Mr. Chairman, the statement just made by the Minister of Finance gives a somewhat comfortable interpretation of the situation which exists, an interpretation very much in contrast with what those of us who
have been reading the press were under the impression did in fact prevail. When the minister says that we have not reached and would not expect to reach agreement I must say that he is using a very mild and rather deceptive interpretation of the vehement denunciation there has been of the inadequacy of the proposals now put forward.
The minister has pointed out that there will be a very substantial increase in the amount of money to flow from the federal treasury to the provinces over and above what would have been payable under a continuance of the present tax rental agreements. There is no question as to that fact. That, however, should immediately bring to our attention the source of these revenues from which payments will be made. These are revenues that by tradition were primarily provincial revenues under the concept of confederation. This is not a case of a generous handout by the federal government. This is or should be an attempt to reach a just, sensible and reasonable solution of the use of the main fields of direct taxation which are the fields primarily open to the provincial governments.
I agree with what the Minister of Finance has said in regard to the extent to which this subject has been discussed in detail. I do not believe that it is necessary to review the history of the federal system on this occasion and particularly at the resolution stage. Nor do I think it is necessary to go into the history of the various stages by which we have reached this point. However, I think it is essential that we recall that if in fact we believe in the federal system, we must remember the basic proposition that the power to tax is the power to govern. We must remember that if one government becomes dependent on another government to the extent of a considerable part of its revenues, then its real right to govern as an independent body may become more than illusory; it may become a myth with serious consequences to the survival of the federal system in Canada.
We are not dealing now with something that has not been discussed frequently before this time. But it seems necessary to reiterate the basic proposition that wherever governments have become dependent upon other governments for their revenues in substantial measure, fixed upon some rigid pattern, the fate of those governments has usually been in jeopardy. That goes back over a long range of history. It has not always been the case that central governments made payment to the local governments. Actually in the Weimar republic in Germany after the first world war the situation existed under which the central government became largely dependent upon payments from the states. That
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Federal-Provincial Financial Arrangements situation seriously weakened the central democratic government in Germany; it seriously weakened its capacity to meet the urgent problems of the times.
Here in Canada we have a case which has been paralleled in other jurisdictions over the centuries, and that is a situation where the provincial governments, as a result of certain historic facts, are becoming more and more dependent upon the federal government. What is more, the municipal governments are becoming more dependent upon the federal government and the provincial governments with which they are directly associated. It is customary for us to use the legal expression that the municipalities are the legal creatures of the provinces. It would always be well for us to remember that these municipalities are very real entities and not just constitutional bodies. They are very real entities which predate confederation itself. They are very real entities which in some cases represent the actual beginning of all our history. They are very real entities where the roots of our democratic system grow. Therefore the needs of the municipalities and the plight of the local ratepayer-whether he be a home owner, a tenant or an operator of a business-are things which we must have vividly before us when we attempt to assess the adequacy or otherwise of the arrangements that are made with the prov->-inces.
There sometimes may be a tendency to think of these large payments-and they are large payments-as something which simply affects the provincial governments in their various duties. Let me point out how heavy the responsibilities of the provinces are with regard to the municipalities. Merely as ar* example, and not because it happens that F had some close association with that province* for some time, I should like to point out what-happens in the province of Ontario, and I may say it happens in varying degrees in other provinces across Canada. Some 40 per cent to 45 per cent of the total revenue available' to the government of the province of OnteEim -whether by way of payment from the federal treasury or from its independent collection of money-is passed over to the municipalities or to various local municipal agencies. That percentage represents a tremendous proportion of the total money that goes to a provincial government. The figures are not available right across Canada with regard to the exact amount that is payable in that way to the various municipal agencies such as school boards and other local bodies of that kind. But what is abundantly clear is that when we consider the amount of money that goes to the provincial governments we are in fact also considering the position of
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Federal-Provincial Financial Arrangements the municipalities and in turn, of course, the position of the local taxpayer as well.
When I listened to the statement made by the Minister of Finance I could not help recalling the opening words of a pamphlet on the negotiations which have taken place up to the present time and which was written by Mr. J. Harvey Perry, the director of the Canadian Tax Foundation. I think I will read these words because they set forth fairly clearly not only the problem that confronts us but the way in which the general public looks upon these highly involved discussions which are represented in such a table as that which was put on Hansard this morning and which is now before us. These are the opening words in the foreword to his pamphlet which was published in February of this year:
Surgery in all its forms is now so complicated that the layman has long since ceased to understand anything but the simplest operation. Among the more baffling of the modern techniques is that employed every five years by our politicians in dissecting the Canadian body fiscal. Even the intelligent citizen earnestly trying to understand finds it difficult to decide whether this quinquennial quartering of the tax system involves highly skilled surgery or merely sophisticated butchery. In part this is attributable to the fact that the really vital incisions take place in the decent privacy of the conference room. But it also arises mo doubt from the frustration of attempting to *relate the periodical bulletins on the progress of the [patient, in which developments appear to be * expressed in the equivalent of algebraic equations, -with the ritualistic invocations and tribal incantations which mark all outward aspects of the *performance. This state of frustration the citizen [DOT]could probably ignore if it were not for a niggling feeling that all these events must in some way be of importance to his welfare.
In this, of course, the citizen is wholly right. These are matters of great importance to him, and he should have some idea of what is going on.
I have read those words, Mr. Chairman, because it must have seemed to many of the hon. members here that they were hearing something in the nature of tribal incantations when they heard flowing from the lips of the Minister of Finance some of those references to the discussions which have taken place and the formulae which are embraced in the various agreements which have existed in the past and which are now being supplemented by the measure under consideration. In fact, one might go a little farther. From the statements that have been made by many of the provincial premiers it would seem certain that this is not merely sophisticated butchery, but cynical butchery of our federal system. These statements must have come, and I am sure did come, to the attention of the members of the government. They do not come from any one single premier. They came from different premiers across Canada who have complained bitterly of the
fact that whether the increase over the amount that would have been payable by a continuance of the tax rental agreements be $163 million or some other figure, these are hopelessly inadequate to meet the demands not merely of the provincial governments, but perhaps even more important of the municipal governments in relation to the rapidly pyramiding demands of our society at this time.
We have entered a period where old standards have simply become meaningless. We have been hearing of the crisis of education. It is more than that. It may well become a tragedy. Just today I was reading a statement that in Paris, France, there is great concern about the fact that only one-third of the number of pupils who ordinarily pass certain examinations in that city have passed on this occasion. This is a symptomatic problem. In order to meet the shortage of space, examination standards are being raised to a point where many children are being denied the opportunity for advanced education which they really need, and which this country needs at this time with the demands of technical and other skilled training.
This is no theoretical problem. This is a very real problem, a grave problem, and one with immense implications for the future of our country. It may well be that within the period of five years that these present agreements are to run, the demands on accommodation in our schools, our technical institutions and our universities, will have mounted beyond all recognition. If the present rate of growth continues in many parts of Canada, the schools of today will be hopelessly inadequate for the demands of five years from now. Already university accommodation is utterly inadequate for the present demands, let alone the demands of the future. At this time young people who have written their university examinations are waiting in suspense, not merely to know whether they passed their examinations, but to know whether they passed their examinations with a standard sufficiently high to get them through the gateway of the university they desire to enter. It is an agonizing situation. No longer is it a mere question of ability to pass examinations. It is a question how many can get into a university where the space is so severely limited. That is not a good thing for them; it is not a good thing for us and it is not good for the future of Canada.
Another thing which has its impact upon this whole situation is that, as we look at the tremendously increased use of mechanical equipment to do work that was previously
done by hand, we are seeing a rapidly increasing demand for higher training in the technical fields which will qualify young people to handle these delicate and involved machines which do these jobs that were earlier done by hand. This is going to mean that a higher percentage of our young people must have a higher standard of education. This is going to run the graph line of demand on space in our elementary schools, our secondary schools, our technical schools and our universities away up into figures that it is difficult even to suggest at this moment. It is in the light of that situation that we must examine the adequacy of what is now before us.
When Mr. Perry in his article to which I have referred, speaks of the fact that the citizen is coming to realize that this is a subject of great importance to him, I hope that it will be realized how vitally important this subject is to every citizen and particularly to the home owner who is now bearing a crushing burden of taxation in many municipalities across Canada today. There are municipalities at this time which are forced to charge taxes which are almost equal to a rental of a few years ago. This is only the beginning unless arrangements that are made today make it possible for these municipalities to meet their demands.
Now, in saying these things following the speech of the Minister of Finance, I wish to make it quite clear that the present formula has some merits in the acceptance of certain very important principles. As the minister pointed out, the proposal contemplates the continuance of a form of tax rental agreement, arrangements for federal collection of payments under those agreements, a tax equalization plan, a provincial stabilization fund which will protect municipalities against a severe drop in their revenues, and in turn an abatement in the federal taxation fields of personal income, corporation taxes and succession duties. The acceptance by the federal government of the place of the provinces and the right of the provinces in the field of income tax, corporation tax, succession duties and other direct taxes is, in itself, a welcome evidence of a return to the position which was always accepted without question over the years between 1867 and 1941, when the wartime tax agreements were signed. Unquestionably, the formulae put forward have some merit; undoubtedly, there are improvements over the fiscal arrangements made in 1947 and 1952; undoubtedly, many provinces will be compelled to enter into agreements with the federal government no matter what those agreements may be. They have no choice.
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It will be recalled that after the first fiscal agreements were proposed many provinces held off for some time. Finally, however, most of them came in reluctantly and with complaints against the inadequacy of the agreements, which were demonstrated to be true as time went on. The complaints that have been made have been demonstrated to be true on each occasion and it is with that thought in mind that we should examine what is now before us.
Whether the provinces are compelled to enter into these agreements or not has nothing to do with whether these present proposals are satisfactory. Are they satisfactory in the minds of the provincial premiers and the representatives of the municipalities at this time? We know they are not. We know that right across Canada the strongest possible terms have been used to describe what may happen if the provincial governments and the municipalities are put in a financial strait-jacket which will limit their ability to meet the mounting demands that lie before them. It can only be said that there may be no choice.
The Minister of Finance (Mr. Harris) has told us that there were discussions. He has told us that government in a federation is not a simple process. It is not. It becomes increasingly difficult, however, if the rights of the provincial governments within that federal system are not fully recognized and that the dealings with those governments are not made on a basis of equality in whatever the allocated fields of responsibility are. It is not enough to admit in discussing the subject now before us that Canada is a federal state; it is not enough to repeat the tribal incantation that we believe in the federal system and that we are in fact children of a federation; it is not enough to say that we believe in the dividing of revenues that will balance the abilities of the governments to meet their responsibilities. The subject now before us is whether we really believe in the federal system sufficiently to do our utmost at this time to find real agreement with the provincial governments and with the municipalities which are very real entities indeed as to the allocation of taxes which will make it possible for them to carry out the heavy responsibilities which they cannot ignore and cannot shirk.
The true federal system admits that in their own fields the provincial governments have full authority over the responsibilities imposed upon them by our constitution. There are special reasons why the federal system must be conserved and strengthened in Canada. We have reasons of history; we have reasons which lie at the root of the very existence of one nation known as
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Federal-Provincial Financial Arrangements Canada here on the North American continent which cannot be ignored in discussing the solution of these problems. It is not only for reasons of history but also for reasons of geography that we must not merely give lip service to the idea of the federal system, but that we must do all within our power to vitalize that system, to give it living strength so that every government, federal, provincial and municipal, may meet the great and expanding responsibilities of the years of peace.
It was argued, and the argument was accepted by the provincial governments, that centralization became necessary during the years of war. Decentralization is equally necessary in years of peace. Decentralization is just as much a part of our federal system, and just as much a part in the needs of peace, as is the necessity of some measure of centralization to meet the compelling demands of war.
Subtopic: MEASURE TO PROVIDE FOR AGREEMENTS WITH PROVINCES