Newfoundland National Convention, 19 September 1946, Debates on Confederation with Canada


September 19, 1946

[Requests for information were tabled by Mr. Starkes, Mr. Reddy, Mr. Fowler, Mr. Roberts, Mr. Hillier, Mr. Smallwood, Mr. Bailey, Mr. Figary and Mr. Fudge. Mr. Smallwood gave notice of motion to ask the government for a statement of the gross national product]
[The Chairman announced that the Commissioner for Finance would address the Convention later in the day]

Report on the Financial and Economic Position of Newfoundland[1]

Mr. Ashbourne I want first of all to congratulate most heartily Mr. Newell and Mr. Keough, two young men unknown to me until just recently, on their maiden speeches. In resuming the debate on this motion, I ask the earnest consideration of the members present for a few observations which I shall make. I wish it to be understood that I am regarding this report as a valuable one. We cannot be too fully informed on the financial and economic conditions of our land. I came to this Convention with an open mind, and with a firm desire to ascertain as well as I could, for myself and for the people who sent me here, a true picture of Newfoundland. Before my election I was asked what form of government I favoured. My reply was that I refused to have my hands tied. I realise, sir, that if I had my mind made up before I came I might as well come and cast my vote and then go home.... I would like to approach this important Convention with an unprejudiced mind. This is a View which I made clear to my district, and I feel that I lost some votes because of my association in former days as a member of responsible government; some of my constituents may have thought that I still favoured responsible government. I realise that in the north there is a very strong sentiment in favour of Commission government. The matter of selection of Commissioners has often been debated, some people preferring a form by which the people themselves would elect the Commissioners. I believe the fishermen and other producers in the country, have realised that there has been a certain stability and security evident for some years, particularly in the ordinary marketing of our staple products of the fisheries. It is perhaps true that in other sections of Newfoundland there may be decided preferences for some other form of government, or for responsible government. I have no doubt, sir, that the seeming indifference and apathy which was reflected, particularly in some outports, in the small number of votes cast in the election in June, was perhaps because the people were not sufficiently informed about the matter. I had no public meetings. I got out a manifesto and distributed it. When it was my privilege to sit in the House of Assembly about 20 years ago I said I had no doubt but that half a dozen men could govern Newfoundland.
My first experience, sir, with this chamber, was as a boy when I stood in the gallery yonder and looked down upon this house. The one person that I remember was Sir Robert Bond, that great statesman that we remember with pride and affection, who represented the honourable and his toric district of Twillingate, having as its chief town the metropolis of the north. This great leader in the political arena was one of the greatest statesmen Newfoundland ever produced, whose wise and stable leadership is a matter of history. I remember well Sir Robert, and, although I cannot at the moment recall his exact words, he talked about a bubble which would be made to expand and occupy such a large space, but which would utterly disappear when touched by such a small thing as a pin-point. When the people of Newfoundland decide that it is time to take up the duties of responsible government there should not be the shadow of a doubt about the ability of the people to carry on successfully the various tasks of government. It is no easy task to govern a country wisely and well. It is an easy matter, often times, to borrow money, and much easier to spend it, but we all know where that generally leads. We have suffered in the past in Newfoundland, and I believe it is largely because of a lack of education. I believe that we need here in the city of St. John's a university, and we need in our city, and also in our outports, the very best teachers that we can procure. The monies now being spent on education will, I hope, bring rich rewards in the future. I have no doubt in my mind whatever, Mr. Chairman, about the honouring of 40 NATIONAL CONVENTION September 1946 the pledge given us by the British government. The British government came to our aid generously and fully in our days of need, and advanced us $11 million, and let us show our appreciation of this fact. We live in a world in which we are interdependent. No man lives to himself, no country lives to itself. As the ebb and flow of tides continue, so a mutual world trade and commerce will ever be present upon the vast expanses of our ocean, bringing us, we hope, the necessary essentials of life, and also carrying our own products by which we live and by which we have flourishing industries, and to provide the necessities of life....
Our strategic position between the new and old worlds, being the Gibraltar of North America, gives us a wide bargaining power. We have near our shores vast treasuries of the deep, which when properly developed and effectively marketed will enhance our economy. We realise we have been fortunate in having UNRRA and the rehabilitation associations to help us out in the marketing of our produce, and as we face the future it gives us some concern regarding the competition which will soon be evident from fishing countries on the other side. We must see to it that our capital assets bring to our shores that necessary wealth by which our people can live and maintain themselves in dignity and security. That is why people long for freedom from want and a sense of security, so that they will be able not only to have three meals a day, but there will be that dignity and that prestige which we as Newfoundlanders desire. It is unthinkable that we should do without the necessary amenities of life in order to provide and build up an expensive administrative form of government. We have many drawbacks, some of them resulting in unemployment. In the north, people can only work for a period of a few months, necessitating quite a bit of spare time. There is a serious curtailment in the earning power of Newfoundland as a result which we must try to overcome. Our social conditions need improving, the cost of living needs to be lowered. In this great task of building a better Newfoundland we are digging the foundation. Let us find the solid ground on which we can help to build a better Newfoundland, realising that we are building and working together, and let us see to it that we do not labour in vain.
[The debate was adjourned, and the Convention resolved into a committee of the whole to hear the address of the Commissioner for Finance]
Mr. Wild I believe it is the wish of the members of the National Convention that I should this evening give a broad outline of the financial position of Newfoundland as I see it. The Report on the Financial and Economic Position of Newfoundland, prepared by the Secretary of State (which I shall refer to as the White Paper) which has been prepared for the assistance of the Convention, covers a good deal of the same ground and gives more detailed information than I shall be able to attempt today. I would also like to refer to the survey on Newfoundland, edited by Dr. MacKay[1], copies of which have, I believe, been circulated to members and which contains much valuable information. What I have to say will not be new, as I believe that most of you have already given a good deal of private study to these important questions and fully appreciate the essentials of the present position, but my talk will, I hope, be of some help in bringing these matters into focus.
It is chiefly with government revenue and expenditure that, I take it, you are concerned at the moment, although in your present deliberations this must be considered in relation to the economic position of the country as a whole.
Perhaps it would be most convenient if I started by reference to government expenditure.
The table on page 5[2] of the White Paper-shows a rise in expenditure between June, 1934, and March, 1946, from $11.6 millions to $29.1 millions. The latter included over $6 millions of reconstruction expenditure, so that a figure of $23 millions should be taken for comparative purposes. The estimates for the present year again provide for a total of $23 millions, if we exclude reconstruction and special expenditure amounting to $11 millions to which I shall refer later. This increase from $1 1.6 to $23 millions in ordinary expenditure, i.e. the cost of maintaining government services at their present level, including the service of the public debt, is large - September 1946 NATIONAL CONVENTION 41 the cost has been just doubled, and you will wish to know the main reasons for it. As the White Paper shows, maintenance of social services (Public Health & Welfare and Education) account for $5 millions of the increase, and maintenance of public services (Posts & Telegraphs, Customs, Justice, Natural Resources, Public Works and grants to the Newfoundland Railway) for $4 millions. There have been increases of lesser degree under other heads.
There has, as you are aware, been a very considerable increase during the last 12 years in the scope of government services, To meet needs, which in the view of the Commission were urgent, we have increased the size of our hospitals and other public institutions including the erection of some 14 cottage hospitals; we have extended the nursing services, clinics, anti-TB services, etc. We have substantially increased the rates of assistance given to the infirm and aged. Sir John Puddester will be able to give you a fuller account of these improved social services.
Educational services have been very considerably improved, particularly the status and emoluments of teachers; the introduction of compulsory education has led to an increase in the number of children attending educational establishments. The present maintenance vote of over $3 millions for education compares with a total of half a million dollars to which the service had been cut in the days preceding the period now under review. The increases of cost in the Departments of Posts and Telegraphs and Customs are not so large and are counterbalanced by increased revenue. In the Department of Justice the strength of the police and fire services have been considerably extended. While in the Department of Natural Resources there have been established services such as the provision of bait depots, and substantial grants to the Newfoundland Fisheries Board; this department has also introduced the Ranger Force and inaugurated numerous schemes for the encouragement of agriculture and for rural development which did not exist before. In passing I might mention that an item of $500,000 on page 58 of the estimates for 1946-47, representing payments to the Salt Fish Marketing Fund, which are counter-balanced by similar receipts under the head of customs, will in future disappear as this Fund is now being wound up. There have been considerable developments in the services rendered by the Department of Public Works, including the maintenance of roads, public wharves and buildings, and geological surveys.
But quite apart from the widening of the scope of government services, we have to bear in mind the increased costs for salaries, supplies and materials which are the inevitable result of reduction in the value of money through the war. Furthermore, we have to remember that in 1934 government services had been pared to the bone, as in the case of the educational service to which I have referred particularly, and a considerable increase over the levels to which expenditure had been cut in the time of severe depression could be expected in the natural course of events.
I should point out that the provision of $23 millions in the present year for ordinary maintenance expenditure, including the service of our public debt, makes little provision for unemployment relief, although the total of over $1,300,000 actually provided for assistance to the infirm and aged is very much greater than it was a few years ago. In 1937 we spent over $1,600,000 on unemployment relief at the rates than current, and it is certain that, if similar unemployment conditions returned, we should require a very much larger amount to meet this need. Quite apart from the possibility of provision having to be made in the future for unemployment relief, we cannot, in my view, expect any reduction in the figure of $23 millions at present provided for maintenance services. Savings may be effected in certain directions, but they will be more than counterbalanced by normal expansion of activities, which is the inevitable trend in any progressive community. We can, indeed, expect additional costs of well over half a million dollars a year in respect of the operation and maintenance of new institutions, such as the new sanatorium on the west coast, the extension of the sanatorium in St. John's by the incorporation of one of the naval hospitals, and the operation by the Department of Public Health and Welfare of a former military hospital at Botwood, The provision of these improved social services has undoubtedly led to a better standard of living, which I am sure you will agree was urgently needed; it would certainly lead to great hardship and probably suffering if these benefits were not maintained. A question 42 NATIONAL CONVENTION September 1946 you will have to consider is whether they do not need to be further extended.
We have also provided in 1946—47 for $11 millions in respect of reconstruction and special expenditure. As I explained in my last budget speech, of which copies are available to members of the Convention, reconstruction expenditure, which we might alternatively call extraordinary expenditure, relates to important extensions of existing services and to new projects, mostly of a capital nature, such as new hospitals, public buildings, roads, harbour improvements, etc., which are essential for progressive development of economic and social conditions. It is expenditure which could be drastically reduced, even if not completely out off, if financial stringency dictated such a course, although it would mean leaving a number of worksunfinished and would be a most unfortunate happening so far as the development of the country is concerned. We have applied the term "special expenditure" to certain recoverable advances which we are making, mainly by way of loan, such as advances to the St. John's Housing Corporation. It might reasonably be argued that this is not expenditure at all in the true sense, but we have included it in the budget in order to get statutory authority and to show a complete picture.
The main items of reconstruction expenditure, which for 1946—47 amounts to $8 millions, are in respect of advances to the Newfoundland Railway for capital improvements, the cost of improvements in the internal telegraph system, costs of civil re-establishment and vocational training, grants for the extension and improve ments of school buildings; schemes for the development of the forests, fisheries and rural districts under the Department of Natural Resources; improvement and reconstruction of roads and bridges and the building of new roads, the construction of new hospitals and other public buildings and of ' new harbour facilities, the provision of homes for indigent persons, etc., all under the Department of Public Health and Wefare such as that for the extension of the general hospital at Comer Brook, and special assistance to new local councils. Details of these reconstruction services can be obtained by reference to the current estimates as well as to the memorandum on reconstruction and development schemes which has been prepared for your information.
Members will no doubt wish to consider this memorandum at greater length. As is explained in the opening paragraphs of the memorandum, the schemes which are not already in hand must be regarded as tentative. Progress would depend entirely on the availability of funds and particularly on the state of current revenue, out of which it would be hoped to meet as large a part as possible of such reconstruction expenditure, with the object of conserving the island's surplus balances to meet the needs for a rainy day. It is pointed out in the memorandum that, while a considerable number of the schemes would not involve additional recurring costs of maintenance, in other cases such a consequence must be considered. This is of particular importance in the case of new roads, which call for heavy recurring expenditure in maintenance. On the other hand, some of the schemes should lead to increased revenue or the saving of expense. I haVe previously referred to special expenditure, which amounts in the estimates for this year to approximately $3 millions. Over $2 millions of this is in respect of loans for housing purposes; $250,000 is for loans for the development of the fishing industry; and the balance is required to finance operations at the Gander Airport, the cost of which we hope to recover. This is a matter about which the Commissioner for Public Utilities and Supply will be able to give you further information.
If you will refer again to the table on page 5 of the White Paper, you will be able to trace the growth of revenue from $9.6 millions in 1934-35 to an estimated $30 millions in the current year and an actual revenue of over $33 millions in 1945-46. Present indications are that actual revenue in the current year will exceed the estimate as, you will be glad to hear, actual collections are in advance of the revenue which we had received in the corresponding months of last year. We are still experiencing a "boom" economy which has not yet begun to recede. How long we can expect this happy state of affairs to continue is a matter of conjecture. In any event, we can, I think, expect a considerable increase over the level of revenue attained in the years before the war. Just as the depreciation in the value of money has increased government expenditure and earnings generally, so we may expect a corresponding increase in ad valorem customs September 1946 NATIONAL CONVENTION 43 revenue (subject, of course, to tariff adjustments), and also in the yield of income tax based on earnings and profits. To maintain ordinary expenditure at its present level, we shall, as I have already pointed out, require at least $23 millions a year, and the more we can raise in excess of this figure, the better shall we be placed to undertake development projects.
I have been asked if I would give to the members an estimate of the total national income of Newfoundland. This is, of course, an important index by which to measure taxable capacity and I have always regretted that we are not so well equipped in Newfoundland as in some other countries to measure this factor, which is being used to an increasing extent for taxation purposes. The answer to the question can best be obtained by reference to the appendix on page 528 of the survey, edited by Dr. MacKay, to which I have already referred. It will be noted that lack of adequate basic information has prevented the writer from making more than a rough estimate and has compelled him to make it with reference to a pre-war period. His estimate amounted to approximately $45 millions per annum, which he suggests had been doubled during the war. I do not know whether any of the members present are familiar with the intricacies of calculation of national income according to the formulae normally employed. It is a very complicated business and no statistical calculations can be of much value unless adequate and accurate basic information is available. It is certainly not available in Newfoundland at the present time and the only practical way of getting down to the task would probably be to take samples of in dividual incomes of cross-sections of the community as a basis to work on. One of our greatest difficulties in obtaining basic statistics in Newfoundland has been the reluctance and suspicion of the persons called upon to give the necessary information, and it will need something in the nature of an educational campaign before we can obtain the data which we require for the purposes we are considering. Our difficulties are all the greater because of our scattered population and because such a large proportion of our population work as individuals rather than as wage-earners in industrial undertakings. I might add that notwithstanding these difficulties we have been considering whether we could enlist technical assistance to carry out a survey of the kind which would be required, and I hope that it will be possible, in due course, to give a closer estimate, though I am afraid it will still be merely a rough estimate, of our national income. I should like to make it clear that, although our statistical information has not reached the standards we desire, it is nevertheless much more complete than it was a few years ago. We have indeed made consider able advance in this direction and, moreover, we have greatly improved the methods of collating the information obtained. Returns of imports and exports are, for example, now produced quarterly and much more promptly than formerly. I have brought with me a copy of those for the quarter ended 31 March, 1946, which members can examine if they wish. I should be pleased indeed to arrange for any members who so wish to see the very modern and extremely interesting machines which we have installed in the Department of Finance for statistical and other purposes.
There is no doubt that our taxable capacity has increased considerably since before the war. The country is stronger in a number of ways and a good deal of money has been spent in the reorganization and improvement of the fisheries, but there is still room for considerable development, as the chairman of the Fisheries Board pointed out the other day. To increase our standards of living we must, of course, increase our output per capita. Although we cannot expect the price of fish to continue at its present level, there are promising signs, such as the activities of the International Food Organisation, which suggest that a determined effort will be made to stabilise prices and to ensure that primary producers are given a fairer deal than they often were in the past. We have a number of promising new industries, such as the canning factory which is being installed on the west coast, and the prospects of the paper and logging industries, for the next few years at any rate, are distinctly bright: the companies concerned are looking for additional labour. The future in regard to mining is not quite so clear, but work is steady at the present. We also have to take into account the several thousands of men engaged in steady employment at the American bases and the Gander and Goose airports.
In assessing, on this very broad basis, prospective levels of production, to which our taxable 44 NATIONAL CONVENTION September 1946 capacity is closely related, we must also bear in mind the stronger position of the country by reason of accumulated savings, both personal and corporate, to which reference is made in tables 4 and 5 appended to the White Paper. These savings should ensure for some years to come a steady demand for goods and services and act as a most valuable buffer against the effects of possible depression.
As you are aware, we have considerably increased direct taxation during the war, and it now amounts to more than half the yield from customs duties, on which we used mainly to depend. Some revision of our tariff will undoubtedly be necessary as the result of international trade discussions which have been under consideration for some time and which are now scheduled to start next month. We shall, of course, endeavour to secure more favoured treatment for the entry of our produce into other countries but, at the same time, we shall be expected to make concessions in return. Until these negotiations have reached a more advanced stage, it will be impossible to assess the effect on our yield from customs duties but, in any event, we must be prepared for some reduction in this source of revenue, as our tariff is undoubtedly still heavy on certain classes of commodity, although, as you will see from paragraph 17 of the white paper, during the last 12 years the average rate of duty over all imports has been reduced from 36.5 to 25.5 per cent. We can, I think, expect some increase in revenue from the Department of Posts and Telegraphs as its telecommunication services are improved and extended. On the other hand, we must be prepared for some decline in the revenue from the Board of Liquor Control, as a falling off in consumption above the war time levels is already taking place.
I should like next to refer briefly to the public debt. You will find a statement of the debt and sinking funds as at 31 March last on page 35[1] of the White Paper. This includes both the sterling debt, and the local loans of $1,500,600 (3.75%), $1.5 million (3.25%) and of $2 million (3%) raised in 1940, 1942 and 1943, respectively. Since that date we have paid further annual sinking fund instalments of ÂŁ177,950 and $41,250 on the sterling 3% guaranteed stock and on the dollar 3.75% war loans, respectively, so that the net figure of $82,188,000 shown in the statement must be reduced by these amounts. If we allow for the recent 10% appreciation in the Canadian dollar and interest accrued on sinking funds since 31 March, the net debt is now reduced to the equivalent of approximately $73,876,000. As is mentioned in the memorandum on reconstruction and development schemes, we have recently set aside, at interest, an amount of ÂŁ800,000 (approximately $3.2 million), to meet the repayment of the two remaining sterling trustee stocks which mature in 1950 and 1952, respectively. This sum was obtained from the government of the United Kingdom as the first repayment of the loans totalling $12.3 million which we made as a voluntary contribution to the war effort in the years 1941- 1944. The balance of these loans still due to us by the government of the United Kingdom is now approximately $9. 1 million, and applying the repayment of $3.2 million to the reduction of debt, the total amount of our public debt is reduced still further to $70.5 millions.
This figure excludes a 2.5% loan to the railway arranged in 1941 from the Defence Supplies Corporation of the United States for the purchase of equipment, of which the balance outstanding is now $1,493,000. It also excludes the value of unredeemed savings certificates, amounting to some $2,257,000, out of total issues of $3,103,000, since we have balances set aside to meet in full the government's liability in respect of these certificates. Out of the proceeds of savings certificates, we lent $1,800,000 to the United Kingdom (part of the $12,300,000 I have already mentioned), which will be available when we want it. The balance required to meet outstanding certificates is on deposit, at interest, at the Bank of Montreal, St. John's; this is the source from which current redemptions are met. At the end of March, 1946, we had an accumulated revenue surplus of $28,669,000. Of this, $10.5 million was loaned to the government of the United Kingdom (since reduced by the repayment of $3.2 million to provide for the redemption of the two sterling securities I have mentioned). The balance, apart from some $240,000 used to finance the payment of allotments, etc, of men serving overseas with the imperial forces, was deposited at interest at the Bank of Montreal. I should explain, however, September 1946 NATIONAL CONVENTION 45 that additional advances in respect of similar agency services, have been made by the bank on a guaranteed overdraft basis, instead of being the subject of issues from the exchequer. The amount of such outstanding advances at the present time is approximately $1.2 million. They will be cleared as soon as audited accounts are rendered by the Newfoundland departments concerned to the service departments in the United Kingdom, who, I might add, have been pressing for these accounts as they are anxious to clear them as soon as possible. This matter is well in hand and I am informed that a large batch of audited accounts has been despatched to the United Kingdom during the past week.
I understand that the Convention wishes to have further information regarding the 1% sinking fund on the 3% guaranteed stock. The annual payment, as shown in the published estimates, is the figure of ÂŁ177,950 which I have already quoted. It has been paid every June since 1938, when the first payment became due, to the trustees to invest the sinking fund contributions in the guaranteed stock, as well as the interest which they receive on the sinking fund investments. In addition to the statement in the white paper, you will find this information in the accounts published with the Comptroller and Auditor General's report.
[It was agreed that Mr. Wild would be requested to meet the Convention again on September 24. The Convention adjourned]


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



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

Notes de bas de page:

  • [1] Volume II: 16. [Volume II is not in The Confederation Debates Collection]
  • [1] R.A. MacKay was special assistant to the Canadian Under-Secretary of State for External Affairs and editor of Newfoundland: Economic, Diplomatic and Strategic Studies (Toronto, 1946).
  • [2] Volume II:18. [Volume II is not in The Confederation Debates Collection]
  • I Volume II:45. [Volume II is not in The Confederation Debates Collection]

Personnes participantes: