, since this is of great interest to the province of Alberta, and likely to Saskatchewan, depending on how that province handles its natural resource development. These capital moneys to which I referred result from what is in effect the alienation of a natural resource, and these once-for-all sales are in no way income revenue on a recurring basis.

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LIB

Walter Lockhart Gordon (Minister of Finance and Receiver General)

Liberal

Mr. Gordon:

I wonder if the hon. member would allow me to give an answer to that particular question on second reading. I am having a calculation prepared but I am not quite ready to deal with it today.

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PC

David Vaughan Pugh

Progressive Conservative

Mr. Pugh:

The question I have for the minister actually is in regard to the provinces on this point of resources. Did this financial suggestion come from British Columbia or Alberta or was it suggested to them? What was the discussion on it at the time of this conference. The hon. gentleman made mention of it at the beginning of his speech on July 7. He said, as reported on page 5181 of Hansard:

In the past year or so the amount of federal-provincial consultation has been increased very considerably. .. .We have had two federal-provincial conferences which have dealt with a range of matters including the important question of tax-sharing...

As a result of these consultations and our consideration of the financial problems of the provinces the government has come to the conclusion that the fiscal relationship with the provinces was in need of modification...

What I am wondering about on this resource point is this: Other ways have been suggested by myself, but it does seem to me very important indeed that when we are about to

Federal-Provincial Relations embark on a tax sharing agreement that is less promising we should know where British Columbia stands in relation to an ever expanding national resource program. It has been pointed out that such a program is extractive. In making greater use of your resources, in the forestry industry you use up your resources; in the oil industry you use up your resources, and it seem a little unfair the government has taken those two provinces, Alberta and British Columbia. Was this the suggestion of the provinces or of this government, and if it was of this government did the provinces resist such an idea?

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LIB

Walter Lockhart Gordon (Minister of Finance and Receiver General)

Liberal

Mr. Gordon:

I would first refer the hon. member to the table which was printed in Hansard on July 7 in which he will see that under these changes the province of British Columbia will receive more than $16 million more per annum in 1966-67 than it would have received if these various changes do not take place. By the same token he will see that Alberta will receive more than $9 million more than if these various changes do not take place. Obviously, as is shown by the table, if no adjustments were made on account of natural resources revenues the increased amount to be received by British Columbia and Alberta would be even greater. That is a fact. There is no question that various changes, various formulae, could be suggested which would produce larger additional revenues to British Columbia and Alberta, or to any of the provinces if these were thought necessary, or desirable, or responsible. However, as I have pointed out, these changes will mean that the provinces as a whole will receive some $265 million more each year and the federal government will receive some $265 million less each year than would have been the case had no adjustments been made. So, with respect, I do not favour any formula which would increase these amounts even more than they are as set out in the table.

I think it is perfectly obvious that neither of the provinces mentioned volunteered or recommended a formula which would reduce what otherwise would be coming to them, but I again refer to the fact that both these provinces will receive a substantial amount additional to what they would be receiving if no changes in these arrangements were made. I think anyone is entitled to say that a particular formula would be better than those outlined here. But these are the formulae to which the federal government was prepared

5396 HOUSE OF

Federal-Provincial Relations to agree, and these are the formulae which will be encompassed in the bill to be presented in due course.

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PC

David Vaughan Pugh

Progressive Conservative

Mr. Pugh:

If I might just go on with this in perhaps a piecemeal fashion, I take it we have dominion-provincial relationships and this has been stressed by the present government. I asked the question as to who suggested this portion of the formula stipulating the handing of 50 per cent of resource income over to the federal government? I asked the question, was it suggested by the provinces or was it suggested by the federal government? If I cannot get an answer to that-

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LIB

Walter Lockhart Gordon (Minister of Finance and Receiver General)

Liberal

Mr. Gordon:

I will give you an answer.

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PC

David Vaughan Pugh

Progressive Conservative

Mr. Pugh:

Then whatever the answer is, did the provinces agree to this arrangement? Also, to what extent did the federal government and the provinces explore this idea?

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LIB

Walter Lockhart Gordon (Minister of Finance and Receiver General)

Liberal

Mr. Gordon:

In the first place, Mr. Chairman, I want to correct one remark of my hon. friend right away. There is no thought whatever, and it was never intended, that part of the resource revenues would be turned over to the federal government. All that has been suggested is that half the total of the resource revenues should be taken into account in the calculation of the equalization payments that would otherwise be payable to what we all recognize are two of the wealthier provinces of the nation.

The hon. member asked me where these proposals originated, Mr. Speaker. It is a responsibility of the federal government to make such proposals. These proposals were put forward by the federal government to the conference. It has never been the custom, in recent years anyway-it certainly has not been for some time-to ask for formal agreement on the part of the provinces. I am not sure that that idea would speed things up exactly. What is done in practice-as I am sure the Leader of the Opposition would agree if he were here-is that after discussion the federal government finally has to make a proposal, and if it is not considered to be too unreasonable or unfair, it is the proposal that is adopted. But nobody says, "Will you please sign on the dotted line and agree?"

I suppose some measure of agreement is indicated when the provinces accept the cheques that are paid to them every quarter or every month.

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PC

David Vaughan Pugh

Progressive Conservative

Mr. Pugh:

Getting down to what I want to find out, Mr. Chairman, would the minister answer this question. Did the province of British Columbia and the province of Alberta,

on this proposition being put before them, agree with it, or were they against it? Did they express any dissatisfaction with the idea?

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LIB

Walter Lockhart Gordon (Minister of Finance and Receiver General)

Liberal

Mr. Gordon:

I do not think it is customary, Mr. Chairman, to state what goes on in detail at these federal-provincial conferences. After all, they are held in camera and it is agreed ahead of time that any statements-certainly at the last two conferences this was agreed- shall be deferred until the end of the conference, and then a communique is issued. After that the individual premiers are free to comment as they so wish. I have not a record of what Mr. Bennett and Mr. Manning said after the conference. I remember Mr. Bennett being very pleased about one item in these calculations, and that was to make the additional 25 per cent of the estate duties or succession duties available to the provinces.

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PC

Erik Nielsen

Progressive Conservative

Mr. Nielsen:

Mr. Chairman, throughout this debate I have heard reference after reference made to "the provinces", reference after reference made to "federal-provincial fiscal relations" and "federal-provincial conferences", but not one word have I heard with respect to the application of fiscal theories or formulas to fiscal problems in the Yukon Territory and in the Northwest Territories.

I think I could do no better than cite at the opening of my remarks a passage from a royal commission report with which I am sure the minister is familiar, that on Canada's economic prospects which the minister headed up some years ago. At page 413 of that report, in the chapter dealing with the development of the north there appears this passage:

There is widespread recognition in Canada that the northern reaches of the country, including the northern sections of the provinces as well as the Yukon and Northwest Territories, constitute a new economic frontier. Northern Canada today and tomorrow may be what the west was in the earlier period of our history. It not only offers attraction to those in search of adventure and fortune but it has seen industry become interested in these areas as a long term source of basic materials.

I am sure the minister is aware that the Yukon has its shared cost programs, too, as does the Northwest Territories. While the forms of government are similar, there are some rather striking constitutional differences. In the first place, the Yukon has a wholly elected council and all matters concerning supply must be voted on by that council before a penny can be spent. I have asked in this house of the Prime Minister and of

others on several occasions whether provision was made, in the procedural approach of the government, to the inclusion in these federal-provincial fiscal conferences of representation by the government of the Yukon territory either as a participant or by way of an observer to sit in, so that first hand advice could be given to those who have the responsibility of making decisions which affect shared cost programs.

One does not need to stop at one department, the Department of Northern Affairs and National Resources, when considering the fiscal problems besetting the north, and the Yukon particularly. You can run through all government departments that have anything to do with human development and industrial development in the territories. Health and welfare, for instance, with hospital insurance programs and Canada pension plans to which the Yukon taxpayer, and the northern taxpayer generally, pays by way of contribution; Indian affairs, where the Yukon taxpayer also bears a burden regarding the programs implemented; the Secretary of State and his responsibility to report to parliament on the activities of the B. and B. commission. That commission has not yet visited the north country, yet the people there have very distinct views on confederation and the problems besetting Canada today. There is the Department of Public Works, with a huge responsibility that affects our economy very decidedly in the Yukon since the transfer of the jurisdiction for the maintenance of the Alaska highway from the Department of National Defence.

In the field of veterans affairs, Legion organizations and other veterans in the Yukon have very decided views as to whether or not veterans hospitals in this country shall be transferred to various jurisdictions. In the field of labour, a national labour code affects every workingman in the Yukon. Unemployment insurance and other matters coming within the direct sphere of responsibility of the Minister of Labour affect very vitally the daily fives of the Yukon workmen. In regard to the field of agriculture, we listened the other evening to the Minister of Forestry, who carries a split responsibility with the Minister of Agriculture for agricultural affairs as they affect the application of ARDA. He said he had visited every province in Canada, wishing to leave the inference that that was all there was to Canada. But he had not visited the Yukon or the Northwest Territories, where there exists a very good potential

Federal-Provincial Relations in agricultural development. The lack of consultation by this government and by its ministers, with one single exception in the Department of Northern Affairs and National Resources, shows in turn a decided lack of appreciation of what this part of Canada has to offer to the over-all fabric of national development.

It seems to me that if the taxpayers in the north in the Yukon and Northwest Territories are expected to bear a portion of the cost of the implementation of these various federal-provincial territorial programs, the people of the north should have a voice in how they are to be constructed and applied. If a hospital insurance program is to be implemented-as it was-surely representation from the two northern governments should be had as to how this implementation is going to affect the over-all economy of these two territories. Similarly with the Canada pension plan; if this is going to be implemented in the Yukon and Northwest Territories, which I assume is the intention since these areas are part of Canada, we in the north should be consulted so that the government and their advisers can obtain first hand advise as to how the application of such a program is going to affect the over-all economic fabric of our country; and when I speak of our country I mean the northern portion of it.

The last fiscal arrangement which was made with the Yukon Territory, in 1962-and the Yukon signs the same type of federal agreement as do the provinces-provided the best possible arrangement that the Yukon had ever had. I wonder whether in 1967 this sort of approach is going to prevail. I am having my fears in this regard because I see the government on every hand pulling in its horns with regard to northern development projects. The only project in the way of construction of development roads in the Yukon which is now under way is a short section of the development road from Watson Lake to Ross river. That is the only one in the Yukon this year, contrasted with the tremendous upsurge of activity in road and bridge construction during the years 1957 to 1962.

I do not blame for one moment the Minister of Northern Affairs and National Resources for this lack of appreciation of the great potential of northern Canada. I blame his colleagues in the cabinet, because I am sure he has in all likelihood made just as

Federal-Provincial Relations strong representations to his cabinet colleagues for a continuation of this development program in the north as he undoubtedly made with regard to keeping the jurisdiction over Eskimo affairs in the federal sphere of administrative responsibility. He probably did not meet with the same success, otherwise we would be seeing more of this economic activity, economic activity to which the minister did not seem to give much credence in the royal commission of which he was the author a few years ago. The minister recognized the fact that one of the most serious problems besetting the development of the north was communications, and I am sure it was having some regard for the observations made in that report by the minister that that great development program was launched by the previous government, a program which has attracted private industry and capital into the Yukon-

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RA

Gilles Grégoire

Ralliement Créditiste

Mr. Gregoire:

That is out of order.

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PC

Erik Nielsen

Progressive Conservative

Mr. Nielsen:

-and in the Northwest Territories private industry and private investment, which has lessened the burden on the federal treasury. And if that is out of order, Mr. Chairman, then I fail to appreciate what we are speaking of here. I thought it was federal-provincial fiscal arrangements. It is comments like that, sir, from the hon. member for Lapointe which points up his supreme ignorance of affairs northern. He should be one of the first to realize, as should his confreres from Quebec, how we in the north feel about these matters. We in the north are making a last stand. As we were prior to 1957, we are again now getting back to the idea that we should have some sort of Colombo plan in operation so that we can realize some sort of development similar to that which went on between 1957 and 1962. I would invite the hon. member for Lapointe and others who display the same sort of ignorance to visit the north, as I have Quebec, and get first hand information of which he speaks.

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RA

Gilles Grégoire

Ralliement Créditiste

Mr. Gregoire:

Mr. Chairman, I think the hon. member for Yukon is trying to evade the issue. I would like to speak of his ignorance of the rules of the house because he was out of order. I know the situation up north. I have been up there, and the hon. member should not say it is ignorance on our part when we call him to order. First of all, he should learn the rules of the house.

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PC

Erik Nielsen

Progressive Conservative

Mr. Nielsen:

What I have said, Mr. Chairman, must have touched a sore point with the

hon. member, otherwise he would not so righteously rise to drag a red herring across the subject matter of this debate with which I was pointedly dealing at the time of his interruption. School programs and educational costs in the north are substantially higher than in southern Canada. We look to the federal government to bear a substantial portion of the cost of educating our youth. Twenty five per cent of the population of the Yukon are still at school, and I am sure that these statistics in the Northwest Territories are similar. Large numbers of Indian people and Eskimos, for whom the federal government is directly responsible, are concerned, and this is surely a matter upon which the governments of the two territories should be heard.

I suggested a moment ago that what we might be looking for there is the application of some sort of Canadian Colombo plan. I hope that the minister and some of his less enlightened colleagues will visit the Yukon and Northwest Territories so that they can see first hand the conditions which exist. They speak about underdeveloped areas and areas requiring the expenditure of federal tax dollars. These are some of the more needy areas of the world today with human beings living in what amounts to little more than hovels.

Before 1957 we in the Yukon said that perhaps one of the solutions we might implement in order to obtain some sort of relief was to declare a war on the state of Alaska, and then lose it and apply for foreign aid from the United States government. This is the way we are beginning to feel again, and I am sure that the Alaskans, who are northerners under the skin, would welcome us into their embrace.

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NDP

Stanley Howard Knowles (N.D.P. House Leader; Whip of the N.D.P.)

New Democratic Party

Mr. Knowles:

Is that not a bit risky? You might win.

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PC

Erik Nielsen

Progressive Conservative

Mr. Nielsen:

With the spirit of the Yukoners such as it is, I have no doubt of the outcome, no matter how many are up against us in Alaska. But what I am trying to point out is that there is this feeling there because of the decline in government investment in the north.

I know it is the view of the Minister of Northern Affairs and National Resources, because he stated it often enough during his recent visit across the Yukon and Northwest Territories, that the primary responsibility for investment capital in the Yukon and Northwest Territories must come from private resource sources. This is wrong. I

see the parliamentary secretary shake his head when I say that I feel this is wrong. I say the primary responsibility for development there is a federal responsibility. It is the federal government which has direct control over almost all natural resources above the 60th parallel, save exceptions in the provinces of Quebec and Newfoundland.

Therefore it is the federal government that must bear the prime responsibility for implementing programs and for investing risk capital in order to create the atmosphere which will bring about a partnership between government and private industry in order to achieve development programs. That was the philosophy of the previous government and that should be the philosophy today.

The construction of the development roads and bridges-I am sure the parliamentary secretary to the minister realizes this-that went on in the Yukon in those few short years have attracted more investment dollars from mineral exploration and development companies than ever before in the Yukon's history, save during the Klondike gold rush. Twenty billion tons, a huge deposit of iron ore, was discovered in 1962 by the Crest Exploration Company. If the program that was launched in 1957-58 had been commenced ten years earlier, we would be marketing that iron ore now instead of there being some doubt of it because of a concurrent discovery of iron ore in Australia, and the means would have been found to make it competitive.

I know that the minister's philosophy on this subject is to develop the resources from the northern portions of the provinces first and then, when we need this reserve which we have in northern Canada, to go in and get it. But where else in Canada, indeed where else in the world can you hold up the development of a 20 billion ton deposit of iron ore, which could have been sold on world markets ten years ago had that private investment capital been attracted by the adoption of proper development policies.

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July 13, 1964