Mr. Higgins Mr. Chairman, when we adjourned yesterday, I was referring to budgets that
had been made by the delegation prior to their
going to Ottawa in June... Now we made two
"guesstimates" going to Ottawa, one was to do
with expenditures and one with revenue. There
has been a difference in both these budgets, from
the ones we made up and the ones that are before
you today, and it is in that connection that I would
like some explanation... Now if you will begin
on page 56 of the Black Book, part II, you will
probably follow me a little more intelligently. It
is "Probable Division of Existing Newfoundland
Public Expenditures"....
[Mr. Higgins then went on to compare the estimates of probable provincial expenditures
and
revenues prepared by the Ottawa delegation and
printed in the Black Book, with the estimates
submitted by Mr. Smallwood on December 8]
....I merely draw your attention to these [changes] because frankly the way it appears
to me is
this: that when these estimates were made up by
the committee going away, they did the best they
could with what they had. They had no clerical
help from the department concerned, even
though application was made, but we did the best
we could. Now I submit to Mr. Smallwood that
he was faced with increased expenditure, and he
had to find increased revenue for it, and he has
apparently stepped up the figures that the committee prepared, and I would like an
explanation
as to why he did mat.
Mr. Smallwood Mr. Chairman, Mr. Higgins
has gone to great trouble to compare the estimates
of revenue and expenditure made up by the Ot
tawa delegation before we went to Ottawa, with
the estimates of revenue and expenditure that I
brought in here on Monday. Frankly I do not see
the point. I do not see what point there is in
comparing two things which are not comparable.
Before we went to Ottawa we felt that we ought
to have some idea of how much money the
Government of Newfoundland would have to
spend each year, if we became a province, and
what would likely be the revenue to go towards
that expense. We felt that we ought to do that. We
did it according to the best of our knowledge at
that time. We spent three months in Ottawa, and
we learned a lot, and on the basis of what I learned
I brought in here on Monday estimates of what
the Province of Newfoundland would likely have
to spend per year. and estimates of what the
revenue from all sources would likely be.... What
relation there is or can be between the two, apart
from a purely academic relationship, I fail to see.
As I have said several times in the last two or
three weeks the estimates of expenditure and
revenue that we made up before we went to
Ottawa, that appear in the Black Book, are out of
date...
in introducing these estimates on Monday. I
took, I believe, from 3.30 - 5.30 pm to read them,
and to explain various items that differed
materially from the government's own current
estimates... The basis of comparison should be
between the estimates that I brought in here Monday and those of the government as
they exist in
the current estimates. That is a fair basis of comparison from the standpoint of expenditure.
Now
from the standpoint of revenue I grant you. the
988 NATIONAL CONVENTION December 1947
government's own current estimates for this year
are only in part a fair basis of comparison ...
because in my estimates the revenue is divided
into two kinds — on the one hand revenue got by
taxing the people of the province, and on the other
revenue from non-taxation sources. From the
standpoint of the taxation sources it is fair to
compare my estimates with the estimates of the
government. From the standpoint of non-tax
revenue, the government's estimates do not furnish us any clue or any guidance whatsoever.
I would point out that the estimates that I
brought in estimate that in the first eight years of
union the government of the province would
spend $123 million; and I would point out further
that $83 million of that ... I estimate would come
to the government not from taxation sources at
all, which leaves $39,960,000, call it $40 million
to come to the government from taxation on the
people of Newfoundland; and ... in respect of that
item it is fair to compare it with the government's
present current estimates in the Blue Book; but
with respect to the $83 million from non-taxation
sources there is no basis of comparison, because
those are based upon the terms in the Grey Book.
Now while I am on my feet, I want to reply to
Mr. Hollett.
Mr. Higgins Before you reply to Mr. Hollett, I
wonder if you would mind answering those two
specific questions I asked? Whatever we learned
in Ottawa or did not learn in Ottawa, I would like
to know how licenses for motor vehicles and
drivers has been increased from $250,000 (some
of us do not like that estimate) to $325,000? Can
you tell me that?
Mr. Smallwood I do not mind answering that
specific question. When we were drafting our
estimates of possible revenue for the Province of
Newfoundland before we went to Ottawa, there
was, as Mr. Higgins has said, some difference of
opinion as to how much we should estimate to be
revenue from vehicular licenses on motor cars,
trucks, buses, and from drivers' licenses. My
contention, and the dispute, if there was a dispute,
between some members of the delegation and
myself, was that we should raise that amount.
Now who was right and who was wrong? I was
right.
Mr. Smallwood I will show you why I was right
and the others wrong.... The government itself in
the Blue Book estimates for the current year
$220,000. The year before they raised $180,000,
so this year they estimate $220,000, and to date
they have taken in over $260,000. Now who was
right and who was wrong?
Mr. Smallwood All right, this current year they
have taken in already over $260,000. They only
estimated for $220,000, and my estimate of
$300,000-odd is not for this year, or next year,
but an average for each year for the first four
years of union; and during those years ... there
will be more roads in Newfoundland ... there will
be more miles of road in 1948 than in this current
year, and each year there will be more mileage,
there will be more motor cars, especially, sir, if
we get confederation, because they will come in
duty-free from Canada. There will be more motor
cars, and more drivers, and it is a perfectly fair
and conservative estimate to do what I have done,
to estimate for the first four years of union
$320,000 a year where the government this very
year has taken in already over $260,000. I have
already given that explanation. Mr. Higgins sat
behind me here while I did it on Monday afternoon. It is true I was back on to him,
and I can't
guarantee that he was here every moment, but I
explained all these points on Monday afternoon.
Why go all over it again?
Mr. Higgins I don't think you explained that
particular point.
Mr. Smallwood I explained that point in considerable detail, exactly as I did it for the past four
or five minutes.
Mr. Chairman As a matter of fact I recall distinctly Mr. Smallwood stating: "Already this
year the government has received $265,000".
Then he went on to say, "I should not say 'already
this year', because for all practical purposes we
must assume that there will not be much additional revenue raised in this respect
between now and
the end of March next year".
Mr. Higgins Where are the roads going to come
from, Mr. Smallwood?
Mr. Smallwood Now I pass on, Mr. Chairman,
and reply to Mr. Hollett.
Mr. Higgins If you don't mind, with all due
respect, I don't like to be brushed off as easily as
that.
December 1947 NATIONAL CONVENTION 989
Mr. Smallwood Well, I do not like being
brushed off, but I have an intense dislike to being
insulted, strange maybe.
Mr. Chairman Just a moment, Mr. Smallwood, so that I can deal with the propriety or
otherwise; why do you feel that you are being
insulted because Mr. Higgins has asked you
where the additional roads are coming from?
Mr. Smallwood I was not referring to that. I do
not regard that question as an insult. I regard this
as an insult: I spent from 2:30 to 5:30 pm explaining these points, then to be asked
by a gentleman
who sat here three or four feet from me right
throughout that period ... all these same questions
over again. It is insulting to me.
Mr. Chairman Mr. Smallwood, on that point I
cannot sustain you. Whether or not Mr. Higgins
was here, and if he is merely asking you to
recapitulate or reiterate information you have
already given the House, at the worst it can be
merely construed as a waste of time; but I have
no knowledge of Mr. Higgins being here at the
time. I have to deal with the tenor or substance of
his question... I find nothing insulting in the
question itself. Whether or not Mr. Higgins was
here and heard that and is now asking for information that you have already given
the House on
Monday is something I am not prepared to rule
upon... If you don't mind, Mr. Smallwood,
would you have any objection to answering
Mr. Higgins' question?
Mr. Smallwood Mr. Chairman, in reply to
Mr. Higgins I will now ask him a question. Will
he please tell me what roads are being built in
Newfoundland, what are budgeted for, how many
were built in 1947, how many are budgeted for in
1948? And I have as much right to ask him as he
has to ask me. He was a member of the Ottawa
delegation, and l was a member of the delegation.
Am I going to sit here, or stand here and be treated
as though I was a stranger and he was a stranger?
We were both up to Ottawa together. Now I will
ask him the question. Please answer, Mr. Higgins.
Mr. Higgins Mr. Chairman, Mr. Smallwood
made the budget, and there are no roads in the
budget. Now Mr. Smallwood, will you tell me
what roads were built here for the past 20 years,
year by year, and name where they are, and what
it will cost to maintain them, etc.
Mr. Chairman Mr. Smallwood, there is no
item in the budget or estimate covering roads as
such, but indirectly you did raise the position by
virtue of the fact that you did predicate your
estimate of increased revenue upon the position
that more and more roads are to be built in the
passage of time... Therefore I feel compelled to
hold that while there is no direct reference to it,
it is introduced into the picture by virtue of the
fact that you predicate the higher figure upon the
assumption that more and more roads will be
built.
Mr. Smallwood No. I am not answering it, and
I am not going to answer it. Let any man who was
not on the delegation ask me an honest question,
and I will give an honest answer.
Mr. Smallwood If Major Cashin asks, he is a
man, and I will answer.
Mr. Smallwood I am not going to be insulted. I
have stood it for three weeks from a fellow colleague on the Ottawa delegation; he
can sit back
and discuss that delegation, and treat me as if I
were a member of it and he was not. The whole
country is talking about it. Now let Major Cashin
ask.
Mr. Cashin Well, I am going to put it this way:
I take it that Mr. Smallwood means that when
roads are built they are going to be built out of
capital, not out ofcurrent revenue. Is that right?
Mr. Cashin Yes, under confederation, they are
built out of capital.
Mr. Cashin Yes. That's just the point. Now if
we go into union, if we ever do, and I don't think
we will, there is supposed to be $30 million
roughly in cash in our accumulated surplus
earned from monies owed by the Housing Corporation and individuals, therefore you
take $10
million of that money and you deposit it with the
Canadian government, which is to be spent on
current account only. That leaves $20 million
balance, which is supposed to be capital account,
from which you would spend, 1 take it, to build
these roads. Now there is over $9 million of that
990 NATIONAL CONVENTION December 1947
in England today. There's going to be another $5
million or $6 million this year spent out of this
surplus to pay for fish, that's $15 million, consequently you have $5 million left
of your accumulated surplus in Newfoundland. Now the way
road building is going these days, $5 million is
not going to increase it very much, and unless and
until you got your sterling converted into dollars,
and we have not been told in any of these terms
here whether or not the Canadian government is
going to convert this sterling back to dollars for
us, I can't see how you can do much road construction with $16 million in Great Britain
and
just $5 million here in capital account, a lot of
which will have to be taken probably for various
other matters of capital expenditure.... That's the
point I want to know, if there is any arrangement
between the Canadian government, Newfoundland government, and the Ottawa delegation
to the effect that all this money we have in
sterling will be converted back to dollars, and
when it will be converted; because if you have
not got it converted you can't build many roads,
because you have no surplus on your provincial
budgeting, you have deficits.
Mr. Smallwood I appreciate the point made by
Major Cashin, and the gentlemanly way in which
he has made his point. Major Cashin and I are
becoming like...
Mr. Chairman We will stop this commotion in
the galleries right away. Members will please
remember that this is an investigation of a very
serious matter by the members of this Convention
and no members, or anybody outside this Convention is entitled to participate in the
debate at
all, therefore we are not concerned with the approval or disapproval of any person
in the gallery,
and I don't want to hear any further commotion
there. Go ahead, Mr. Smallwood.
Mr. Smallwood Mr. Chairman, as I said here on
Monday, this where the note on page 2 says,
"This assumes that the accumulated cash surplus
of $28 million has been converted into dollars
and placed on deposit at 2 5/8% with the Government of Canada, and that an average
of $3 million
a year is withdrawn during the first eight years of
union for the purpose of development in Newfoundland."
Mr. Cashin Excuse me, in order to get 2 5/8%
from Canada, you have got to convert it into
dollars. How is that going to be done? Is the
Canadian government going to do it, or is the
British government going to find the dollars
when we become a province? Because you can't
find it unless you convert it first.
Mr. Smallwood I agree that that is true. Major
Cashin will understand, and he will appreciate
the position I take, when I say that in view of his
very well-known stand that we will never get
back our interest-free loans from Britain, and that
it will never be converted into dollars, that I feel
like saying as little as I can humanly say on that
point, as to how the sterling will be converted into
dollars and by whom. I will say this, that I have
no doubt whatever that our sterling, that part of
our accumulated surplus that now lies in sterling
or will lie in sterling at the time of union, will be
converted into dollars; because, as Major Cashin
points out, the Government of Canada agrees to
receive on deposit from Newfoundland at 2 5/8%
interest, only the part of the surplus in dollars....
It is important therefore, that the sterling be converted to dollars. I have no doubt,
none at all, that
that will be done. I don't want to say more than
that, and furthermore I am not going to be forced
to say any more than that.
Mr. Higgins May I go on? If Mr. Smallwood
will not answer me maybe someone else will. I
am still on this road question, and I would point
out to you that the gasoline tax has been increased
from the amount we figured it at, $750,000, to $1
million, that is $250,000 more, and there is
$75,000 more on the items that I outlined a
minute ago, and that $325,000. I still ask
Mr. Smallwood where are the roads coming from
in four years, or eight years, to make that increase.
Mr. Smallwood Mr. Chairman, was Mr. Higgins not in the House when I said...
Mr. Hollett Before we go into that, as we have
only one reporter, could we have a recess for a
few minutes?
[Short recess]
Mr. Smallwood Mr. Chairman, I would just
like to say a word or two in general about this
question of roads. This year, on June 24, the
Cabot Highway was opened.
[1] This year they
began to complete the road from Gander to
Lewisporte, and the road from Corner Brook to
Port-aux-Basques, and they had planned to con
December 1947 NATIONAL CONVENTION 991
tinue these roads next year. They also began the
road on the Burin Peninsula. These are roads
which almost certainly will be completed before
we become a province at all, except the stretch
from Stephenville Crossing to Port-aux-Basques.
That would have to be one of the first roads to be
completed after union, because until it is completed to Port-aux-Basques, Newfoundland
would not get the new ferry on the Gulf, and our
tourist trade depends to a very large extent on our
getting that ferry.
I think it is common knowledge that a lot of
roads were commenced this year and will be
finished next year; and that in the course of the
next few years the mileage of motorable roads in
Newfoundland is going to increase steadily and
considerably, which, in view of the fact that last
year the government took in $900,000 in gasoline
taxes, and in this current year will touch the $1
million mark, it is pretty conservative, for the first
four years of union, to put gasoline revenue at
only $1 million, and for the second four years to
stick another quarter of a million on it and say
that revenue from gasoline will increase in Newfoundland between 1947 and 1955 only
by
$250,000. So I hold that it is a most cautious and
conservative estimate, and it would not surprise
me at all, not at all if, by 1955, revenue to the
province from gasoline, for use by motorists,
would be up to $1.5 million, rather than $1.25
million. Now yesterday, Mr. Hollett drew my
attention...
Mr. Higgins Can I go on for a minute before you
answer that question? I would like to finish...
Mr. Smallwood I have said I am not going to
answer a whole lot of questions by Mr. Higgins.
I have made an exception in two cases, but I am
not going to be made the victim of courtroom
tactics, and be subjected to cross-examination by
a fellow delegate. Anyone else, yes, but not by a
fellow delegate.
Mr. Higgins It is a little awkward, but I would
like to ask a couple of questions if it would be all
right.
Mr. Chairman I rule that Mr. Higgins is entitled to ask his questions at this time.... I don't
want that to be misconstrued to mean that I am
ruling upon the propriety or impropriety of the
questions. If Mr. Smallwood's answer to all or
any of these questions is that the knowledge is
already known to Mr. Higgins because he was a
member of that delegation, well of course that is
a matter for Mr. Smallwood to decide himself. I
therefore hold, Mr. Higgins, bearing in mind
what I have already said, that you have a right to
put your questions.
Mr. Higgins I said, sir, that I made a mistake.
The budget that we have for revenue in the Black
Book was not made before we left here. We made
a budget before we left, but the budget that is in
the Black Book was a budget made by the entire
delegation while we were in Ottawa. Now I am
dropping the roads, as it is a pretty hot bridge, and
I would like to have an explanation of why the
item Home Affairs has been increased from
$50,000, as arrived at by the delegation in Ottawa, to $125,000?
Mr. Smallwood Mr. Chairman, I answered that
in great detail on Monday, and not only that, but
the result of it was an exchange of questions
between Major Cashin and myself which led me
to deliver a talk on what it was proper to call
revenue and what was not proper to be called
revenue. So, having given a complete explanation on Monday, and again yesterday, I
don't
propose to do it again.
Mr. Higgins Why was the revenue increased
from $50,000 to $120,000?
Mr. Smallwood As I have already explained
that on two occasions this very week, yesterday
and on Monday, I don't propose to answer it
again today.
Mr. Higgins The question was never asked. The
question was merely asked should it go to capital
or current account.
Mr. Chairman On that point there was, if I
remember correctly, an exchange between Major
Cashin and Mr. Smallwood as to the propriety of
including expenditures of that sort in current
account. I must say that my recollection is that
Mr. Smallwood...
Mr. Higgins I only asked how did the increase
arise. That's all. Nothing more.
Mr. Higgins Well, can I have one more question
and then I will sit down? The item of Forestry was
increased from $151,000 to $171,000. Now
$20,000 is neither here nor there, but I would still
like to know how that increase was arrived at.
992 NATIONAL CONVENTION December 1947
Mr. Smallwood Now, sir, I am ready to reply to
Mr. Hollett if everyone else is ready.
Mr. Higgins I take it I am not going to have an
answer to that?
Mr. Smallwood I have already answered that
question and I am not going to answer it again.
Yesterday Mr. Hollett drew to my attention
the fact that in the government's estimate there
appears an item which does not appear in this
estimate of mine. It is in respect of the 3.5%
loan, 1950, £569,796, and the 3.5% loan, 1952,
£302,731, interest £30,539, or $123,378. I did not
include that in my estimate of provincial government expenditure, and Mr. Hollett
wanted to
know why I had not done so.
I said yesterday that it might turn out that I had
been wrong in not including it, and if I was wrong
I would confess so frankly, and I do now confess
that I ought to have included that amount on the
expenditure side, and I thank Mr. Hollett for
drawing my attention to it. It is not an extremely
important item. The interest on the one is
£10,596, or $42,000 a year, and the interest on
the other is £19,943, or $79,770 a year. Now one
of them comes due in 1950 and the other in 1952,
so therefore, if you have my estimate of provincial government expenditure by you,
you might
add in respect of the first two years of union
$123,378 a year. And in respect of the next two
years of union, $42,808. You see, after the first
two years of union the first loan would have been
paid off, and there would be no further interest to
pay on it, and we would still have two years to go
on the small loan, which is $42,000 a year interest, and in two years that would disappear;
so that
averaged over the eight years, that would, be
$41,000 a year average, or averaged for the first
four years it would be $83,000. So as I have done
it by averages, you might add to the expenditure
for the first four years of union $83,172 a year.
Mr. Fogwill Mr. Chairman, I want to ask
Mr. Smallwood, a question in respect of the civil
service pensions of those civil servants employed
by the Government of Newfoundland today, who
would be employed by the Government of
Canada if and when we become a province, and
in relation to their employment, to their years of
service in the Government of Newfoundland.
Under clause 17, subsection 2:
Canada will make all necessary payments in
respect of such pension rights and may
deduct from any subsidies payable to the
Province of Newfoundland any payments
made in respect of pensionable service of
such employees with the Government of
Newfoundland.
Will those deductions be made in the form of
payments to the civil service pension fund of
Canada, or will they be made in respect of the
accumulated service in the Government of Newfoundland, and would those civil servants
be paid
for part of their service under the Civil Service
Act of Newfoundland, and part under the civil
service pension fund of Canada? Would they be
paid for as contributions into the civil service
pension fund of Canada, that's what I want to
know.
Mr. Smallwood I have Mr. Fogwill's question
very clear. I will sort of review the whole position
so that everyone will know what we are talking
about. Mr. Fogwill would not mind that, would
he?
Mr. Smallwood I will make it as long as necessary to make it clear to everyone, and no longer.
Let us assume that on the day of union the
Government of Canada employs certain people.
That is the first time they become civil servants
employed by the Government of Canada in Newfoundland. Say at the Railway they take
on new
men. Well, it is employees of the Government of
Canada, it does not say civil servants in the
clause. You passed the words. "Employees in
departments or activities taken over by the
Government of Canada."
Mr. Fogwill That is those persons who have
acquired pension rights under Newfoundland
law, therefore I was confining my remarks to
actual civil servants.
Mr. Smallwood All right, we will deal with that
alone. In departments of the Government of
Newfoundland which the Government of Canada
takes over, after they have taken over, they take
on a new man we will say. So far as his pension
is concerned, the Government of Canada is
responsible for that as long as ever he works for
the Government of Canada. But they will also be
taking over men who are already in these departments, who are now civil servants of
the Government of Newfoundland, and have acquired
certain pension rights by working so long for the
Government of Newfoundland. They go right on
December 1947 NATIONAL CONVENTION 993
being civil servants of the Government of
Canada. Now what Mr. Fogwill wants to know is
this: who pays the pension of such a man in
respect of the period that he worked for the
Newfoundland government?.... The answer is the
Newfoundland government pays it. Now second,
about this deduction. You will notice that the
word is "may". If the Government of Newfoundland fails to pay the proper pension to
a civil
service pensioner that is his due, his right, that he
earned by working for the Newfoundland
government, then in order that that civil servant
will not lose his pension rights for the period that
he worked for the Newfoundland government, if
the Newfoundland government does not pay his
pension, then the Canadian government will; but
it will deduct the amount from the subsidies they
are expected to pay the Newfoundland government. It is not deposited in the civil
servants'
pensions fund in Canada, because it is an actual
pension. Have I made that clear?
Mr. Fogwill I look upon it from a different light,
for this reason: there is no doubt that there would
be civil servants in the Government of Newfoundland today rather up in age, we will
say, and
if they were 56 or 57 years old, would not be able
to come under the benefits of the Civil Service
Pension Act of Canada, if they became civil
servants of Canada...
Mr. Fogwill Because of the fact that they would
not attain the ten years service which is required.
It does not matter to me very much, but in summing up the situation of those people
in the civil
service today who will be taken over by Canada
in the event of union, that number amounts to
1,168, and the total payroll is $1,744,000. If we
compute that into the average rate it would be
approximately $1,000 per person. Now then, if
they were taken over by the civil service of
Canada, and paid contributions to the civil service fund at 5%, which is the lowest
rate, that
would amount to $87,208.
Mr. Fogwill On the total year's salaries. It may
be a little less, because the wages were not so high
a few years ago; nevertheless I would assume that
the total years of service on these employees
would be approximately 12. I think that's conservative, because I know many people
who have 30
or 40 years service now with our civil service. As
we compute that amount of $87,208 we got
$1,046, therefore we have got to make provision
in this provincial budget, where you have
$202,000 laid down in respect of payment of
pensions. I don't think we are going to have much
relief on $202,000 in respect of paying pensions
for those who are on pension at the present time,
because that will continue for a period of years,
and then they will be in the civil serivce of the
province if we have it.... I think you have got to
lay down in your budget, Mr. Smallwood, a sum
of $1,046,000. You can lay it down yearly, or you
can lay it down in one sum. If you lay it down for
an eight year period you have to lay down
$130,000 for each year.
Mr. Smallwood That's very interesting. We
went into that at considerable length in one of our
committees in Ottawa. It struck me at one time
that it might pay the government of the province
to do exactly what Mr. Fogwill has suggested
might be done, lay out the capital sum from the
surplus and in that way wipe out at one blow the
province's liability for civil servants' service
pensions. That would be one way to do it, but, as
we have got an amount of $200,000 a year in
those estimates of mine, and as civil service pensioners gradually die, we will finally
reach a peak
and then the peak will begin to fall, but it won't
be half $200,000. It will gradually as he says,
begin to fall, so that the $200,000 a year covers
it.... If Mr. Fogwill would like sometime to have
a debate on the superannuation and pension
schemes of Canadian civil servants I would be
highly pleased to have it. It is one of the very
finest. When a civil servant in Newfoundland
gets a pension, when he dies then his pension dies
too; but not in Canada, it goes on to his wife and
children.... The point to remember is this. John
Jones is now working in any post office. We
become a province, and Canada takes over the
Department of Posts and Telegraphs, so Jones
becomes an employee of the Government of
Canada, so then he gets pensioned. The Government of Canada pays his pension out of
the pension fund, towards which, it is true, he has
contributed for his 15 years service with them,
and the Newfoundland government pays his pension for the 15 years he worked for them;
so he is
getting a pension from both governments. The
number of pensioners that the Newfoundland
government will have to pay for will be going on
994 NATIONAL CONVENTION December 1947
for many years to come. As they gradually get
pensioned they will come on to the Newfoundland government for part of their pension
... and you have already your existing pensioners;
and you have those civil servants who will still
be provincial civil servants.... Now we have an
amount of $200,000 a year. That will cover it....
It might go to $250,000 for a year or two in which
case you would have to find another $50,000 a
year....
Mr. Fogwill ....The $200,000 that we have laid
out will only cover civil service pension rights for
the employees of the Province of Newfoundland.
Also included are those who will get pension
rights and be superannuated in a few years. That
has not even reached its peak yet, not even in
regard to the ones who will be left to us. That will
be an amount of probably 1,800 to 2,000 people.
Now then, 1,600 people will go into the employ
of the Government of Canada. I take that out of
the estimate, and we have got to provide now in
our provincial estimate, for their prior service,
and that prior service will amount to $870,000 at
ten years' service. At 12 years, which is only a
conservative estimate of the average years of
service of all those people, it will amount to
$1,046,000. We have got to provide for that.
Mr. Fogwill That's the total each year. Now
then, we have got to take 5% of that and multiply
it by their service, and lay down $130,000 a year
for the next eight years to provide for pensions of
those who go into the federal employ of the
Government of Canada.
Mr. Fogwill Mr. Chairman, it's just as well to
tell the people of this country the truth.
Mr. Smallwood Now suppose we don't have
confederation, and the present government is
what we go on with; or if we have anything but
confederation in the next ten years. At the present
time civil service pensions are costing us
$202,000 a year. What will be the bill ten years
from now? Has Mr. Fogwill figured that out? Per
year, ten years from now, what will be the civil
service pensions bill that the Government of
Newfoundland will have to pay?
Mr. Smallwood It will be double! Well, in that
case I am completely stumped. Mr. Fogwill does
not figure on anyone dying; all he figures is that
the number of pensioners will keep piling up, and
none of them will die.
Mr. Fogwill Of course they will pile up, because they are getting older all the time. Did you
read the Civil Service Pension Act a little while
ago? Did you read it?
Mr. Smallwood You must admit that I have
been fairly busy this past few weeks, and can't
read everything.
Mr. Northcott Yesterday it was stated that in
the event of union with Canada some of the civil
servants would probably be paid off; but on the
other hand Mr. Smallwood said that under
various departmental heads we would probably
have an extra 1,000 engaged. That's right isn't
it?
Mr. Northcott Well, the question I want to ask
is this: assuming they get $2,000 a head for an
average salary, that's $200,000; who pays that,
the provincial government?
Mr. Northcott The civil servants, the extra
1,000 that you refer to.
Mr. Smallwood I said that if we become a
province our public service would be cut in two,
one part would still be ours, and our provincial
government would have to pay that. The other
part of it would become federal government, and
the Government of Canada would stand it. In the
departments that the Canadian government
would take over and handle, they would take the
civil servants who are in each particular department at the time union takes place.
But on top of
that again there are government departments in
Canada which we have not got here at all, which
would be established. The Canadian government
would open new offices here over and above the
Newfoundland offices that they would take over,
and in those new offices they would employ
something up to 1,000 people.
Mr. Northcott Who would pay them? That's
the point I want to get at.
Mr. Bailey Mr. Chairman, I wonder, in the light
of the budget just brought in of $15 million, why.
December 1947 NATIONAL CONVENTION 995
since we have nearly twice as much territory to
service, is the Nova Scotia provincial budget
$30,018,000? Now the municipal budget of Nova
Scotia I believe is $9,941,000. I think that works
out at around $18 a head. That's just for roads and
schools, and I can't seem to be reconciled to the
fact that this provincial parliament we are going
to have, to give the people what we are getting
now, can be operated on $15 million. I think there
was a strong plea put forward as to our backwardness, and I know if we are going to
have services
in this country we have got to pay for them, and
the only way I know that you can pay for them is
by raising taxes, and when you raise taxes you get
revenue, and can do the work. I think the strong
plea to send a delegation to Ottawa was that we
could get a better way of life if we went into
confederation with Canada, or if we negotiated to
see how much better that life is going to be. But
I have been struck very forcibly, and I have done
a little deliberating, that the estimates of
municipal taxes and everything has been kept off
our desks. I hold that one of the first things that
the members of this National Convention should
have had was all pertaining not only to the federal
government of Canada, but if the people vote to
demand confederation they should know the
other side of the business. You have got nine
different provincial governments in Canada, and
since I have been in this Convention I have got to
hear the first word yet as to how John Doe in a
fishing village in Nova Scotia, or north New
Brunswick, or the Magdalen Islands, or the
Gaspé Coast, how he fares, and how he raised his
taxes. The only way we can get that is by getting
their estimates to see how they operate and work,
and I find it is being kept away from us as far as
possible. Nobody in this country, not only in the
government, not even the Trade Commissioner,
can give me any idea of where one book can be
found of how the provincial governments of
Canada are being governed. So I would like
Mr. Smallwood to answer this question: how can
he say that this country can be operated on $15
million when we want new roads, we want
schools, and the things that the Nova Scotians
have got, and the New Brunswickers and the
Prince Edward Islanders are supposed to have,
and the other provinces throughout Canada? I
know how they get them, by lifting themselves
by the straps of their boots. I think we have to go
down to this confederation business. I don't know
how much the Canadian government is going to
put into Newfoundland, and I am sure nobody
under heaven knows how much they are going to
take out. We have been paying quite a lot of their
taxes in the last 100 years since they went into
confederation. But now, I want the people of
Newfoundland to know what John Doe is doing,
how he is governed, how he is taxed, how he lives
and the rest. I know it because I spent a lifetime
among those people. I made six voyages to the
Gaspé Coast, and I know just what it is; and I
know north New Brunswick and how these
people live; but I want the fishermen, before this
is put to the vote of the people of Newfoundland,
for them to know how the provinces are
governed; and I would like Mr. Smallwood to tell
me how Newfoundland and its dependency,
Labrador, is going to be governed on $15 million
when it has taken $30 million for the Province of
Nova Scotia where they have good roads, well set
up after nearly 100 years of municipal care, and
we have nothing at all.
I take it we are going to have a royal commission come down here in eight years time,
and you
know the promise. I am not going to read it, you
have heard it, and I want to know what they are
going to do when they put us on a par with
themselves, what we are going to have to pay. I
know by cities and towns and villages in Nova
Scotia the amount, and I know by cities and towns
in the other parts of Canada just what confederation means.
Mr. Hollett Are we going to have another
recess, sir? If not I would like to say a few words.
Mr. Chairman If you don't mind, Mr. Hollett,
in a minute or two. Mr. Bailey has addressed a
question to Mr. Smallwood, and he may want to
answer it.
Mr. Smallwood I don't know that there is anything particular I have to say in reply to Mr.
Bailey, who has been having very considerable
enjoyment and interest I suppose in boning up, or
studying the systems of taxation in some of the
provinces of Canada. To me, all learning is never
a burden, it is grand to know things, and a grand
thing to study; but in relation to Newfoundland I
don't see very much point in knowing what kinds
of taxes they have in any particular provinces or
municipalities in Canada. It has no bearing on us,
sir. They have their system of taxation. and we
996 NATIONAL CONVENTION December 1947
will have our system of taxation. It is not because
one province does it one way that all provinces
must do it the same way, and I am prepared to
argue it. There is a tremendous variation in some
respects from one province to another. We would
be still another variation. We have our ways of
doing things. There is one limit laid on us, one
condition laid down, and it is a good condition.
No province is allowed to put any taxes on its
people except direct taxes.... Indirect taxes are
not allowed. Now with that one condition ... it is
entirely our own business as a province how we
levy our taxes, what kind of taxes they will be,
and how much we will collect in each kind of
tax....
Mr. Bailey could stand here for three hours
listing the different kinds of taxes they have in
the different provinces, and that would have just
as much to do with Newfoundland as if he had
spent the time talking about the different kinds of
taxes they have in Timbuctoo, Somaliland,
Tanganyika, Nyasaland or out in the Gobi desert
of China. Let them have what kinds of taxes they
want, we will have the kinds of taxes we want, so
long as they are direct taxes. That's our business,
and Mr. Bailey can save himself an awful lot of
trouble if he will only remember that it is up to
the House of Assembly of the Province of Newfoundland....
[Short recess]
Mr. Bailey Mr. Chairman, I want members to
turn to page 4 of the Grey Book, "Reassessment
of Newfoundland's Financial Position". Now I
take it that this paragraph is a deliberation of the
delegation to Ottawa, and as such each and every
man who went on that delegation is responsible
for what is there. I want to read this clause 14:
In view of the difficulty of predicting with
sufficient accuracy the financial consequences to Newfoundland of adjustment to
provincial status the Government of Canada
will appoint a Royal Commission within
eight years of union to review the financial
position of Newfoundland and to recommend the form and scale of additional financial
assistance, if any, which may be required
by the Government of Newfoundland to
enable it to continue public services at then
prevailing levels without resorting to taxation more burdensome, having regard to
capacity to pay, than that of the Maritime
Provinces.
Mr. Chairman Before you go on Captain
Bailey, I don't find myself in agreement with
your observation that the Ottawa delegation, as
such, are directly responsible for everything in
this, and that the members of the Convention are
indirectly responsible.... It must be remembered
in fairness to the members of the delegation, and
to the members of the Convention, that this document was prepared and forwarded to
the Convention some considerable time after the delegation
had left Ottawa. Had this been presented to the
delegation before they left Ottawa and they had
then approved it in principle, then I feel that your
criticism that they would be responsible to this
Convention for everything that went into this
document would be a perfectly fair statement to
make.
Mr. Chairman If this had been placed in the
hands of the delegation before they left Ottawa
and they had accepted it, either expressly or
without disagreement, in any way, shape or form,
then I would say, "Yes, they are directly responsible for everything contained therein."
But that
is not the position.
Mr. Bailey But if we accept it, I should have
added that. As far as it stands now it is a pig in a
poke.
I feel I must emphasise that as far as the
financial aspects of the proposed arrangements for union are concerned, the Government
of Canada believes that the
arrangements go as far as the government can
go under the circumstances. The Government could not readily contemplate any
change in these arrangements which would
impose larger financial burdens on Canada.
[1]
Now then...
On the other hand, with respect to those
matters which are primarily of provincial
concern, such as education, the Government
of Canada would not wish to set down any
rigid conditions, and it would be prepared to
give reasonable consideration to suggestions
December 1947 NATIONAL CONVENTION 997
for modification or addition."
Mr. Bailey I just wish to deal with the financial
side of it, Mr. Chairman. Coming back to this
assessment of Newfoundland's financial position. When we accept this in this Convention,
and
the eight years have passed, and we give that
royal commisssion the right to come here and to
help us set up, it says here, "...having regard to
capacity to pay, than that of the Maritime Provinces." Yet Mr. Smallwood turns around
and says
it's none of Canada's business how we get our
taxes. We must get them directly.
Mr. Chairman Under section 92 neither is it
any of their business.
Mr. Bailey And yet Mr. Smallwood can tell me.
Supposing for instance that we have got to find
say $30 million, how are we going to get it
without putting in the same form of taxation that
the other nine provinces of Canada put in? I will
be happy to listen to him. This is the place I am
in, and that is what I want the people to know. If
we go on having extra social services, and extra
responsibilities I want the people of Newfoundland to know, no beating around the
bush
or anything at all; I want you to come out clear,
that when that royal commission comes down
here and lays the case before us, does that mean
we are going to have the same form of taxes as
they have in the Maritime Provinces? I don't see
any way out. If a delegate to this Convention can
get up here and tell me how we, in this island, are
going to be taxed after we lose the way we are
collecting taxes today, i will be perfectly satisfied
to listen, and I don't know but that I will go along
and work for confederation.
Mr. Smallwood Mr. Chairman, that's a very
good point raised by Mr. Bailey, and it's a point
that deserves a straightforward and honest
answer. He directed your attention to clause 14....
What does that mean? That is an extremely
important clause in these terms. It is sometimes
said that confederation for Newfoundland would
be a leap in the dark. In certain respects it would
be and in certain respects it would not. Certain
things are laid down, and are as plain as the day.
But in other respects it would be a leap in the dark,
and one respect in which confederation would be
a leap in the dark is this very matter, sir, that we
are discussing here today, and ever since Monday. That is, could the government of
the
province pay its way?.... Any government can
pay its way. There need never have been a year
since 1920, when the bad times hit us, when the
government needed to fail to balance its budget.
A government can always pay its way. it has three
ways to do it: 1. To stick on more taxes. 2. To cut
down on the public services. 3. To do both, to put
on more taxes and give the people less service.
Now these are three ways, and either one of them
will enable any government to pay its way, but
that's not what we mean. As a province we have
got to have our own government, and can that
government pay its way without putting too
heavy a burden of taxation on the people, and
without cutting down on the public services? It is
impossible to answer that with finality, and when
I came in here on Monday 1 brought in what I
called "estimates". I admit frankly that I am not
a prophet, and that i cannot see through a stone
wall further than any other man.... I have brought
in what I honestly and sincerely consider to be
conservative estimates or guesses, if you like,
showing that we can do that, but we may not. I
will be man enough to admit that if in any one of
these eight years the government should spend
more in that year or take in less revenue in that
year than I show, then in that year we have to dip
into our surplus to pay the debts. Why should i
try to hide that or refuse to admit it?....
Now in view of the difficulty of predicting just
what will happen financially to this government
if we become a province... the Government of
Canada says, "We know what you are up against.
You can't forecast it exactly. Tell you what we
will do; we will set up a royal commisssion" - as they have done before in other
provinces. They
set up the royal commisssion headed by Sir
Andrew Ray Duncan in the three Maritime
Provinces in 1926. They set up another one
headed by Mr. lustice White, and so you get the
Duncan-White Award. These royal commissions
admitted that the Maritime Provinces could not
pay their way and give the people proper service,
so the Duncan-White Award recommended that
they pay more to the Maritime Provinces, and
they did, and they are still doing it. So they said,
"We will appoint a royal commission to look into
your finances, and we will do that inside of eight
years after you become a province". Now what
do they do? When that royal commission lands in
St. John's, what is their job? To look into our
finances. What for? To see what? To see whether
998 NATIONAL CONVENTION December 1947
they need to recommend more subsidies for the
Province of Newfoundland. Not only whether
they need to recommend more subsidies, but the
form and scale of additional subsidies. Any
government looks to get subsidies, and if they
land here seven years after we become a province
and look into it, what would the government of
that day say?.... But there is a test. It is not enough
for the government of that day to say, "We need
more subsidy", there is a yardstick laid down,...
The yardstick is this: how much more subsidy, if
any, does the government require to enable it to
continue the public services of Newfoundland
not as they are now in 1947, but as they are in the
year that the royal commisssion comes here
without resorting to taxation on the Newfoundland people more burdensome than in the
Maritime Provinces. That's not all. Without
having to put on more taxation more burdensome
than in the Maritime Provinces, having regard
(and I direct Mr. Bailey's attention to this clause)
having regard to their capacity to pay.... That's
the clause: "having regard to capacity to pay".
Don't lose sight of that clause in all your consideration of this section 14 of the
terms of union.
Mr. Bailey I still can't understand a royal commission coming down here, and if I
were to refer
back to your budget 1 am glad I am able to see
that this country will be able to be run for $72, I
believe that's the figure, $72 a head.
Mr. Bailey $75 instead of $122. Well it's only
$3 out. Now then, we will take capacity to pay. I
think if anybody here understands these two
places I do. We will take Fortune and Shelburne.
We will take the municipal taxes in the two
places. I believe they have got a town council in
Fortune and I believe the government is paying
half of that town council for the current year,
Then if we go over to Shelburne, a town with
practically the same earning capacity as Fortune,
we find they have got a population of 1,605, they
have 50 sidewalks, 3.5 miles of asphalt, and no
stone or gravel roads. And we find out they are
spending $19,299 for municipal purposes, and
$16,200 to educate their children. They have a
total tax levied of 61%. The cost for each pupil is
$61 per year. The total tax is $36,117. In the light
of that, if a royal commission comes down here
to Fortune, Grand Bank, Bonavista or Wesleyville, or Heart's Content or anywhere else,
because I believe in town councils, and I believe
we should get them as soon as possible. those
grants are going out. We are running the province
and you said so, and I don't suppose you would
get up here and deceive this National Convention
that this country can be run for a mere $75 per
capita, instead of the $122.36 they are drawing
today, in the light of the fact that the Nova Scotia
mean per capita tax today for all federal, provincial and municipal governments is
$216 per head.
Now they are coming down here and they are
going to let us off. It is preposterous. the whole
set—up. These are the things we have got to take
into consideration and put before our people.
Because I have heard it ever since I was knee-
high to a grasshopper how much better those
people live in Canada, in this place or that place.
I fail to see it. If they live they sweat for it. Take
our position down here. If they cut out the town
councils. We don't expect a man coming down
here in the middle of the summer and sitting in
the house to understand. They don't see our Octobers and Novembers and Decembers.
when
there is no way to get on the fishing grounds. in
the southern part of Nova Scotia the vessels can
go to the grounds seven days out of every ten in
the winter, when our men have not been able to
take to the grounds since October, not because
there is no money to get there, or because they
have not got the guts to go there, but simply
because nature is against it. But it is no good to
tell someone just coming down here, who don't
know our climate, that those things exist, and
then they turn around, and here's what they will
throw up to you: "Look what our people pay!"
And what can you say about it? So I don't hold
with it at all myself. Let's admit today that we
can't tun this province under $100 or $125, and
give this province, if we come under confederation, the things that our people are
expecting if
they vote for confederation. Remember that. We
have got to be in a position to tax ourselves, we
have to to be prepared to fork up $125 per capita
at the very least. I fail to see the trend of the way
things are going. We are masters in our own
house, but when once somebody else gets over us
it will be a different matter.... I know myself if
we are ever going to lift our people to the standards they expect to be lifted to,
we have got to
start lifting ourselves by our own bootstraps,
Mr. Smallwood I would like to reply to just one
December 1947 NATIONAL CONVENTION 999
point made by Mr. Bailey. He took a comparison
between the town of Fortune in Newfoundland,
and the town of Shelburne in Nova Scotia. I take
it that they are both fishing towns. He made a
most amazing statement. He said that he thought
they had the same taxable capacity — Fortune
and Shelburne. I wonder if Mr. Bailey really understands what I am talking about when
I am
talking about taxable capacity.
Look, the highliner fishing boat on the southwest coast this year paid off her men
at $2,200 a
man, and for Newfoundland it was fine pay
wasn't it? Certainly, compared with what the
other men got, $2,200 was very good. Mr. Chairman, Fortune Bay fishermen, Newfoundlanders
from Fortune Bay were fishing the same time
aboard Nova Scotia vessels on the same grounds,
and they got the same quantity of fish as the
Freda M., or slightly below it, and they paid off
at $3,000, and I am going to be told that the same
taxable capacity lies in Fortune Bay as in Nova
Scotia? What kind of nonsense is that? Taxable
capacity is measured by the earning power of the
people, and men who earn $2,200 on the high-
liner have not got the earning power of men who
earned $3,000 for roughly the same quantity of
fish the same year. Everyone on the southwest
coast knows that, and they will hear it tomorrow
night when it is broadcast. I make that statement
now. Ask any fisherman. Captain Bailey is a
fisherman, at least he used to be, and probably as
he says, he will be again I have not a word against
it. He is going to be a good confederate some day,
but anyway he is a good man, but he is not the
only fisherman. We have men along the southwest coast, fishermen in hundreds, who
for years
and years and years have been fishing in Nova
Scotia, and every man of them knows that in
Nova Scotia they earn more money for the same
work. I am not going to try to explain the reason.
Perhaps that is too big for me to explain, but you
can't compare the taxable capacity of Fortune
with the taxable capacity of Shelburne. You can't
do it.
Mr. Bailey Mr. Chairman, I said the town of
Fortune had the same taxable capacity as the
town of Shelburne...
Mr. Bailey Now look here. We say we are in the
saltfish business, and it is bad enough for the fresh
fishermen up there. If we say Lake and Lake in
Fortune are producing 10,000 quintals of fish this
year, and say Frost in Shelbume produces 10,000
quintals of fish, and the 10,000 from Fortune and
the 10,000 from Shelburne go into the Puerto
Rico market. Has Fortune got the same capacity
to pay as Shelbume got? Was there as much
money came back into Fortune as there was in
Shelbume from the market? It is preposterous! If
there was not a cent paid to the fishermen, wasn't
that money brought into Fortune?
Mr. Chairman You are getting far from the
track because of the fact that there are no comparative figures as to the earning
capacity of
Fortune and Shelbume before us. and as far as I
am concerned you simply select those two for the
purpose of making a comparison. I don't want a
prolonged debate upon a question upon which
there has been no foundation laid before the
Chair. We are discussing now the towns of Fortune and Shelbume, and none ofus is in
a position
to know whether any statement made by anybody
on the question is correct or otherwise.
Mr. Bailey I have got to disagree with you there,
Mr. Chairman.
Mr. Chairman I am not going to have my ruling
debated. Is that clear? If you choose to lay the
foundation for your statement, then I will decide
whether or not the debate as presently carried on
by you and Mr. Smallwood is relevant or not, but
as far as I am concerned you are both hopelessly
afield.
Mr. Fogwill Mr. Chairman, I would like to ask
a question, sir, under provincial revenue, Department of Posts and Telegraphs. There
is the sum
of $87,000 listed as revenue, and I think it is
wireless, cablegrams, etc. What I would like to
know, if Mr. Smallwood would tell me, is the rate
of tax and the number of cablegrams and wireless
messages; and also if that tax, whatever it is, is
imposed on internal telegraph messages. I ask
that now because he may not have the figures
with him, and he may have it tomorrow.
Mr. Smallwood I have not the figures here. but
I will try and get it.
Mr. Chairman I think if members are going to
draw conclusions or comparisons it is not too
much to ask that the foundation first of all be laid,
1000 NATIONAL CONVENTION December 1947
because how can I decide anything on pure
hypothesis or conjecture, and the debate, as far as
I am concerned for the last 15 minutes, has had
anything but a factual foundation.
[The committee rose and reported progress, and
the Convention adjourned.]
