Mr. Chairman Mr. Reddy, Mr. Bailey was occupying the floor, if you don't mind deferring it.
Mr. Bailey Mr. Chairman, as regards to this discussion we were in yesterday evening when the
question probably went outside of the scope of
the clause discussed, I assure you that I did not
intentionally do it; I was just trying to make it
clear for the Convention and the people to understand.
Mr. Chairman Iam sure we all appreciate that,
Captain Bailey.
Mr. Bailey I would like you to turn to page 4 of
the Grey Book, where I intended to follow on
when I left off yesterday evening when brought
to order - Transitional Grants:
In order to facilitate the adjustment of
Newfoundland to the status of a province and
the development by Newfoundland of
revenue-producing services, Canada will pay
to Newfoundland each year during the first
twelve years of union a diminishing Transitional Grant payable as follows...
Now each and every one of us will note that
after the first three years there has to be found a
certain portion from taxation different from what
we have got today. I want it made clear just what
we have to expect, I believe in the quotation
which was, I think, made in this House by some
member, that the wrong way to tax a people is for
one body to collect the taxes and another body to
spend it. So I believe that When we get closer to
the crux of the matter and find out what we are
being taxed for, I believe we will have a better
form of government. I think this clause we have
before us points that out very strongly.
I find, and I am worried about it, that there has
been no effort made for any adjustment in what
we have before us. We know what we are going
to get, it has been pointed out very strongly,
everything that is coming to us; but nobody has
taken the trouble so far to point out what we are
going to pay and how it is going to be paid. I tried
yesterday in my humble and probably illiterate
manner to bring to your attention the difference
in the direct taxation that must come upon us if
and when we come into confederation. We must
adjust ourselves, and l not only see that 12 years
to the day we will have to find this amount that
is brought before us, but also another $1.5 million. I cannot see for the life of
me how this
country can have the very least in services under
$5 million taxation. Now that's the point I would
like to make clear today. and I don't see, looking
at it from every angle. after the federal and
provincial governments take their cuts. where the
cut is going to come from for municipal purposes
and for our schools. You will find out that the
578,062 people of Nova Scotia are collecting
$9,941,058 for their schools. I say we have got
twice the territory to service, because we can't go
on leaving the Labrador in the place it is into; I
am sure it is the greatest disgrace in the world,
the way that Newfoundland has left the people of
Labrador. If there is one body of people in our
country that has raised themselves by the bootstraps, against odds that you can hardly
understand, it's the people of Labrador. I believe that
they should have the same as everybody else.
There isn't any doubt that there's an immense
amount of wealth in the country, and our people
in Labrador should not be left like the natives.
I tried yesterday to explain in my simple way
how these people are raising this money. I can't
quote the districts in the Province ofNova Scotia,
that's the municipal statistics, the clause here
would be too deep to go into. I think we have got
about 33 pounds of data on this Convention Act,
and I slogged through most of it, and I believe if
we were to make an impartial survey of Nova
Scotia we would have to have 30-odd pounds of
that... I am not satisfied that this country is going
to get all it needs for $75 per capita, It can't be
done, and if we had $120 per capita, including
December 1947 NATIONAL CONVENTION 1001
our federal taxes, we will have to find another $5
million to give the service to the country that the
people require.
When we look around we know what we have
to have. Take just Public Health and Welfare. We
will go through the villages of Newfoundland. It
is not because it can't be done, or should not be
done, but because the people don't understand.
You want a staff of people going through this
country just to educate people. If you don't, it will
cost money just to prevent ill-health in many
cases. There are hundreds and thousands more
items that I could think about if I had the time,
but I don't want to keep this Convention too long,
I just want to emphasise the fact that those taxes
have to be raised, and yesterday I brought it down
to two localities; I did no harm in what I was
trying to do, I wanted to show the responsibility
that would fall on the people of the different
villages and settlements and towns throughout
this country if we have got to put those services
in. I believe they should be put in if we have
responsible government or Commission of
Government. I am sure it should be done if we
have Commission government. And then we will
have our people saying, "I don't know how much
taxes I am paying". Nobody knows. Canadians
know, yes the Canadians know. Why does the
Canadian and Nova Scotia man know? Because
the Nova Scotia man collects the taxes, and not
only collects the taxes, but he employs an army
— six councillors here and six there and 12
somewhere else to see if those taxes are used
right.
That's all I am going to say on this, and I
believe there are others wanting to get the floor.
I want to emphasise this fact to our people that
we cannot go on, and we are not going to go on
getting a handout from the federal government of
Canada to run this country. Now that's all we
talked of so far — handouts. When that time
comes we will have a royal commission and what
will we find? Perhaps $100,000 or $200,000,
perhaps $500,000 being collected for municipal
services outside St. John's. What is the royal
commission going to say? "Why you are not
taxing your people at all — look what our people
are paying. You have got to bring it up." And that
is the question before us today. Now whether our
people are going to have that royal commission
down is none of my business, they have got the
vote and let them use it, but for everyone's sake
let us realise that they are going to come in and
they don't promise anything else. This Grey
Book doesn't promise us anything else, and common sense doesn't promise us. That is
all I am
going to say on this question today.
Mr. Reddy Mr. Chairman, during the past
several days l've asked myself often if I were
dreaming. Everyone of us hears some strange and
funny things as we go through life, but a story as
fantastic as any I've listened to has been
delivered in this house during recent days by the
member from Bonavista Centre, Mr. Smallwood,
with a straight and solemn face, and up to this
moment I am not sure whether or not the member
for Bonavista has been playing one of his practicaljokes and poking fun at us all
the time.
Mr. Smallwood Mr. Chairman, a point of of
order. Mr, Reddy is imputing motives to me, and
he is out of order in doing so, and every time he
does I am going to rise to a point of order.
Mr. Chairman Just a moment now, gentlemen,
please. Your point of order is predicated upon the
assumption that Mr. Reddy is imputing motives
to you, Mr. Smallwood.
Mr. Chairman No, I hold that that is just what
he has cleverly avoided doing, by virtue of that
expression, he says, "I don't know whether or not
Mr. Smallwood is playing one of his practical
jokes upon us."
Mr. Smallwood That itself is a definite imputation. It is casting doubt upon my bonafideness. It
is casting doubt upon my honesty and sincerity.
He definitely casts doubt. He does not know
whether I am doing such and such or not. If that's
not an implication. if that's not casting doubt
upon my integrity as a member of this Convention, and as one piloting this report,
if that's not
casting doubt, I don't know what is.
Mr. Chairman No, I am afraid 1 can't sustain
you on that point. In effect he says he can't plumb
the psychological depths of your mind to know
exactly what you are doing. I can't see that he has
imputed bad faith or anything else, because he
says he does not know. He says. "I don't know
whether or not Mr. Smallwood is playing a practical joke."
Mr. Smallwood But isn't be bound to assume
that I am a man of integrity?
1002 NATIONAL CONVENTION December 1947
Mr. Smallwood I am on my point of order.
There is one still before the Chair. Am I not
entitled, as a member of this Convention, to have
it assumed, unless it can be proved to be otherwise, that I am a man of integrity
and sincerity?
And here is a man who says he does not know
whether I am a man of integrity or not.
Mr. Chairman He does not know whether you
are playing a practical joke or not.
Mr. Smallwood In other words he does not
know whether l am honest or not, whether I have
introduced this sincerely and honestly, or
whether I am just playing a joke. If that's not
imputing...
Mr. Chairman I am sony, Mr. Smallwood, I
have to hold that the statement made by
Mr. Reddy is not capable, in my judgement, of
the interpretation you have placed upon it.
Mr. Reddy I know we are living in a mad world,
and I have thought recently that we here have
ringside seats, and are participants in propagating
some of this madness.
Mr. Chairman, about three or four weeks ago
the Economic Committee delivered through
Major Cashin its Economic Report. As a supplement to this report, the Committee made
a
serious, and I believe sincere attempt, to give an
estimate of our probable revenue for the next
three years, which period they called the foreseeable future. They were careful to
say that they
were guessing, but that this guess was based on
present day facts, as they saw them; and as they
were all intelligent men, they made what they
said was an estimate of what our economic condition might be for the next three years.
When Major Cashin sat down the member for
Bonavista Centre rose to his feet, and launched
forth on perhaps the most devasting, violent and
bitter speech I have listened to since I came here
15 months ago. Mr. Smallwood ridiculed the idea
of this Economic Committee attempting to give
the people a problematical budget for three years
ahead. Mr. Smallwood used his bitterest sarcasm
to discredit the Economic Report in general, and
the three—year budget in particular.... Mr.
Smallwood said, in effect, that for the Economic
Committee to estimate our revenue three years in
advance was nonsense and worse. When he had
delivered his solar plexus punch I felt that, irrespective of the merits or demerits
of the case,
that Mr. Smallwood was sincerely convinced that
the future could not be seen, and our probable
revenue could not be essayed, and we could not
count our chickens before they were hatched; and
that this was the honest and sincere conviction of
the member for Bonavista Centre. So much for
that; but as they say, "time marches on".
For the past three or four days I have been
sitting, listening to the same member from
Bonavista Centre stand up and deliver his estimate of our revenue and expenditure
if we became a province of Canada, not for a foreseeable
future of a paltry three years, or four years, or five
years, or six years or seven years. No, nothing
less than a period of eight years in the future is
worthy of the attention of Mr. Smallwood, and
equipped with his own particular spyglass, and
all by himself, he projects himself and all of us
eight years ahead, up to 1956. He then divides the
eight years into two four-year periods, and
proceeds with serene self-confidence to read our
economic future for the next eight years — and
in three days composes a budget covering from
now till 1956, and brings it to this House and
delivers it for our appreciation. And I have no
doubt if the gentleman from Bonavista Centre
had been requested to prepare a budget taking us
further into the stratosphere, he would have done
so with equal facility.
Now Mr. Chairman, I may not have the best
of understanding, but as I see it the member for
Bonavista Centre has said in effect to Major
Cashin and his associates of the Economic Committee. "How dare you attempt to look
into the
future. That is not your province — that is just
another of my provinces. and it is only I who am
permitted to see the shape of things to come. It is
all right for me to estimate eight years ahead, but
it is nonsensical for you, Major Cashin, to attempt
any such thing!" Mr. Chairman, may I be pardoned if I ask in all seriousness if there
be some
direct ray oflight giving the member for Bonavista Centre prophetic vision, and leaving
the other
members of this House in darkness? If so, I wish
to raise a point of order, so that this ray of light
be made available to the other members also.
Mr. Chairman, the humble members of the
December 1947 NATIONAL CONVENTION 1003
Economic Committee said that they were sticking their collective necks out when they
attempted to guess the economic future of
Newfoundland — three years ahead. if so, what
can be said for the gentleman who so bravely tells
the people of Newfoundland that by following his
programmes their economic welfare is assured,
not for just a day, not for just three years, not, not
for just eight years, but always.
Mr. Smallwood Mr. Chairman, I want to reply
to Mr. Reddy, but there is lots of time if Mr. Hollett wants to reply to the witty
speech which
Mr. Reddy has just delivered, and whose author
I congratulate very sincerely upon his wit and
humour. The point, the one point in the speech
sir, which I think demands a reply is this: that I
quarrelled with Major Cashin, the chairman of
the Finance Committee, and with the members of
the Finance Committee, for having brought in a
budget looking three years ahead, and that I then
am so inconsistent as to bring in one for eight
years ahead. Now that's the point of that speech.
Sir, there is no point in it. There is not a good
point. What the Economic Committee did was
bring in a firm budget for three years. I have not
done any such thing. What they said was that each
year for three years the Government of New
foundland under responsible government would
collect...
Mr. Cashin Mr. Chairman, I rise to a point of
order.
Mr. Cashin We stated no such thing, that a
government of Newfoundland under responsible
government — I don't think the words "responsible government" appear in the Economic
Report.
Mr. Smallwood All right, the Government of
Newfoundland, whether responsible, or Commission or what. I don't think the Economic
Report could have meant the government of the
Province of Newfoundland. I think they meant
the Government of Newfoundland for each of the
three years foreseeable in the future would collect
roughly $30 million.
I have said that if we become a province there
are certain fixed assets that we know we will get.
There is no guesswork about it. We know the
provincial government will get $6,820,000 a year
in subsidies. We know we will get $35 million a
year for the first three years, $22 million in eight
years. We know we can, or will get $666,000 paid
back to the provincial government for Gander;
we know we will get $1.8 million or whatever it
is paid back to the government for the two Railway boats — that's $2 million. Now
I have merely added up the income for the first eight years
that we know we will get. I have added that up,
and it comes to $80 million. Sir, that is not
guesswork, just ordinary addition and multiplication of known facts: $80 million will
come to the
provincial government of Newfoundland, leaving $40 million to collect in taxes, that
is $5
million a year. Now sir, for any man in this
Convention or out of it to get up and say that in
the coming eight years the government of the
Province of Newfoundland could collect, on an
average, $5 million a year revenue, $40 million
in eight years, through taxation, is surely, surely,
not to be put in the same class as forecasting $30
million by taxation, $30 million for the next three
years. Surely there is all the difference in the
world. I estimate that the Government of Newfoundland, if we become a province. would
need
to spend in the first eight years $120 million; $80
million of that would come in from sources that
we know about, that are in the Grey Book. That
leaves $40 million to get by taxation in eight
years, an average of $5 million a year. You don't
have to be a prophet or a financier to be quite
firmly convinced that we as a province can collect in taxes $5 million a year. So
that the speech
which Mr. Reddy has just read out is really quite
without point. it is comparing two things that are
not actually comparable.
Mr. Hollett First I would like to make a remark
or two with regard to the statement made by
Mr. Smallwood yesterday relative to the interest
on the 1950-52 loans. You will rememberthat the
day before yesterday I pointed out to
Mr. Smallwood that I thought he had erred in
some way, and that he and his budget makers had
failed to provide for $123,000 in his accounts.
that is to say $80,000 and some hundreds from
1947-50, and some $40,000-odd from 1947-52.
Mr. Smallwood replied to me that he would
answer me yesterday, after consulting with the
Finance Department. Now I feel quite sure that
Mr. Smallwood did not have to consult the
Finance Department. I am also certain that he did
not consult them at all...
1004 NATIONAL CONVENTION December 1947
Mr. Hollett And if he did, he did not get any
satisfaction
Mr. Hollett Well, in that case there must be
something wrong with the Finance Department,
because they have made a ruling that they will
not answer any questions from this Convention
unless it comes through the proper channels. I
wonder therefore why Mr. Smallwood has the
privilege of going to the Finance Department and
getting the information. He can go to his little
friend who helped him make up the budget,
[1] and
he probably did. Anyway I discover that he and
his budgetmakers were $123,000 short in 1947-
48, 1949-50, and $40,000-odd short for 1951-52,
That was the first thing that should have gone into
that budget. That was left out, and as I go through
it I find there were many other things left out,
many other things not accurate there; but having
found that first error I studied it very carefully,
because i was indeed surprised.
Now Mr. Chairman, first I have a reply to one
of the first things stated in this House, one given
in connection with the statement made by
Premier Duplessis, wherein he stated that formal
notice had been given to the Commission of
Government that he was not satisfied, and did not
intend to remain satisfied with the judgement of
the Privy Council, 1927, relative to the Labrador.
I am just in receipt of a reply to that question
which was tabled here from the government.
December 5, 1947.
Dear Sir:
In reply to question asked by Mr. M.M.
Hollett, M.A., as to whether the Premier of
Quebec had served formal notice upon the
Government of Newfoundland that the
Province of Quebec does not consider that
the judgement of the Privy Council in 1927
relative to the boundary between Quebec
Labrador and Newfoundland Labrador is the
final settlement of this issue, I am directed to
inform you that no such formal notice has
been received by the Commission of Government.
Yours faithfully,
W.J. Carew
Secretary.
So up to December 5, 1947, Mr. Duplessis had
not made good his statement.
Then I have another reply to a question which
I made on the December 2. and this one is so
important that I will read you the notice of question first:
I give notice that I will on tomorrow ask
His Excellency the Governor of Newfoundland to seek clarification from the
Government of the United Kingdom for the
benefit of this Convention on the following
point:
That is to say, that whereas under the
Lease Bases Agreement 1941 it was stipulated that upon the resumption by Newfoundland
of the constitutional status held by
it prior to the 16 February, 1934. the contracting parties to said Agreement would
be the
Government of the United States ofAmerica
and the Government of Newfoundland.
Now therefore, what would be the position should Newfoundland enter into confederation
with Canada?
Would the contracting parties under said
Agreement be the Government of the United
States of America and the provincial government of Newfoundland, or otherwise, and
if
otherwise, to inform this Convention as to the
real position which will exist.
And to that question this is the reply signed by
Mr. Carew, Secretary of the Commission of
Government. I take it that the Commission had
made inquiry from the Commonwealth Relations
Office, otherwise they would not have replied to
it.
Dear Sir:
With regard to the question submitted by
Mr. Hollett on December 2, the reply is as
follows:
It is assumed that the question is based on
the text of notes exchanged between
Mr. Churchill and Mr. Winant at the time of
the signature of the Leased Bases Agreement
of 1941 (Cmd. 6259). It was then agreed
between the United Kingdom and United
States governments that "upon resumption
by Newfoundland of the constitutional status
held by it prior to February 16, 1934, the
words "the Government of the United
Kingdom wherever they occur in relation to
a provision applicable to Newfoundland in
December 1947 NATIONAL CONVENTION 1005
the said Agreement shall be taken to mean,
so far as Newfoundland is concerned, the
Government of Newfoundland and the
Agreement shall then be construed accordingly".
The wording of this note did not cover the
position which would arise in the event of
Newfoundland entering into the Canadian
confederation, but in that event the present
function of the United Kingdom government
in relation to Newfoundland under the terms
of the Agreement would devolve upon the
Government of Canada.
From that I read that upon confederation the
contracting parties to that base agreement will be
the governments of the United States and the
Dominion of Canada. In other words Newfoundland is out of the picture. Entering confederation
you give up all claim to the bases.
Remember they are only leased grants for 99
years, and while some of us may not be here,
some of our offspring may be, and these lease
agreements, whereby part of Newfoundland was
given away by Great Britain for a few destroyers,
upon confederation we pass over the whole
leased territory, the lease goes over and the agreement is between the USA and Canada.
That looks
very much to me like the alienation of the public
domain of this little country of ours.
I asked that question because I see the seriousness of it. I see Canada taking over
these bases
and being a party to the agreement with the
United States, and under the defence pact which
Canada today has with the United States it is
simple for Canada to man these bases, put her
own men in here for a while, a skeleton crew if
you like, and deprive 3,500 Newfoundlanders of
jobs which they are now working at, and for
which I understand they are getting very good
pay.
Mr. Chairman I don't know whether I am as
clear on that as you are, that the Government of
Newfoundland shall be taken to mean the
Government of Canada in the event of our going
into confederation; by virtue of the fact that under
section 92, sub-clause 13, of the BNA Act, the
civil rights of the province will fall upon the
province, so whether they mean the provincial
government, in the event of entering confederation, or the federal government of Canada,
does
not appear to me to be quite clear. But if they
mean the federal government of Canada I would
be interested in knowing how they arrived at that
conclusion.
Mr. Hollett In my opinion it would be highly
unconstitutional, but we have been the subject of
so much unconstitutionalism (if that is the word,
sir) since 1933, that I never expect to see constitutionalism applied here again.
I will read that
again: "But in that event the present function of
the United Kingdom government..." What is their
function now? They are party to the agreement
with the United States of America, "But in that
event the present function of the United Kingdom
government in relation to Newfoundland under
the terms of the Agreement would devolve upon
the Government of Canada." That's plain
enough. I want you gentlemen to think that over.
Mr. Chairman "Upon the Government of
Canada." As a matter of interest. Mr, Hollett, I
would like to know the manner in which that
conclusion has been arrived at. It would be very
interesting.
Mr. Hollett Yes, I think it is about time our
people did know and ask about it.
Mr. Higgins It is a very serious position if that
is so.
Mr. Chairman All I can say is that I don't know
how you get around it in the event of our becoming a province, because civilian property
rights
within the province of course come within the
domain of the provincial government. How then
can the Canadian government, as such, abrogate
to itself the rights which are reserved to provincial governments under section 92?
l am not
trying to obstruct you, but it is a very far-reaching
conclusion, and I would like to know how it is
reached.
Mr. Butt I just want to suggest to you that it may
be a question of defence, you know, which is
purely federal government.
Mr. Hollett I put it to you that this is not a
question of defence. I am talking about the base
agreement. it is a question of Newfoundland territory.
Mr. Chairman The point is this... that while the
reversion under the lease would ordinarily come
to the province under section 92, we would understand that defence, being a matter
concerning
the bases and the Government of Canada, would
naturally come within the purview of section 91,
1006 NATIONAL CONVENTION December 1947
therefore in matters of defence the bases might,
as defence, come within the jurisdiction of the
federal government. Still the point made by
Mr. Hollett is this: how can they abrogate to
themselves the rights which would pass to the
province, the right to the reversions under the
lease, which would be transferred to the province
under section 92?
Mr. Butt The logic of it is that it would revert to
the federal government.
Mr. Chairman As defence, but as a matter of
civil and property rights, no. Mr. Hollett, if I may
interrupt you at this, I would like to declare a brief
recess.
[Short recess]
Mr. Hollett ....Now Mr. Chairman, in looking
at this whole matter of this information which has
been brought back to us from Canada by the
delegation which went from this Convention to
find out if there were any equitable basis for
union between Newfoundland and Canada, and
in studying these books which have been brought
back, and all this information, I feel that it would
be wise if we pause for a little while in our
deliberation and take a look at Canada, relative
particularly to these agreements which the
Canadian government is endeavouring to make,
and which they have made with some of the
provinces.
As we know, these tax agreements have not
been signed by Ontario, Quebec and Nova Scotia
as yet, and I want, before I go on to that, to give
the delegates a sort of refresher on this business
of confederation. To that end I want us to remember that in 1864 British North America
was just
a number of inconsiderable colonies dispersed
along a narrow belt of territory from the Atlantic
to the Pacific. In the centre was the Province of
Canada, stretching 1,000 miles from Gaspé to the
Detroit River, linked together commercially by
the St Lawrence River system and the Grand
Trunk Railway built in 1850, and consisting of a
million French Canadians and a million and a half
English, Irish and Scotch settlers, whose chief
industries were agriculture, lumbering, shipbuilding, fishing and considerable manufacturing.
Britain had adopted a free trade policy, and the
Reciprocity Treaty with the United States was not
to be renewed. The St. Lawrence was frozen up
for six months of the year, and the northern
United States were not too friendly at that time.
On the Atlantic seaboard there were the colonies
of Nova Scotia, New Brunswick and Prince Edward Island, as well as Newfoundland, with
a
total population of 800,000 in 1864. Nova Scotia
was still prosperous, her prosperity based on the
era of wooden ships and the high prices following
the American Civil War. It was a colony of
fishermen, sailors and traders. Nova Scotia had
enjoyed representative government for 100
years, and had a culture all her own. She had fish,
lumber, agriculture and coal, and traded with
New England, the West Indies, Europe, and indeed the whole world all seasons of the
year. New
Brunswick, the home of United Empire
Loyalists, had much the same natural resources
as Nova Scotia. Prince Edward Island had
agriculture, fishing and shipbuilding. All three
were prosperous on account of the demand for
their products by the United States and the high
prices then existing. Then in the centre was the
Red River District (now Manitoba), with 10,000
souls, mostly half-breeds. In the west were two
separate colonies, one on Vancouver Island, and
British Columbia on the mainland. They united
in 1866 to form one colony, but not more than
10,000 people lived there. Such was British
North America in 1864, or just before the idea of
confederation was mooted. Between all these
colonies there were no commercial dealings
whatsoever.
There were various causes for the desire of
confederation: there were conflicting interests,
personal ambitions of some statesmen, and there
was the question of commercial greed between
the various colonies; most of all there was fear of
the American empire. Confederation as finally
consummated was only a compromise, for it was
the hope and wish of Sir John A. Macdonald and
most of the Fathers of Confederation that a real
legislative union could be brought about, and not
merely a loosely bound number of autonomous
provinces. "I have always contended", said Macdonald in one of the debates, "that
if we could
agree to have one government and one parliament, it would be the best, the cheapest,
the most
vigorous and the strongest system of government
we could adopt." Lower Canada (Quebec), New
Brunswick and Nova Scotia, however, were
against such an idea for various reasons, and so
Macdonald, Sir Charles Tupper and others who
December 1947 NATIONAL CONVENTION 1007
favoured the idea of one government for the
whole of Canada, had to be satisfied with what
we know as confederation or no union at all.
However, confederation as consummated in
1867 left no doubt as to where the sovereignty of
Canada lay, and as Sir Wilfred Laurier stated,
"Every reasonable precaution seems to have been
taken against leaving behind us any reversionary
legacies of sovereign state rights as they have in
the United States to stir up strife and discord
among our children."
The relationships between the provincial
legislatures and the Dominion government were
defined by the division of powers actually written
into the British North America Act and later
modified by what the courts have since said, the
words which describe what those powers really
mean. The strength or weakness of the Canadian
government relative to the provincial governments has depended in large measure upon
political, fiscal, economic and social considerations.
The powers of the Dominion government as laid
down in the British North America Act include
these high functions and sovereign powers by
which general principles and uniformity of legislation may be secured in those questions
that are
of common import to all the provinces, to quote
Lord Carnarvon when he introduced the act in the
House of Lords. In other words, power was given
to deal with all matters of a public and general
character, as for example the making of treaties
or the making of war, and laws relative to taxation
in general. And to the provinces was given those
powers which allowed then to deal with all matters of a merely local or private nature
in the
province.
If you have had the opportunity, gentlemen, to
read the British North America Act you will find
in one section that the Dominion government is
given the power to raise money by any mode or
system of taxation. And, if you turn to another
section you will find that the provinces are given
the exclusive right to make laws in relation to
direct taxation within the province in order to
raise revenue for provincial purposes. This is
very important to remember, for it is these two
sections which all down through the past 82 years
have caused so much friction in dominion-
provincial relationships, and which on more than
one occasion have nearly wrecked the union. In
other words, during all these years the proper
division of power as between the Dominion
government and the provincial legislatures has
been a continuous source of haggling, and caused
a breakdown in the whole federal system around
1937.
A province which hitherto has run and
financed its own affairs, on entering into such a
union must of necessity lose some of its tax
sources to the central. or in this case the
Dominion govemment, just as also it will be able
to rid itself of some of the costs of government.
Take ourselves, for example; if we entered into
confederation tomorrow our treasury would lose
$10.5 million on account of income tax and about
$18 million in customs and excise. On the other
hand, we might rid ourselves of the railway
deficits, the servicing of our deficit, and a few
other charges In other words, by relinquishing
$28.5 million we no longer have to worry about
these services as a government. But as individuals we would still have to contribute
to
their costs. For instance, on all those articles we
import, other than from Canada, we shall still be
charged duty, and the Dominion government
would collect from us about $15 million in income tax instead of the $10 million we
now pay.
But let us get back to Nova Scotia in 1865.
Whilst still a separate province in 1864, Nova
Scotia had a revenue of $1.3 million and an
expenditure of $1,222,355. leaving a surplus of
$77,645. The question was how much of the $1.3
million revenue would still remain to the local
legislature after confederation. At that time over
90% of Nova Scotia's taxation revenue came
from customs duties, and this, on going into
confederation, she would have to turn over to the
Dominion government. Acutally it was found
that if Nova Scotia entered confederation only
$107,000 could he expected to be collected by
her from the local revenue sources still reserved.
It was found that after she would go into confederation her local expenditures would
be
$667,000, Now this would leave a deficit of
$560,000. How was the deficit to be made up?
There were various methods devised: (1) the use
of the power of direct taxation; (2) concession of
the right of the province to use indirect taxation;
(3) divide Nova Scotia into municipalities and let
them hear much of the burden with regard to
government roads, health, etc. Up to this time
town councils were almost unknown in Nova
1008 NATIONAL CONVENTION December 1947
Scotia.
What was finally decided was the form of a
subsidy from the Dominion treasury. The difficulty however was to decide on a method
of
subsidy which would not appear unfair. For instance, to make up Nova Scotia's deficit
on account of loss of revenue, it would require $1.70
per capita, $1.33 for New Brunswick, and but 38
cents for Quebec and Ontario. They argued that
if Nova Scotia was to receive $1.70 per head of
population so should the other provinces. The
Quebec Conference very nearly broke up over
this matter. That was the Quebec Conference in
1865, I think it was.
Mr. Hollett Thank you. What really saved the
day was that Nova Scotia, through Dr. Charles
Tupper, undertook to try to carry on with
$371,000 instead of the $667,000, the actual cost
estimated in 1864, a reduction of 40%; Prince
Edward Island cut 27%, and New Brunswick
12.5%. Thus, Nova Scotia's position after confederation would be as follows:
| Revenue |
$ 107,000 |
| Expenditure |
371,000 |
| Deficit |
$264,000 |
This deficit amounted to 80 cents per head of
population, and this was made the basic subsidy
rate for all the provinces, and if you look at your
tax agreement you will find that that is still existing in the tax agreement which
is offered us
today.
Now how the finance ministers of Nova Scotia
and New Brunswick ever hoped to carry on under
this static financial arrangement is anybody's
guess. The proof that this financial arrangement
was a hopeless one is to be found in the fact that
Nova Scotia ran a heavy deficit almost immediately, and had to seek better terms from
the
Dominion government within a year. By 1874
Nova Scotia was expending $755,000 on necessary services, and could hardly be expected
to
carry on with $371,000 as agreed in 1867. Hence
Nova Scotia, as well as the other provinces, had
to go repeatedly to the Dominion government to
beg for an adjustment, and they have been doing
that ever since.
No provision seems to have been made for any
expected form of economic or social evolution.
Nor is any made today under the various agreements which the provinces have with the
Dominion government. There is no flexibility in
the system of subsidy per capita per year, or as
some provinces have agreed upon now, for a
period of five years. For instance, the economic
and social revolution in Canada during the 70
years from 1867 to 1937 is indicated most
pointedly by the fact that whereas in 1867 the
total Dominion, provincial and municipal expenditure was $25 million, in 1937 it was
$1,000
million. And it is interesting to note that in 1930.
the provinces and their municipalities or town
councils were providing 70% of the total outlay
on the primary functions of government in
Canada. The municipal system of government
along with the provincial governments bears
most of the burden, so much so that the
Hon. Charles Dunning was able to say. "The
Dominion government does not render to the
people of Canada anything like the volume and
value of services performed by the provincial and
municipal bodies of Canada".
Now, the sources of revenue left to the
province after confederation were mainly four in
number:
1. Revenues from fees, licenses and permits.
2. Revenues from lands, forests and mines.
3. Revenues from direct taxation.
4. The annual subsidy from the Dominion
government.
The first of these in the provinces, as in Newfoundland, amounts to very little. The
second
yields but a very modest revenue. The fourth was
to be a fixed amount. And it was upon the third
— direct taxation — that both the province and
the town councils had to rely. The unfortunate
circumstances were, however, that the Dominion
government also has had to invade the field of
direct taxation. Thus it comes about that in
Canada we have both the provincial government,
Dominion government and town councils, under
the provisions of the British North America Act,
all resorting in the past in large measure for their
revenues, to some means of direct taxation.
Prior to the war, the Dominion and provincial
governments were taxing incomes, and the
provinces were collecting succession duties; for
the Dominion government, as before stated, can
raise money by any mode or system of taxation
whatever, in spite of the fact that the provinces,
under the British North America Act were given
the exclusive right to direct taxation.
December 1947 NATIONAL CONVENTION 1009
Mr. Hollett What method was left for the
municipalities or town councils? It has to be
remembered that 93% of all people in Canada
live in incorporated areas. Their main method of
direct taxation is the tax on property and tax on
business. Prior to 1942, Nova Scotia and New
Brunswick also taxed income, but now and for
the next five years the Dominion government
alone will tax income in all provinces except
Ontario, Quebec and Nova Scotia, who still retain
the right to tax incomes as well. Under confederation the town councils have the right
to tax all
real property, that is to say your house and land,
your boats and nets, your barn and farming equipment, or any other kind of property,
as also any
improvements which you may make on these
properties. If you are unable to pay these taxes on
your property, the municipality or town council
has the right to take it and sell it or rent it, and as
a matter of actual fact the total amount of property
taken from the individual property holders in
Canada by town councils up to the year 1943, by
reason of the fact that the owners or householders
could not pay their taxes, was $88,484,188.
However, you cannot have roads and education and public welfare unless you pay for
it by
way of taxation, and since the provincial governments of New Brunswick and Nova Scotia
and
the others have surrendered most of their taxing
powers to the Dominion government under the
present system of confederation, the burden of
the maintenance of said roads, education and
public welfare must be borne by the municipality
or town council.
The trend today in Canada is to nullify the
usefulness of the provincial governments and
concentrate all power and authority at Ottawa, so
that eventually they may have just one government at Ottawa, and the municipal authorities
throughout Canada, constituting the Government
of Canada. It is just this that all the provinces of
Canada last year fought out bitterly with the
Dominion government, and against which only
Ontario, Quebec and Nova Scotia were strong
enough financially and morally to successfully
contend.
To fairly understand the position, sir, of
Canadian finance at the present time, we have to
remember that during the period 1930-1937 the
combined revenues of provinces and
municipalities fell short of total relief and current
expenditures by over $750 million; and this in
spite of ruthless cuts on account of education and
health services, and the restriction of relief payments in many areas to little more
than the barest
needs for existence. By 1937 the whole provincial financial structure was falling
about the
govemment's ears, so much so that the various
provincial bodies were unable to issue securities
on the New York stock market when they had
obligations falling due. Temporary assistance
was given by the Dominion government and on
the recommendation of the Governor of the Bank
of Canada, a royal commission was set up on
August 1, 1937. After three years this Rowell-
Sirois Commission made its report and recommendations, but 1 need not go into that.
The plan
was endorsed by the Dominion government, and
this was the plan which subsequently was
employed as a basis for discussion at the conference of January, 1941 — which as you
will
remember, proved a dismal failure.
Hepburn of Ontario thought the publication of
the report and the conference ill-timed and complained of the $500,000 cost of the
report. He held
that great financial concerns and wealthy individuals who were holders of provincial
bonds
had engineered the report. He also objected to the
surrender to a central authority of rights and
privileges granted under the British North
America Act. Most of the premiers spoke against
the Sirois recommendations, and refused to sit in
further conferences. Said Hepburn, "I will not
sell my province down the river for all time to
come and allow our social services to remain a
victim of the dictatorial methods of a
bureaucracy to be set up in Ottawa."
However, although three provincial premiers
had refused to even sit down to discuss the
Rowell-Sirois Report, they all agreed to surrender income tax collection to the Dominion
government for the duration of the war and for
one year thereafter, as did also the municipalities.
As a result the municipalities were compensated
yearly to the amount of $86 million, Nova Scotia
receiving less than $3 million. What would we
have got, I wonder? The Dominion finance minister then proceeded to step up rates
on personal
and corporation incomes to the highest possible
point, collecting nearly $1,000 million in 1943
from these sources alone as against $123 million
1010 NATIONAL CONVENTION December 1947
collected by the government and municipalities
in 1940.
So great was the opposition to the Rowell-
Sirois Report in 1941, that the recommendations
used as a basis for discussion at the conference of
provincial premiers in 1945-46 were a new and
fresh approach to the problem of Dominion-
provincial relations. The agenda was to emphasise full employment and high national
income. If, it said, employment and income can be
maintained at a high level all our problems are
manageable: if we fall seriously short they may
be overwhelming. Previous Dominion-provincial conferences had been called when most
of
the provinces were in financial difficulties. The
1945-46 conference, however, was assembled
when each and all could balance their budgets.
The Dominion government, however, was carrying a staggering burden of debt. In 1940
its national debt was only $4 billion. in 1945 it was $13
billion and mounting; the interest on the national
debt would exceed the entire current expenditure
on all services before the war. On top of this there
was the matter of civil re-establishment of her
soldiers, which would run into many billions. I
want to point out now the disunity between the
provinces, because I think Newfoundland should
know the relationships between the various
provinces in the Dominion of Canada before
herself making the plunge.
The conference of Dominion and provincial
premiers met in the House of Commons on the
morning of August 6, 1945. The Rt. Hon. W.L.
Mackenzie King occupied the Chair. The personnel of the premiers had changed considerably
since the conference of 1941, and it was hoped
that some real settlement of Dominion — provincial differences could be accomplished.
In spite
of the almost superhuman efforts of the
Dominion prime minister, it was doomed to
failure. No comprehensive plan for the whole of
Canada could be arrived at, and after nine months
the whole conference came to an abrupt end,
Prime Minister King in his opening address on
August 6 said that
an effort is being made to ensure the maximum of co-operation between the federal
government and the governments of the
provinces, in order that the Canadian people,
working together, may achieve the constructive goal of peace as effectively as they
have
carried on the essential though inevitable
destructive talk of war. Further. just as our
fighting men have assured our freedom, so
may we use that freedom to win the victories
over depression, over unemployment. over
insecurity and over want, victories over
prejudice, over intolerance and over disunity.
Brave words these, Mr. Chairman. Let me see
how difficult of accomplishment they were.
The matter of taxation was the great stumbling
block. Said Premier Drew of Ontario, "If the
provincial legislatures were to continue as free
and responsible legislative bodies within the conception of the British North America
Act, then it
would seem clear that the provincial governments must have authority over their own
taxation within clearly defined fields". He pointed to
what he termed "the fundamental weakness of
the British North America Act, the restriction of
the provinces to direct taxation and the authority
given the Dominion government to raise money
in any form of taxation".
Premier Duplessis said, "We are opposed to
centralisation of power. We are here to collaborate and co-operate. Co-operation and
collaboration can never exist where solemn
pledges are disregarded and pacts are violated.
An accumulation of powers leads to autonomy.
Centralisation leads to Hitlerism." He said he
regarded the British North America Act as a
solemn contract. They had been granted certain
taxing powers under the Act, and unless they
were allowed to exercise these powers they could
not carry out their legislative duties to their
people in the provinces and municipalities. Now
Ontario and Quebec are the wealthy provinces,
88% of all invested capital in Canada is concentrated in these two provinces.
The Nova Scotia premier was a bit more conciliatory. Premier McNair of New Brunswick
spoke of the economic plight of his province, to
which geography, national policy and monopolistic competition from other parts of
Canada had
been basic contributing factors. New Brunswick's per capita income was just about
the
lowest in Canada. The remedy, he said, lay with
the federal authorities through their exclusive
control of tariffs, trades, freight rates, credit and
monetary policy.
Premier Hart of British Columbia expressed
the belief that it was still an indispensable feature
December 1947 NATIONAL CONVENTION 1011
of responsible government that the provinces
should raise their own revenues by their own tax
laws, and not have to depend on handouts from
the Dominion government.
Premier Jones painted a gloomy picture of his
province. "Prince Edward Island", he said, "had
not sought to enter into confederation. It was
Canada that had sought to bring PEI into confederation. At that time they were relatively
well-
off. That had now changed, and they had
gradually been reduced to a rather unprosperous
state."
Premier Manning of Alberta wanted a definite
understanding about respective fields of
Dominion and provincial jurisdiction, a fair and
equal adjustment of such burdens as freight rates
and tariffs, a settlement of taxation and monetary
issues in which Dominion policy has an adverse
effect on the provinces. He reviewed the fiscal
experience of the province from confederation
until their situation became acute with the depression of 1930.
And so it was in this spirit that the Dominion
proposals were formally placed before the conference. The proposals of the Dominion
government were in three sections:
1. There was an outline of the philosophy
with which they proposed to attack Canada's
post-war problems.
2. There was a summary of the plans which
the government hoped to adopt for an orderly
transition from war to peace.
3. This consisted of the actual proposals for
the post-war years. It was this third section of the
Dominion proposals which the provincial
premiers generally would have none of. It offered
substantial grants to each of the provinces, on
condition that they withdrew completely from the
fields of personal and corporation income taxes
and succession duties, leaving these taxes solely
for collection by the Dominion government. In
return the Dominion government offered:
1. A public investment policy whereby the
central government would pay 20% of the cost of
provincial and municipal public works, provided
they were executed within a period named by the
Dominion government.
2. A social security programme, embracing a
national health programme, a national old age
pension scheme at age 70, Dominion-provincial
old age assistance at age 65 - 69, unemployment
assistance for unemployed employables. That
would be in our country fishermen, unemployed
employable, at certain times of the year. I think
it would also include not only fishermen, but
agriculture, forestry, lumbering, logging,
transportation, and various other things. Further,
in view of the fact that succession duties also
would be given up by the provinces, the
Dominion government would make a grant of
$12 per head of population.
On the first presentation of these proposals all
the premiers merely accepted them as a basis of
argument. Premier Jones of PEI spoke of the very
unsatisfactory economic history of his province
under confederation. The revenues were not
capable of much expansion. The deficits grew
year by year. "The intention of confederation",
he said, "was for each province to have a fair
share of the commercial benefits. The federal
parliament has failed to function as intended, and
as the Maritimes were promised it would function. The conditions are blighting the
native
genius of our people." The premiers of the other
eight provinces had further caustic remarks to
make with regard to the Dominion government's
plan.
A committee then was formed consisting of
Mr. King, three Dominion ministers and nine
provincial premiers to study the plan. They met
in private session on August 9, 1945, but immediately adjourned until November 26.
It sat until
November 30, then adjourned until January 28,
1946, when it sat for a further five days and
adjourned again until April 25. It then was
decided to meet in public session on April 29.
These public sessions lasted four days, when the
premier of Quebec left for his home in disgust. I
give you, sir, this brief account of the period of
sessions to show how deep-seated is the rift in
Dominion-provincial relations and how far they
are from agreement on any policy.
Let us see what happened at this public session
which began on April 29, 1946, after nine months
of study by the provincial governments. Each
province prior to April 29 had made written
replies, criticisms and counter-proposals. It was
found that eight provinces attacked the proposals
and the ninth province rejected the whole plan
even as a basis of negotiations. Five of the nine
provinces suggested that certain tax fields should
be left to the provinces. Three provinces
December 1947 NATIONAL CONVENTION 1012
criticised the inadequacy of the provisions for
unemployment relief since the "self-employed",
such as fishermen, who in certain economic areas
might far exceed the number of wage earners,
were left as a local responsibility. You can see
how much that would affect us here in Newfoundland. Three of the provinces disclaimed
the
entire philosophy of the Dominion plan in that it
would eventually destroy the autonomy of the
provinces and hence the whole idea of federation.
Many other objections were brought forward by
individual provinces. All their objections gave an
advance idea of what was to happen at the public
sessions of April 29 to May 3 when the conference broke up.
When later the per capita rate of grant was
raised which brought the Prince Edward Island
grant from the Dominion government up to $22
per capita, Premier J. Walter Jones of that
province insisted that it would still leave the
province $1 million short of what it would need.
Nova Scotia said also that such a per capita grant
would be far from sufficient. Premier Drew
stated that its acceptance by the Province of Ontario would result in a $15 million
deficit per
year. Premier Duplessis compared the small sum
which Quebec would receive with the large sums
collected out of the province by Dominion taxation in recent years. Douglas of Saskatchewan
stated that a subsidy based on population was
unscientific and that there was no relationship
between population and needs — and so it was
with all the provinces. Said Ontario's premier,
If the provinces were to abandon their
most important sources of direct taxation in
return for an annual payment on a fixed basis,
they would place themselves in a legislative
strait-jacket from which they could only escape by abandoning still further powers
in
return for added payments at some future
date. They would become little more than
local administrative commissions of the
Dominion government, which would ultimately mean the abandonment of the basic
idea of federation and the British North
America Act, and the eventual result would
be despotism.
Premier Duplessis voiced the same idea when he
said that
The evils of centralisation mean totalitarianism in the end.... The exclusive rights
of the provinces in matters of social legislation, education, civil law, etc., should
be
conserved one by one and safeguarded, if
confederation is to survive. The federal
proposals would destroy the inalienable
rights of all the provinces: then tend to establish and increase the growth of bureaucracy
which does not suit and can never suit either
a democracy or a country ruled by parliamentary institutions.
It was evident to the Dominion government that
their proposals would not be acceptable, and so
they made other offers to the premiers. They were
briefly as follows. In return for specified payments to the provinces the Dominion
government
proposed that the provinces undertake, for the
next three years, not to levy income, corporation
and succession duties taxation. The annual payment was a guaranteed minimum of not
less than
$15 per capita based on the population either in
1941 or 1942 as the provinces might elect. It was
to rise with national income and population. I
want you to know that under this tax agreement
the subsidy which we shall get depends on two
variable things. It depends on increase in population, and it depends on the gross
national product
of Canada — two variables, and I shall point out
to you later just how they did vary. Under this
proposal PEI was to receive $2 million in 1947,
Nova Scotia $10 million and New Brunswick
$7.5 million. The Dominion government was
also prepared to allow the provinces to make tax
levies on mining and logging operations. Further,
the Dominion government was prepared to seek
an amendment to the constitution so as to enable
the provinces to levy an indirect tax on retail
sales. It also would allow the provinces to tax
property. They also were prepared to pay part of
the burden of health services, to the extent of 40
cents per head of population. Assuming that we
were a province that would amount to about
$120,000. When we remember that our health
estimates for this year are approximately $6 million we can see how insignificant
such help
would be to us. They would take care of old age
pensions and grant some unemployment assistance. Altogether this was a much better
offer, but
still the provincial premiers decided they could
not agree. Nor did they agree.
The Premier of Ontario claimed that in 1945
the Dominion government had collected over
December 1947 NATIONAL CONVENTION 1013
$700 million from the people of that province
alone on account of income and corporation
taxes, and yet in return for the complete
withdrawal not only from these fields, but also
succession duties, the Dominion government
now proposed to pay to the Government of Ontario $64 million. Premier Duplessis of
Quebec
also spoke strongly against the Dominion
government plan, and described it as "the scuttling of confederation". MacDonald of
Nova
Scotia pointed out that the provinces were left
with "great and growing obligations" to their
people, but to meet them the only exclusive fiels
of taxation proposed to be left to the provinces
are real estate and automobiles in the hands of
their owners. He expressed the view that the
provinces had made a bad bargain in confederation. He predicted, and these are his
words, that
"Provincial autonomy will be gone, provincial
independence will vanish, provincial dignity will
disappear, provincial governments will become
mere annuitants of Ottawa, provincial public life
— and I do not think these words are too strong
— will be debased and degraded". Premier McNair of New Brunswick spoke like MacDonald
of Nova Scotia against the proposals. Premier
Garson of Manitoba in his address made remarks
which show only too clearly the differences between the provinces, particularly between
the
provinces of Ontario and Québec and the comparatively poor provinces, as did also
Premier
Hart of British Columbia. Premier Jones said that
PEI had entered confederation upon the understanding that it would receive from the
federal
government such subsidies as would enable it to
carry on the public services allotted to the provincial government without resorting
to direct taxation. "The subsidies paid in the past to Prince
Edward Island", he said, "and the amount now
offered are totally inadequate." Premier Douglas
of Saskatchewan expressed great disappointment
over the Dominion government's proposals and
stressed the need for an emergency grant to meet
such crises as drought, crop failure and agriculture relief. Premier Manning of Alberta
stated
that the proposals failed to meet the conditions
which his government thought necessary for a
remedy.
The conference then adjourned until May 1,
1946, and then the Minister of Finance, next day,
in a speech which lasted for 1 3/4 hours, stressed
that in spite of the objections raised by the nine
provincial premiers, the Dominion government
would stand firm and had no intention of modifying the proposals. I would ask you
to look at your
Grey Book again, and see what Premier King
says about the proposals: "it is the best we can
offer". His speech only served to increase the
anger of the premiers, and particularly so of those
of Ontario and Quebec. Said Mr. Duplessis, "if
the Ottawa proposals are in the nature of a 'take
it or leave it', I will leave it and take my train back
to Quebec." You will find that he did do that.
Premiers MacDonald, Manning and Douglas also
spoke that day, as also did Premier Drew of
Ontario; and when the conference adjourned, the
word "failure" could be written across the whole
proceedings. Manning attacked what he called
"the uncompromising rigidity" of the Dominion
government. Their attitude, he said, was "indefensible" and he laid the responsibility
for
failure on the doorstep of the Dominion government. Drew of Ontario complained, as
had
Duplessis, of the 'take it or leave it' attitude of
the Canadian government. He commended to
Finance Minister Ilsley the careful reading "of a
book called Mein Kampf." He said he would find
there clearly set out the formula that the authority
of small individual states ought to be diminished
and their power invested in a central government.
Mr. Ilsley, he said, had spoken of a "heavy
obligation" involved in carrying health insurance, baby bonuses and old age pensions,
but
it happens, he said, that there were to be financed
by new levies upon the taxpayers. He, Mr. Drew,
was certainly opposed to double taxation in any
and every field. Subsidies, repeated Mr. Duplessis, cannot compensate for permanent
rights.
Centralisation gave birth to bureaucracy, and
bureaucracy was the enemy of democracy.
The rest of that day, sir, was spent in a wrangling spirit of angry speechmaking,
something
like we get here sometimes, and the sitting adjourned until next morning, May 3, when
Mr.
Ilsley endeavoured to show how utterly impossible for the Dominion was the counter-proposal
of the Ontario premier.
More speeches in the same tone as on the day
before were made. "Ontario has gone the limit",
said Drew. Duplessis said, "Dominion proposals
were not acceptable to Quebec." He again quoted
Sir Wilfred Laurier as saying that, "A policy of
1014 NATIONAL CONVENTION December 1947
federal subsidies was wrong, and always led to
extravagance." He quoted Mackenzie King himself as saying in 1930, "that it was a
vicious
principle to have one body raise the taxes and
another body spend the people's money thus
raised." When the conference resumed its sitting
after lunch Premier Duplessis was not present.
He had gone back to Quebec City as he had
threatened, and after another 1 3/4 hours, the
conference adjourned and it has not again been
reconvened.
Certain provinces have since made five-year
agreements with the Dominion government,
whilst others have refused to do so, that is to say,
Ontario, Quebec and Nova Scotia. This, very
briefly, is the story of a Canada united in war, but
greatly divided in peace. This is the Canada
which we, as Newfoundlanders are asked to
pledge our word to unite with. I ask you
gentlemen to consider it well. You have heard the
opinions of the prime ministers of the various
provinces of Canada. I take it they are the best
men that Canada can produce. These are their
reflections on the tax agreement which has been
offered to Newfoundland today. We have no
prime minister, we have no parliament, we have
no place where men can get together with a
mandate from the people, as did Duplessis and
Drew and all the others. These men came
together and consulted and they came to the
conclusions as I have just quoted,
There are certain things, sir, which stand out
very clearly:
1. All provincial premiers agree that the
provincial governments can best look after the
welfare of their own people.
2. To do this they must have money.
3. To get the money they should be able to
adjust their own taxes in certain fields, and not be
in the position of beggars to the Dominion
government.
4. In a changing world both economically and
with regard to social services, a govern-ment's
revenue must also change from year to year. It
cannot be bound by fixed subsidies.
5. A people's welfare is subject to the hazards
of their occupations, and the hazards of the
fisheries, mining, lumbering, manufacturing,
etc., are all different, and consequently the
elected government in every area, whose duty is
towards the people's well-being, cannot have its
hands tied. There must be a certain flexibility.
What of us in Newfoundland? Shall we rush
blindly into something upon which the nine
provinces of Canada, after many months of
deliberation, themselves cannot agree? Now
having the picture of Canada under confederation
before us, let us take a look at what Mr. Mackenzie King and his Dominion government
have to
offer Newfoundlanders.
[Short recess]
Mr. Hollett Mr. Chairman, I come now to a
consideration of the terms which have been
brought back from Canada. I will try to be as brief
as I can, but I do not expect to be able to finish
this by the time we conclude.
Now when we look at these documents which
have been brought back from Canada by the
Ottawa delegation, it will be well for us first to
refer to the letter of Prime Minister King, in
which he says that he was of the opinion that the
questions to be discussed with the delegation are
of such complexity and of such significance for
both countries that it is essential to have a complete and comprehensive exchange
of information, and a full and careful exploration by both
parties of the issues involved, so that an accurate
appreciation of the position may be guaranteed
on each side. There was one gentleman who fully
appreciated the significance of Newfoundland's
entering into union with Canada.
Well, what did our delegation do? We have
some idea now of what they did. They got
together certain facts and figures here before they
went to Ottawa, put them together and went off
to Ottawa, only to discover that these things
which were brought back to us from Canada had
been prepared months before they went up there.
That to me looks very funny. The proposed arrangements, as I stated before, are set
forth in the
document, the Grey Book, and Mr. King, Prime
Minister King again says, "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 those arrangements, so what you have, you have
in the
Grey Book, and Prime Minister King says there
is to be, as far as he can see, no change whatsoever there.
December 1947 NATIONAL CONVENTION 1015
Now let's take a look first at the services
which will be taken over by Canada. You will
find those in section 5. You have all read it, and
I don't need to go over it.... Now let's look at the
financial arrangements, and first as to the public
debt, let's take a squint at that. Canada, as you
know, will assume and provide for the servicing
of the debt now guaranteed by the United
Kingdom, that is $63,569,074. Now what happens really is this, gentlemen, that the
guarantee
of our debt would simply change hands from the
Government of Britain to the Government of
Canada, for mark you, our Newfoundland people
would still raise the money to pay the interest.
Don't forget that. Don't let us have our people
think that Canada is wiping out the debt. She is
just putting herself in the same position that Great
Britain is today, as a guarantor of our debt, but
don't forget that she will see to it that we people
in Newfoundland will service that debt by the
taxes which she will impose upon us. And
another point, if I were a bondholder under that
debt I would as soon have the guarantee of Great
Britain as I would that of Canada. Be that as it
may, I want you to note that Canada, in taking
over our debt does nothing to help us along these
lines whatsoever. We would pay for the servicing
of the debt under confederation as we pay it now,
through taxes, only it will be administered by the
Dominion government. Well, let's say that disposes of the sterling debt, but remember
that we
would still be left, as a new province of Canada,
with a total debt of $10,465,593, besides interest
at from 3.75% to 3%. Canada does not guarantee
this interest for us. This interest, with our local
dollar debt of $10 million, is at the present time
practically $500,000, when you add on the
$123,000 which our friend from Bonavista
Centre forgot. You will find that the interest on
our national debt is $499,000 and some odd
hundred dollars, practically $500,000, and that is
the first charge on the new province.
Now let us take a look at where our revenue
came from this year— I think that 1947-48 would
be as good a guide as any other. The Customs
Department gave us $19.5 million. As a province
we give that up completely. Posts and Telegraphs
gave us $1.7 million. That too, we surrender to
Canada. The Assessor's Office yielded $10.5
million. That too Canada takes over, only more
so on account of higher taxes in Canada. Home
Affairs gave us $194,000, and that's out, practically. Education will yield the provincial
government nothing. Last year the Justice Department
was supposed to yield $47,000. Natural Resources and Public Health and Welfare yield
precious
small amounts as we know. In other words, practically all revenue producing sources
are handed
over to Canada. Now let us assume, and I am not
talking about the latest budget brought in, but the
budget prepared by the Ottawa delegation in
these books, let us assume that these figures of
revenue as a province are correct, or practically
so. They say the yield will be $1.25 million. On
that they added, for a large profit, $1 million, and
that makes a total provincial revenue of $2.25
million. Now what monies do we get from
Canada? You have it outlined there in your Grey
Book. They give you $6.8 million. I think it is.
But remember that's their estimate, based upon
the irreducible minimum and the adjusted subsidy, which, as I already pointed out,
depends on
two variables: the increase in your population,
and the increase or otherwise in the gross national
product of Canada. The gross national product I
think you all understand. Now I want you to look
at page 148, book 1, and turn over to the next
page, and see what I have taken. Instead of taking,
as the Ottawa delegation did, the adjusted figure
of $6.8 million, I have taken the irreducible minimum, and that is $15 per head of
the population,
and the statutory subsidies, the irreducible minimum. I want you to look at this particular
list of
figures here, and you will find that the minimum,
for instance in Nova Scotia in 1944, was
$12,524,000, and the next year it was
$12,244,000, and the next year, 1946, it was
$11,521,000. Then they take a three year average,
and they say, "For 1947 the Nova Scotia subsidy
will be $12,096,000." Well, if you look back to
1944 you will see that it was $12,544,000, practically $500,000 less than the estimated
figure for
1947. Then you can look all along these figures
and you will find that in every one of these
provinces, the estimate for 1947 under this tax
agreement is far, in some cases $1 million, below
that which it was in 1944. Why? Why was it?
Mr. Hollett Why was it? Why say, "It would
have been"? It is immaterial. Why should it have
been? Simply because there was a change in the
population of the province, and there was a
1016 NATIONAL CONVENTION December 1947
change in the gross national product of Canada.
Therefore I say this which the Ottawa delegation
has brought in — $6.8 million — is something
which we cannot take for granted. We don't
know what the gross national product is going to
be this year, or next year, or the year after. The
gross national product in Canada in 1944 and
earlier was tremendous. Why? Because they
were working and turning out guns, ammunition
and ships, and all sorts of war material to send
across to win this war. That in itself gave employment to people and put up the gross
national
product as never before in the history of Canada.
The war ends, and as soon as the war ends all that
industry has to cease, and has to be changed over
to peace time industry, and it is inconceivable to
think that Canada could, in such a few years, get
back to the high peak of gross national product
as it was in the war years.
That figure of $6 million, I put the irreducible
minimum in the books, and that's official —
$6,211,000, and that is the only figure that we can
take. You cannot take the $6.8 million, because
by the time we, if we do, go into confederation,
the gross national product of Canada may have
changed to such an extent that we would not get
any more than our gross irreducible minimum.
To prove that, on the same page on which you are
looking, you go to Saskatchewan. In 1944 Saskatchewan received by way of subsidy,
or would
have received, $16,525,000. Now you notice in
1946 they got $15,291,000, and you will notice
Note D: "The adjusted figure being less than the
guaranteed minimum, the guaranteed minimum
is substituted." In other words, the population of
Saskatchewan had changed, and if you go back
to the population at the top of the page, you will
find that the population in Saskatchewan in 1941
was 895,000, in 1942 it was 883,000, in 1944 —
858,000, in 1945 — 845,000 and still coming
down. In 1946 it was 832,000, as against 895,992,
so you see that change in the population in Saskatchewan over that brief four of five
years made
such a difference in the amount that you would
have been glad the irreducible minimum was put
in there, so the federal government gave Saskatchewan the irreducible minimum. So
I take
that figure. Yes, you will get that much, which is
guaranteed, but anything more you cannot bank
on. Now! Adding that and the revenues which I
have already mentioned, this gives us a total
revenue, more or less assured, of $8,461,756.
From this we must take the amount before mentioned for interest payment on our debt
of
$499,628, leaving $7,962,000, and that,
gentlemen, is the amount of hard cash which you
will have to run your province under confederation, unless you are prepared to impose
new
taxation on the people. The Government of
Canada however, realises how hopeless that
would be, save that in the first three years (this is
a sop, now) they will give us an amount of $3.5
million, or a transitional grant, in order to facilitate the adjustment of Newfoundland
to the status
of a province, and note, "the development in
Newfoundland of further revenue producing service".
In other words then, your revenue in the first
three years of confederation will be, after paying
the interest on your debt, $11,462.128. After the
first three years this amount of transitional grants
is reduced each year by $350,000, until at the end
of the twelfth year you are back where you
started, and the amount is $7.9 million, or practically $8 million, unless you increase
taxation,
and we understood that we have to. We must
increase taxation if we are to partake of the
glories of confederation. Mark that down. You
have to increase taxation in this country if you
want to go into confederation.
Somebody will say, "Oh yes, but you won't
have any customs duties to pay." Mr. Smallwood
will tell you. Gentlemen, I put it to you, if we
enter into confederation it is the plan of Canada
that we shall buy all the goods that she can make
us buy. We are going to buy from Canada, don't
worry about that, and isn't it reasonable to expect
that the manufacturers will take advantage of
that, and put the prices up to such an extent that
the amounts which our people will pay for the
things which they will buy from Canada will be
about on a par with those which the people have
to pay today under our customs duties. I don't
think there is any question of that. I think,
Mr. Smallwood, you will agree with that.
Mr. Hollett There is no question about that at
all, but your provincial government —
Mr. Smallwood will probably be prime minister
December 1947 NATIONAL CONVENTION 1017
— will not be so stupid as to allow that, because
by that time they will have employed some or all
of their multitudinous forms of taxation now
known in Canada, such as taxes for your lands....
Mr. Hollett Oh yes, on your cod traps — I
would not think you would tax Labrador cod
traps, at any rate — taxes on your trees if you like,
or in other words stumpage rates, sales tax, tax on
amusements, education tax, poll tax or head tax,
a poor tax and dozens of others. Mr. Chairman,
if anybody in this House says you are not going
to have a land tax, a county rate and a school rate
and a poor rate, they don't know what they are
talking about. I hold here in my hand a tax notice
issued by the municipality of Cape Breton County to a poor man who is deceased, and
the tax
notice has come to the trustee or administrator of
the estate. He had a piece of land when he died in
Cape Breton County, valued at $100 — no house
or anything on it. His assessment on that $100
piece of land: county rate $4.12, school rate
$2.75, poor rate 30 cents, total $7.17. The man,
being sick and dying, did not pay it from 1944 to
1946, when this final notice was received, and the
administrator of the estate received this bill for
$28.62 for four years, taxes on a piece of land
valued at $ 100 in Cape Breton County — over a
quarter of the value of the land.
Mr. Hollett It was the municipality of Cape
Breton, under the Province of Nova Scotia. So
don't anybody dispute the fact that you will be
taxed. You have to be, you have to get the money
from somewhere.
Now Mr. Chairman, I understand that as far as
the Broadcasting Company are concerned we
can't carry on any further, so I move that the
committee rise and report progess and ask leave
to sit again tomorrow.
[The committee rose and reported progress, and
the Convention adjourned]
