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Newfoundland National Convention, 6 November 1947, Debates on Confederation with Canada

November 1947 NATIONAL CONVENTION 663

November 6, 1947

Mr. Chairman Gentlemen, I have just received a letter from His Excellency the Governor:
Government House, St. John's. November 6, 1947.
J. B. McEvoy, Esq., K.C., LL.B., Chairman, National Convention, St. John's, Nfld.
Dear Mr. Chairman:
In response to a request by the Prime Minister of Canada, the Right Hon. W. L. Mackenzie King, I wish to ask you to kindly bring to the immediate attention of the National Convention the enclosed copy of a letter I have received, together with the enclosure attached thereto.
Have you enough copies? I think they might be distributed. I propose to have the enclosure read by the Secretary when copies have been distributed.... Quite obviously there can be no discussion. Immediately after it is read we will proceed with the business of the day as indicated by the order paper.
Mr. Hollett Mr. Chairman, may I ask if the communication from the Rt. Hon. Mackenzie King is to be read too?
Mr. Chairman I don't know if that is included or not. In my copy it is. If you would be so good, Captain Warren, would you proceed with the reading of the document? I propose releasing the copies to the press.
[The Secretary read the document][1]
Mr. Bradley Mr. Chairman, I do not know how you intend to deal with this communication, but I suggest that because of the importance of the document itself, if for no other reason, the proper procedure would be to receive it now, and to refer it to a committee of the whole tomorrow.... I give notice that I will on tomorrow move that the communication from the Government of Canada be received, and referred to a committee of the whole.

Finance Committee: Economic Report[2] Committee of the Whole

Mr. Job Mr. Chairman, I want to make a few remarks on this Economic Report, and I dare say that people will be curious to know why my signature is not appended to it. Perhaps they will be disappointed when I tell them that, in the main, I was in favour of the winding-up part of the report. I believe that the country is self-supporting. I did not sign the report for two or three reasons. The first was that I thought it was not necessary to introduce a budget. One can quite understand the inclination of Major Cashin to introduce this report on the basis of a budget, and as any finance minister would have introduced it in a house of parliament. I think we can also understand why Mr. Smallwood, who might be termed "the Leader of the Opposition", thought it his duty to tear it to pieces. His tearing of it to pieces was a matter of opinion, whether it was effective or not. I don't think it was very effective. I would like to express my approval of the conclusions of the report, and I don't want to enter into a discussion of the details. I think the report was written in a very racy, very readable way, and presented in a very interesting form. On the other hand I don't hesitate to say that the estimates can be only regarded as guesswork. Estimates generally are. There is no reason, in my opinion, why $35 million or $25 million, or $40 million should not have been taken as the probable revenue, instead of $30 million. However, the figures as they are in the report are pretty good, and it is the interpretation that counts. There is only one discrepancy that I can really point to in the figures, and it is not done with a view to criticism, because I don't think it matters very much. Life insurance values are put down as $30 million as the surrender value.
Mr. Chairman That is the estimated cash surrender value.
Mr. Job Yes, Now I would like to hand to the chairman of the Committee the actual report from the office of the Assessor of Taxes which shows the actual liability to policy holders as at 31 December as $22,237,464.
Mr. Cashin What year?
Mr. Job Last year, 1946. I don't think it matters. That $8 million will not make a shadow of difference to me in my opinion as to the life in 664 NATIONAL CONVENTION November 1947 surance. If the value has increased, as this shows it has ... the effect is very important on our economy as I consider it. When I was a member of this Finance Committee considering this Economic Report I stated at the start that I did not think it necessary to introduce a budget. I was asked to draft a report, which I did — a very short report. It took me two days to do, but I produced this report at the Committee and Major Cashin said that he did not want to introduce it. He said that he wanted to make up this report and produce it. I did not blame him a bit, but I could not agree with what was going into it, and I simply withdrew. I thought it was read very well, was well prepared, and the only objection I have is that it may mislead people. In the short report that I prepared there were one or two things that are not in Major Cashin's report, and I would like to call your attention to them.
I would like to read first of all my reasons for leaving out the estimates. My suggestion was that the difficulty of furnishing really valuable figures was so great under present world conditions that any forecast might be considered a waste of time.... We know what the present situation is, and we know that the situation we can see immediately ahead is very good, but I don't think we can really forecast actual figures. One of the things that makes it clear, one of the points of difference, is what has recently occurred in connection with the saltfish trade — the difficulty of getting exchange. A few months ago, before there was any question of the exchange, we all felt very happy about the situation. That situation has been temporarily solved by the government advancing the money themselves, but that is only a temporary cure. I am not, however, at all pessimistic about the future of the fishery; and I believe that the fresh fish plants and the possibility of central curing stations, will make a great difference in our fish situation.
....One of the points that I thought should have been brought out very strongly was that the standard of living of our people today is a very different thing to what it was in 1934, or 1944 rather. Today we find the average Newfoundlander enjoying undoubtedly a much higher standard of living than ever before. My friend Mr. Smallwood over there read a letter from an individual fisherman, and Mr. Hollett rightly pointed out, I think, that we always have some people in trouble. It will always be so. You can find the same thing in any city, but I think the general condition of our people today is very much improved. I think the people are becoming more accustomed to thinking for themselves, and this is largely due to factors such as the circulating regional libraries, the adult education movement, the co-operative committees, the agricultural societies. the Jubilee Guilds, the Junior Red Cross Association, and our Memorial University College, and I should not fail to mention the increased intelligence and diligence of the various unions all over the country. It is making people think more than they used to do, and that is one of our chief assets, a sign of improvement for the future. I think it helps us to look at the future in a more hopeful way than we have done in the past. Undoubtedly the taxable capacity of the economy has been increased to where it can produce revenues which, in addition to being able to defray the normal costs of government, can support more public and social services than we have ever hitherto had, and yet leave a surplus of perhaps a million or so to spare at the end.
...I would like to refer to the comment in this report on the question of trade with the USA. This to my mind is the vital question in connection with our future economy unless we can do without the fish trade, but it is the vital point in connection with all the future of the fish trade.... I have had the idea for a very long time that if we could get some round table conferences between representatives of Canada, Great Britain and the United States, we would get somewhere. Now this report indicates that would have to be done by a government of our own, and it might be so; but supposing for the sake of argument that the country did elect to continue Commission of Government, I don't see any reason why, if there is a proper agitation, Commission could not have such a conference. But this report indicates that it would have to be done by a constitutional government. That might not be necessary. Of course in case of confederation the thing would simply fall through. It would be impossible.
I would like to wind up by saying I have great pleasure in supporting the concluding paragraphs of the report, as I believe that we are self-supporting, and that we will continue to be self-supporting for very many years ahead....
November 1947 NATIONAL CONVENTION 665
Mr. Vincent ....There are a few observations I would make, and I trust you will bear with me in my rather inadequate presentation of them. Two very able speakers have so far clashed swords, both occupying long periods in the vindication of their pet arguments, and in my opinion with good advantage. I can assure you that I have no intention of carrying the argument so far, for after all I am only the junior lieutenant in the heretofore styled "B", or "Bonavista Block", and with such powerful Sidekicks as the member for Bonavista Centre, and my esteemed and learned friend, Mr. Bradley, K.C., I need have no worries but that the so-called "B Block" will contribute its pennyworth to this debate.
Mr. Chairman, I trust you will pardon me if I confine the greater part of my talk to a discussion of that industry which census statistics tell us employs 62% of our people, for isn't it true that the success of the 62% contributes in a large way to the success of the 38%? In this I know that very fine gambling Newfoundlander, my personal friend Mr. Crosbie, will support me, for his record at the fisheries is told in deeds not in words, and however much our proposed plans for the future of that industry may differ, we both believe in Newfoundland as principally a fishing country. I put codfish first; he, I believe, puts herring and whales. I am going to talk about fish, the soundness of the economy of the fishery ... and if being called a defeatist means the revelation here of cold facts pertaining to that industry, then by all means call me a defeatist. I live with fishing folk, I own Labrador schooners, I supply inshore fishermen, and if this Committee has something practical and constructive to offer, something that will contribute to the future well- being and success of every Joe Killick fisherman, not only in my hard-hit Bonavista North, but to every last fisherman in this island, then count on my unqualified support. I very much regret, however, that in this report I find a lot of well-meaning platitudes. Of that more later on.
The Economic Report, combining as it does the sum total of the findings of the several reports of this Convention, is of first importance. It does seem to me, however, that the real question to be determined is just this: what is the relation of the actual economic position of this island to the constitutional issue? I presume that will be borne out later. For the moment we are to concern ourselves with the subject matter before the Chair. The question to which each delegate must give his considered opinion is simply: can I accept the report of the Economic Committee as being in my opinion a true and accurate picture of the island's economy? Or, to put it shorter, what is my interpretation of the term "self-sufficiency"?
It does seem dangerous to talk about experts, but I hold to the opinion expressed by several others, that the Committee, lacking the services of an economist-statistician, were greatly handicapped in that they had no reliable, authoritative statistics at their command, to enable them to even remotely indicate the basic soundness of our economy. By way of clarification, there is in this report an assumption based on the estimates given the Ottawa delegation by the Railway management that our Railway is worth $72 million, and the question naturally arises, is this a fair and proper estimate?.... The Report of the Forestry Committee, on which committee I actively served with Major Cashin, made a provisional estimate of the earnings of our forest resources as not less than $30 million. Can this evaluation be safely projected into the future? And in this respect, have we or have we not reached our productive peak? Fisheries valued at $30 million; isn't it true that the vagaries of this industry, the many uncertainties surrounding it, are of such a nature that not even a prophet could predict as to whether the product of this industry will have even a nominal market value say five years from now?
We are self-supporting. Time was when such a revelation would make the man in the fishing boat, the man in the street toss his hat into the air and cheer. It might even have been heralded by a roll of drums. Yes, Mr. Chairman, a budgetary surplus, propped up by a healthy looking balance sheet, does show a very promising, rosy picture for the faithful, who do not require an absolute gilt-edged guarantee of our solvency.
Let's talk about the economy of the fishery, in particular the codfishery, for that phase of the industry employs many more men than do the other branches. I believe in our fisheries so much that for the past two years I have been investing, when l was told by a big business friend of mine, a Water Street financier, I am looking at him now, that it was dangerous going, and maybe he was 666 NATIONAL CONVENTION November 1947 right. So now I am going to give you first-hand information as to just how sound the Labrador branch of the codfishery is at the moment — I shall call the play exactly as I find it, November 1947 edition. With the past I have little concern, rather I am concerned with what we shall eat and wear in the years that lie immediately ahead. So, with the indulgence of this House, I'll get district- minded and talk of things as they really are in my constituency of Bonavista North, and I understand this goes for all of the northeast coast, for, as said a gentleman speaking yesterday, "A country is as self-sufficient as its people." Now permit me to refer you to the Economic Report, page 30:
Summarising what we have said with regard to our fishing industry, it would seem that the outlook for the Newfoundland fisheries is anything but discouraging. Indeed, judging from the evidence available and the opinion of those qualified to speak, it would seem that we have entered upon a new era-the era of modernised methods, faster production and more profitable markets. And it is not unreasonable to say that the adoption of methods which have brought prosperity to such a country as Iceland, cannot fail but bring similar results to the 30,000 of our people engaged in the fishing industry of Newfoundland
Now the junior member for "B Block" will have the temerity to give his frank opinion, based on first-hand knowledge of this phase of the industry. The economy of the Labrador cod- fishery is so shot to pieces that the individual fisherman at this moment is just one shortjump ahead of the dole, and if there is to be any Labrador fishery next season, if the Labrador fisherman sails up the coast in a schooner, he will go only with a guarantee of his security, or, to put it plainer, he will go only with a guaranteed minimum salary at the end of the voyage. I have an interest in three schooners which this year prosecuted the fishery, and the 30 men on board these schooners each one declared the day he arrived home, "Not again brother, my last trip", and do you wonder? The season coming as the smashing climax to a cycle of three bad years, the fisherman is fed up. Schooners are being put on the block, codtraps are being auctioned. Is this encouraging? I'll pause here for a moment and ask that question of my hard-boiled, industrious old friend, fishing master Capt. Billy Winsor of Wesleyville. He gave up the fight discouraged, after 40 years up coast, and he's as good a fisherman as ever trod a deck. I'll pause and ask that question of hard-driving fishing skippers, Capt. Malcolm, and Charles Rodgers of Fair Island; I'll ask that question of the shoremen in Cape Freels and at Musgrave Harbour, who wondered what they'd do with the fish when they told them about the convertibility of sterling. I'll ask the chap in Newtown with whom I talked ten days ago, who told me his summer's catch of fish was in his store, and he wanted flour and couldn't get it. Yes, Mr. Chairman, I'll ask them the question, and am well content to await their replies, and quite satisfied to abide by their decisions.
I am not suggesting that government or vested interest can make fish swim at specific periods in specific harbours, so that our schooners may secure substantial loads; but I do want to point out that the Labrador phase of the industry employs a lot of our people, and 1 am not satisfied in my own mind that the fishery generally is anything but discouraging. The Labrador fishery at the moment is flat on its back; some fishing skippers have lost everything, and sharemen- fishermen have given up all plans of going back to the coast. This is not exaggerated. Look up your papers and read the schooners advertised for sale. I am conversant with every angle of this industry, and if this house, or the Commission of Government wants some corroboration, they have only to have a look-see around the northeast coast of Bonavista Bay, and it will be put to them in very strong terms. Modernise your methods, centralise your fisheries, establish dollar credits, invoke the Marshall Plan, transform and refashion, my prayers go with your petitions in this respect, gentlemen of the Economic Committee, but your vested interests, or your government had better bestir themselves, for it is later than you think.
Allow me to summarise; 1947 finds thousands of our fishermen with an average seasonal catch of 30 quintals per man, valued at less than $11 per quintal; 1947 finds our fishermen, all fine adaptable fellows, seeking employment in the woods, to try to augment their meager earnings; and the last straw that breaks the camel's back, this past week I talked with Labrador fishermen November 1947 NATIONAL CONVENTION 667 coming back from the camps to destitute families, told, "Sorry, no work, our camps are filled." Moreover last Saturday I was told by a responsible official of one of the large paper companies, "We have reduced our cut this year", and tragically enough, one of the reductions was in the Bonavista Bay area.
The value of our total productive economy is entirely dependent on the economy of countries thousands of miles away. The welfare of my last fisherman friend down on stormy Cape Freels is entirely dependent on the economic standing of the Italian, the Greek, the Spaniard, living in continental Europe. We have no internal markets for our products, and if we did, what could 300,000 people eat anyhow? Thus I submit that our economic set-up has no similarity in the western hemisphere. I don't know the solution to this big problem of our fisheries. Probably my able friend Mr. Crosbie has something to offer, but this I do know, that solving the problem will require capital expenditure on a large scale, be the source the vested interests or the state. Otherwise, the poor forgotten fishermen, every last man of them, must just patiently endure and quietly wait, till chance or somebody else comes along to redeem their fortunes. I'm finished with the fisheries Mr. Chairman and gentlemen, but before closing, I want to say without any hesitation, that I advocate state control, or government subsidy for this industry, and I am not a communist.
I shall briefly touch on this budgetary proposed expenditure — page 10 of the report — and here I note the figures "Public Health and Welfare—$6,250,000." A lot of money, but with our expanding health service is this enough? What of the actual needs of the far-flung communities remote from the modern capital of St. John's? You can't provide a hospital for every settlement, but they should have at least a nurse for every ten, and if you think we have that you had better look up your statistics. What about those hundreds of known cases of TB vainly awaiting admission to our sanatorium? Are these unfortunate young people to be refused a chance to lead useful lives again? At the moment there is lack of space, and lack of nursing personnel. Have we enough cottage hospitals, have we enough doctors?
Education — proposed expenditure, $3,750,000. What of this? Is it a fact that there was a shortage of teachers this year? Are there still many ungraded teachers occupying positions in our schools, and what of the teachers themselves, overworked and underpaid? Is the compensation they receive adequate to their needs or in keeping with the standards of their profession? I'll pause here and ask that branch of the civil service just how much longer they will have to endure this injustice. The Finance Committee did increase the grant a little, subject, of course, to their resuming the administration of the government in the future.
Public works, proposed expenditure $4 million. I agree with the member for Bonavista East that this is very inadequate. What of the people between Hare Bay and Musgrave Harbour, some 20,000 of them? They have been walking 40 miles to reach civilisation for the past 50 years, and they recently signed a petition begging the powers that be to consider their request for a road. Must they go on for the next 50 years still beating through the 40 miles of wasteland to hear the puff of a train? I shall not touch on the economy of a merchant marine fleet, as proposed by this Committee, I leave that to the member for Trinity South, my good friend Captain Bailey.
The Economic Report is no unworkmanlike muddle. Coupled with a very businesslike financial statement, it reveals in the opinion of its chief sponsor and the signatories, a balance sheet which shows unmistakably that this country is self-supporting. But after a close examination of both reports, and applying an altogether different interpretation to the term "self-sufficient", I cannot agree that this country is self-supporting.
Mr. Higgins Mr. Chairman, referring to the remarks of the last speaker, when he described his membership in the "B Block" I wonder if that should not be "P Block" or "Pessimistic Block", because all we have heard from that block so far has been pessimism about the future of Newfoundland. I don't know whether the other members of that same block are going to speak in that same manner, but if they do, to me it is not a fair criticism of the facts we have had put before us in the report and the facts we know ourselves.
I propose to deal briefly with the report as we have it.... It is relatively unimportant, at least it is to me, whether capital expenditures are put in ordinary expenditures, or whether ordinary ex 668 NATIONAL CONVENTION November 1947 penditure are put in capital expenditures; and may I say again it is relatively unimportant whether Major Cashin, as the former finance minister, made an error in his budget, and underestimated or overestimated his expenditure, or whether his predecessors or his successors did the same thing. I suggest, with all due respect to the Finance Committee, what is important is what was our position in 1934, and what is it today? Because, as you know, the terms of reference ask us to go back to 1934, and study the changes that have taken place in the economy and bearing in mind the extent to which the revenues of recent years have been due to wartime conditions, to examine the position of the country from that time on. That is what I propose to do very briefly. I presume that nearly every member is going to have something to say. We have had two very long, very well-delivered speeches — one extremely pessimistic, and one extremely realistic, in my opinion. But these points come to me in the survey of the 1934 - 1947 period. In 1934 I believe we owed $100 million.... And today we owe, deducting our liquid assets, $35 million. In 1934 the people had $25 million in the Savings Bank, today they have $80 million. In 1934 our people had insurance worth $52 million, today they have insurance worth $100 million. The cash surrender value of this insurance in 1934 was worth $9 million, today it is worth about $22 million. Today we have fixed government assets of something in the vicinity of $140 million. Now the Finance Committee gives our fixed assets in the vicinity of $110 million. I believe they have not added in the value of Gander airport, and the cost of it should be the value of it. We may not be able to put it on the block and sell it for that, but I am putting in the cost of it as the value of it.... Included in that, of course, is the $72 million value that has been put on the Railway. That value has been put on by the management of the Railway. I don't know where you could get any better value for the Railway than by going to the Manager and asking him, and I must say that I think it very unethical of Mr. Smallwood to suggest that we, as the Ottawa delegation, gave figures to the Canadian government which we knew to be incorrect.
Mr. Smallwood Point of order. I did not say, and I did not suggest that the Ottawa delegation had given the Government of Canada any figures or any information knowing them to be incorrect, and I ask Mr. Higgins to withdraw that remark.
Mr. Chairman That is so. The figure of $72 million, so stated Mr. Smallwood, had been handed to the Ottawa delegation, because it was received from the Railway management.
Mr. Higgins Mr. Smallwood did say that we knew we were fooling them when we gave it to them.
Mr. Smallwood I did not, and I ask Mr. Higgins to withdraw both remarks, this one and the one before. I' will read my comment to you if you don't.
Mr. Higgins If you don't like it, or if you don't prefer to take my word for it, you can have the stenographer read it back.
Mr. Smallwood I will have the stenographer read it, or the recording that went over the air, or anything you like. I hope, Mr. Chairman, when he finds that I did not say them he will withdraw them.
[In the absence of a transcript, the Chairman was unable to rule on Mr. Smallwood's point of order. Mr. Higgins agreed to withdraw the remarks so that debate might continue]
Mr. Smallwood I thank Mr. Higgins, Mr. Chairman.
Mr. Higgins You need not thank me, Mr. Smallwood. To revert to our figures from 1934 on, our revenue from 1934-35 was $9,624,000. Our revenue in 1946-47 was $37,250,000. Our expenditure in 1934-35 was $10 million, and our expenditure in 1946-47 was $25 million. We have had a surplus of revenue over expenditure now since 1941, and you all know that expenditure has not been curtailed. Therefore there can be no doubt whatsoever that at the present time at least this country is self-supporting, and we have been self-supporting since 1941. I say also that I am satisfied that our present high expenditure, our present high revenue, is due in a large measure to war expenditures. I think we must all agree to that, but I am prepared to agree with the Finance Committee's contention that our continuing high revenues are, in a large measure, due to the growth of our main industries and general world conditions. I am satisfied that if, as it must, the exchange problem can be handled, that these revenues will continue comparatively high. I am prepared to agree with the Committee's figure of $30 million as a fair revenue for the foreseeable November 1947 NATIONAL CONVENTION 669 future.
What of the future? The best forecast that can be made is only an opinion. I am prepared to accept the opinion of the Committee as to the future. They have given us what was described, I believe in one of our documents at Ottawa, as an educated "guesstimate", and I believe today in the letter we have had from the Hon. Mr. King he describes it as an "informed guess." Whether it is an "educated guesstimate" or an "informed guess", it is as good as any statistician-economist can do for us at the present time. However, to go back to this "guesstimate". Let us look at what the businessmen think of the future, because that's the only way we in this country can gauge what the future is likely to be. If the businessmen of the country are willing to put money into their businesses, backing the future of the country, then we can be fairly safe in saying, "These men do not take chances with their money unless they have a fairly good idea of what they are doing."
Mr. Hickman There could be a philanthropic side to it.
Mr. Higgins Yes, Mr. Hickman, I agree you are a philanthropist in a big way. You are building that big service station in the west end, and that big garage in Corner Brook just because you are a philanthropist. Also in the fish industry there continues to be a lot of money and equipment put into it in the last two years. You realise there are today 18 modern plants in operation. Is that correct, Mr. Chairman? I am not quite sure if it is 18 or more modern fish plants.
Mr. Chairman Fourteen, Mr. Hollett says.
Mr. Higgins Compared with five in 1939 and two in 1934. Do you see the new herring plant being built by Connors Brothers at Petries, as well as a garage? Do you see that hard-headed businessman Mr. Crosbie blowing his money into the fishery for fun, into the herring and the whale fishery? How do you View these new fishery corporations that are being incorporated all over the place?
Then we go to the other of our main industries, mining. The Committee says that the future appears to be good. As far as we can gauge that is a fairly correct assumption. The present market for Bell Island ore is good, and if the apparent rapid depletion of the Spanish ores is correct, and assuming continuous large scale production by British industries, then we can look for a more extensive market in the United Kingdom than before the war. Also you know Germany was one of our biggest customers before the war, and it is not outside the realm of possibility that she may not be a good customer again. The known deposit at Buchans is good, I believe, until at least 1956, and possibly more, but that is apparently the last word we have had. But as you know that mine was supposed to have been closed any time within the last ten or twelve years, closed permanently, and they have found new bodies of ore constantly. The operations at St. Lawrence have demonstrated that the area is one of the biggest fluorspar fields in the world. The Asbestos Corporation of Canada has recently been investing their money in our deposits here. All I intend to say with respect to the ore deposits of Labrador is that they may very well profoundly alter the whole economic position, as the Bell Island and Buchans mines have already done.
With respect to agriculture it is most heartening to know that the Director of Agriculture estimated our products this year are worth $14-15 million. The Finance Committee, in my opinion, has been most conservative in estimating die value of the tourist industry. When on my holiday in Canada the past three months, I made a particular study of the tourist possibilities of the island, and I am quite convinced, as was my friend Mr. Smallwood as well, that the tourist possibilities of Newfoundland really have a wonderful future.
Mr. Smallwood Hear, hear!
Mr. Higgins As I said earlier, the Committee's "guesstimate" of the future appears to me to have a good background. I am prepared to accept the report as presented, and I submit that we are now in a sound, satisfactory financial position, and we have every reason to believe that we will continue to remain in that position in the foreseeable future.
Mr. Butt Mr. Chairman, there is one point in this report which I don't think Mr. Higgins quite stressed enough, one particular section of it. According to the Amulree Report in 1934 the gross public debt was $101 million, and the gross public debt at March 31, 1947, was roughly $83,993,000, but here's the solid fact that could have made a great deal of difference to us. The interest payment on our public debt in 1934, I believe, was $5,200,000. It did not include any 670 NATIONAL CONVENTION November 1947 provision for sinking fund. In 1947, as at 31 March, the interest payment was $3,545,000, and it included a sinking fund provision of $903,380. The point I am making is that there is a permanent and continuous benefit as at today of over $2 million, the amount that we will not have to pay out for interest. If we had had that $2 million which we were paying out prior to that time it would have made a very great difference to the future of this country. I suggest that on that point alone we ought to watch very carefully, because we now have a continuous benefit of something like $2-2.5 million, and it is being reduced all the time. Further than that, it looks as if the sinking fund payment can be kept up for the foreseeable future. I am not going to try to define the foreseeable future, but we are reducing our debt by $8-900,000 a year, and we only have to find, as at March 31, $2.6 million against $5 million in 1934....
Mr. Hollett Major Cashin, may I ask a question through you to Mr. Butt? What was the sinking fund provision in 1947?
Mr. Butt The sinking fund provision for 1947 was $903,000.... The real point is that we have a continuing benefit.
Mr. Cashin I think I ought to further explain this sinking fund. When the Financial Act was passed in 1933 the sinking fund was to be paid in 1937, amounting to 1% of the total sterling indebtedness. The total sterling indebtedness is £17,790,000, therefore the annual sinking fund amounted to £177,950, or in dollar exchange (at that time it was $4.80) it amounts to $854,160, but the point I am trying to make is this, that each year the sinking fund went across to Great Britain. It was invested, as we are told in the Auditor General's report at any rate, in the actual payment of the debt. In other words they got it in, but the following year that amount was not taken off the principal. I agree with that to a point, but the following year we sent over more money paying interest on the debt we had redeemed, and what is the result? Today I estimate, sometimes I make mistakes, but I estimate that Newfoundland has lost $1 million on that sinking fund loan during the past ten years, because if you take £177,000 and compound it annually at 3% you will find that if you work it out at present dollar exchange it will go over $9 million.... In all, we have paid in sinking fund approximately $10 million, that is if you include interest on it, but we have only got the benefit today of$8.5 million on the other side, consequently Newfoundland has lost by the handling of that sinking fund $1.5 million since 1937.
Mr. Smallwood Would you take that step by step and explain, if that is so?
Mr. Cashin Take down £177,000 yourself and figure it out for yourself, because you don't believe what I tell you. Somebody take it down. £177,000 at 3% annually, and compound it for ten years, and find out what it is and check it with the present sinking fund in London, and see where you are. I have gone to the trouble to do it, and I have had it checked by the bank, and I think I am fairly accurate. I state now that we have lost $1.5 million.
Mr. Smallwood Not the mathematical total of it, but in principle, how did we lose $1.5 million? 1f we have, it sounds like a crime firm has been committed against the country. Has this country been robbed?
Mr. Cashin I don't say it has been robbed.
Mr. Smallwood But it has been done out of $1.5 million. Will you explain it?
Mr. Cashin All right, I will explain it to you. You have a note agreement for $1,000 and at the end of the month you pay $100 and you renew it for another month. Is the bank going to charge you interest on $1,000 when you go to pay it the next time? No, on $900, but we have been paying it out, sending the actual interest on the sinking fund overto England. I will explain in my opinion what is happening: the money was sent across to England and it bought in our principal; when it went over the next time they were not able to buy it in, and they did not invest the sinking fund to bear interest, and that's where we lost money, and they did not reduce it from the principal. You can take these estimates for the last ten years and under the consolidated fund services you will find that the 3% guaranteed stock for this amounts to £17,790 to date.... I hold that when that stock was bought in, that the next year when we bought in £177,950 worth, it should have been deducted off here, and that's where I say we lost $1 million at least.
Mr. Smallwood Well, is this the picture? To put it very simply, we will say I owe $1,000, say I borrowed $1,000 from you...
Mr. Cashin You couldn't. I haven't got it!
November 1947 NATIONAL CONVENTION 671
Mr. Smallwood Neither have I, but say you loaned me $1,000 and I agreed to pay you 3% interest on that $1,000 every year, so the first year comes around and I pay you the interest.
Mr. Cashin $30.
Mr. Smallwood Besides that, I am supposed to put aside so much in the bank to meet that principal of $1,000 in say ten years, so that is $100 a year.
Mr. Cashin Yes.
Mr. Smallwood The first year rolls around and I put in $100 for sinking fund, and I pay you the interest of $30. Is this what you mean, that at the end of the second year I have put another amount into the sinking fund, which reduces it by what? Say the sinking fund is another $100, all right that reduces it to $800, but I am still paying you interest on the $1,000?
Mr. Cashin Oh no, you are not, you don't owe me $1,000 now, you only owe me $800.
Mr. Smallwood Exactly, well where have I lost money?
Mr. Cashin You have not, but the country has.
Mr. Smallwood Well, I am the country.
Mr. Cashin Well, you are not the country.
Mr. Smallwood Well, in this illustration 1 am the country, and you are the bondholders in England.
Mr. Cashin Well, the bondholders don't get the money.
Mr. Smallwood Well, I owe you $1,000.
Mr. Cashin You don't understand it, and your talk is driving me crazy. You don't understand it, and it is impossible to drive it into your head.
Mr. Smallwood I am very thick-headed and very dumb, but I am trying to get this straightened out. Where has Newfoundland lost it?
Mr. Cashin She has lot it in interest I tell you, by the trustees of the sinking fund not investing it when it went over there.
Mr. Smallwood They did not invest it in our bonds?
Mr. Cashin They did not invest it at all, and we have lost interest on it.
Mr. Smallwood And they lost interest on it?
Mr. Cashin Sure. When they bought it in the interest was £177,950. The next year when we sent over interest, the interest was paid into the sinking fund. The next year they sent over another £177,950, and they might not have been able to buy it in, and consequently they got on interest on it, but you are sending interest over.
Mr. Smallwood We are sending interest over, not on the sinking fund, but on the portion of the debt that they did not buy in. Is that because they could not buy it in?
Mr. Cashin I don't know, because here's the position. We have asked for a statement of account, and the sinking fund, and all you can get is two lines in the Auditor' General's report.
Mr. Hickman I don't think the reporter can go on any longer.
Mr. Chairman Is it the pleasure of the House to adjourn?
Mr. Cashin I move that the committee rise, we are getting tangled up in a lot of figures here, and report progress, and ask leave to sit again tomorrow.
[The committee rose and reported progress, and the Convention adjourned]

Source:

Newfoundland. The Newfoundland National Convention, 1946-1948 Vol 1: Debates. Edited by J.K. Hiller and M.F. Harrington Montreal: Memorial University of Newfoundland by McGill-Queen's University Press, 1995).

Credits:

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Selection of input documents and completion of metadata: Gordon Lyall.

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