Hon. J. L. ILSLEY (Minister of Finance):
Mr. Speaker, some members of the house are intensely interested in government finance, some only mildly so, and some, I fear, not very much at all. But all are entitled to a clear presentation of whatever the government may wish to say on the subject and I have therefore given some thought to the arrangement of my remarks.
These will fall naturally under four heads- principles, developments, criticisms and prospects. And it will be my object to present under these heads, and with all possible brevity, the facts and observations relating to government finance which I believe deserve the attention of this house.
The Address-Mr. Ilsley
The principles of our war finance policy have been stated before but will bear repetition. Briefly summarized these principles are:
1. That in real terms, that is to say in terms of the loss to the nation of the production required for war purposes, the war is paid for substantially while it is in progress.
2. That the limits of what we can devote to war purposes are not financial but, as previously stated in this house, are physical, mental and moral, that is to say, the physical limits of our resources and the mental and moral capacity of Canadians to bear burdens and make sacrifices.
3. That the task of finance is not only to provide the funds which are used to pay for the war services but more fundamentally is, by taxing and borrowing, to restrict the civilian demand for economic resources in order that they will be available to the defence or supply departments when required.
4. That in discharging this function, finance must keep in step with the defence and supply programme.
5. That for this purpose, taxation, as far as practicable, is a better method than borrowing because it is fairer and final.
6. That taxation should be imposed upon a basis of equality of sacrifice, having regard to ability to pay.
7. That there are practical limits beyond which taxation cannot be carried, so that the government must also do some borrowing, which should be as far as possible out of voluntary public savings.
8. That the third method of war finance, namely, inflation, is the most unfair, the most uneconomical and the most dangerous of all methods of financing a war.
9. That in the early stages of a war, some expansion of credit is often possible without inflation.
10. That later, as the resources of the country become fully employed, monetary or credit expansion necessarily brings about inflation unless offset by strict counter-measures, such as severe taxation.
These principles have been laid down repeatedly in this house by spokesmen for the government, particularly in the budget speeches of September, 1939, and June, 1940. Every step of a financial character which the government has taken has been based upon these principles and it is the policy of the government to continue to follow them.
I may add that as far as I can judge or ascertain, these principles have met with widespread approval in the country. In so far as there can be said to be a public opinion on principles of war finance, the principles I
have outlined are in accord with the overwhelming preponderance of Canadian public opinion.
May I now review the main events or developments relating to government finance -which have taken place since the end of July, when I last spoke on this subject in the house.
First, I should mention the very rapid acceleration in war expenditures w'hich has taken place during the last few months. War expenditures in June and July had been in the neighbourhood of 840,000,000. For August they amounted to 859,000,000; for September to $67,000,000, and for October to about $S2,000,000, which is at a rate of very nearly one billion dollars a year.
Subtopic: CONTINUATION OF DEBATE ON ADDRESS IN REPLY