Mr. Job Mr. Chairman, I want to make a few
remarks on this Economic Report, and I dare say
that people will be curious to know why my
signature is not appended to it. Perhaps they will
be disappointed when I tell them that, in the main,
I was in favour of the winding-up part of the
report. I believe that the country is self-supporting. I did not sign the report for
two or three
reasons. The first was that I thought it was not
necessary to introduce a budget. One can quite
understand the inclination of Major Cashin to
introduce this report on the basis of a budget, and
as any finance minister would have introduced it
in a house of parliament. I think we can also
understand why Mr. Smallwood, who might be
termed "the Leader of the Opposition", thought
it his duty to tear it to pieces. His tearing of it to
pieces was a matter of opinion, whether it was
effective or not. I don't think it was very effective. I would like to express my
approval of the
conclusions of the report, and I don't want to
enter into a discussion of the details. I think the
report was written in a very racy, very readable
way, and presented in a very interesting form. On
the other hand I don't hesitate to say that the
estimates can be only regarded as guesswork.
Estimates generally are. There is no reason, in my
opinion, why $35 million or $25 million, or $40
million should not have been taken as the probable revenue, instead of $30 million.
However,
the figures as they are in the report are pretty
good, and it is the interpretation that counts.
There is only one discrepancy that I can really
point to in the figures, and it is not done with a
view to criticism, because I don't think it matters
very much. Life insurance values are put down as
$30 million as the surrender value.
Mr. Job Yes, Now I would like to hand to the
chairman of the Committee the actual report from
the office of the Assessor of Taxes which shows
the actual liability to policy holders as at 31
December as $22,237,464.
Mr. Job Last year, 1946. I don't think it matters.
That $8 million will not make a shadow of difference to me in my opinion as to the
life in
664 NATIONAL CONVENTION November 1947
surance. If the value has increased, as this shows
it has ... the effect is very important on our
economy as I consider it. When I was a member
of this Finance Committee considering this
Economic Report I stated at the start that I did not
think it necessary to introduce a budget. I was
asked to draft a report, which I did — a very short
report. It took me two days to do, but I produced
this report at the Committee and Major Cashin
said that he did not want to introduce it. He said
that he wanted to make up this report and produce
it. I did not blame him a bit, but I could not agree
with what was going into it, and I simply
withdrew. I thought it was read very well, was
well prepared, and the only objection I have is
that it may mislead people. In the short report that
I prepared there were one or two things that are
not in Major Cashin's report, and I would like to
call your attention to them.
I would like to read first of all my reasons for
leaving out the estimates. My suggestion was that
the difficulty of furnishing really valuable figures
was so great under present world conditions that
any forecast might be considered a waste of
time.... We know what the present situation is,
and we know that the situation we can see immediately ahead is very good, but I don't
think we
can really forecast actual figures. One of the
things that makes it clear, one of the points of
difference, is what has recently occurred in connection with the saltfish trade —
the difficulty of
getting exchange. A few months ago, before there
was any question of the exchange, we all felt very
happy about the situation. That situation has been
temporarily solved by the government advancing
the money themselves, but that is only a temporary cure. I am not, however, at all
pessimistic
about the future of the fishery; and I believe that
the fresh fish plants and the possibility of central
curing stations, will make a great difference in
our fish situation.
....One of the points that I thought should have
been brought out very strongly was that the standard of living of our people today
is a very different thing to what it was in 1934, or 1944 rather.
Today we find the average Newfoundlander enjoying undoubtedly a much higher standard
of
living than ever before. My friend Mr.
Smallwood over there read a letter from an individual fisherman, and Mr. Hollett rightly
pointed out, I think, that we always have some
people in trouble. It will always be so. You can
find the same thing in any city, but I think the
general condition of our people today is very
much improved. I think the people are becoming
more accustomed to thinking for themselves, and
this is largely due to factors such as the circulating regional libraries, the adult
education movement, the co-operative committees, the
agricultural societies. the Jubilee Guilds, the
Junior Red Cross Association, and our Memorial
University College, and I should not fail to mention the increased intelligence and
diligence of
the various unions all over the country. It is
making people think more than they used to do,
and that is one of our chief assets, a sign of
improvement for the future. I think it helps us to
look at the future in a more hopeful way than we
have done in the past. Undoubtedly the taxable
capacity of the economy has been increased to
where it can produce revenues which, in addition
to being able to defray the normal costs of
government, can support more public and social
services than we have ever hitherto had, and yet
leave a surplus of perhaps a million or so to spare
at the end.
...I would like to refer to the comment in this
report on the question of trade with the USA. This
to my mind is the vital question in connection
with our future economy unless we can do
without the fish trade, but it is the vital point in
connection with all the future of the fish trade....
I have had the idea for a very long time that if we
could get some round table conferences between
representatives of Canada, Great Britain and the
United States, we would get somewhere. Now
this report indicates that would have to be done
by a government of our own, and it might be so;
but supposing for the sake of argument that the
country did elect to continue Commission of
Government, I don't see any reason why, if there
is a proper agitation, Commission could not have
such a conference. But this report indicates that
it would have to be done by a constitutional
government. That might not be necessary. Of
course in case of confederation the thing would
simply fall through. It would be impossible.
I would like to wind up by saying I have great
pleasure in supporting the concluding paragraphs
of the report, as I believe that we are self-supporting, and that we will continue
to be self-supporting for very many years ahead....
November 1947 NATIONAL CONVENTION 665
Mr. Vincent ....There are a few observations I
would make, and I trust you will bear with me in
my rather inadequate presentation of them. Two
very able speakers have so far clashed swords,
both occupying long periods in the vindication of
their pet arguments, and in my opinion with good
advantage. I can assure you that I have no intention of carrying the argument so far,
for after all
I am only the junior lieutenant in the heretofore
styled "B", or "Bonavista Block", and with such
powerful Sidekicks as the member for Bonavista
Centre, and my esteemed and learned friend, Mr.
Bradley, K.C., I need have no worries but that the
so-called "B Block" will contribute its pennyworth to this debate.
Mr. Chairman, I trust you will pardon me if I
confine the greater part of my talk to a discussion
of that industry which census statistics tell us
employs 62% of our people, for isn't it true that
the success of the 62% contributes in a large way
to the success of the 38%? In this I know that very
fine gambling Newfoundlander, my personal
friend Mr. Crosbie, will support me, for his
record at the fisheries is told in deeds not in
words, and however much our proposed plans for
the future of that industry may differ, we both
believe in Newfoundland as principally a fishing
country. I put codfish first; he, I believe, puts
herring and whales. I am going to talk about fish,
the soundness of the economy of the fishery ...
and if being called a defeatist means the revelation here of cold facts pertaining
to that industry,
then by all means call me a defeatist. I live with
fishing folk, I own Labrador schooners, I supply
inshore fishermen, and if this Committee has
something practical and constructive to offer,
something that will contribute to the future well-
being and success of every Joe Killick fisherman,
not only in my hard-hit Bonavista North, but to
every last fisherman in this island, then count on
my unqualified support. I very much regret, however, that in this report I find a
lot of well-meaning platitudes. Of that more later on.
The Economic Report, combining as it does
the sum total of the findings of the several reports
of this Convention, is of first importance. It does
seem to me, however, that the real question to be
determined is just this: what is the relation of the
actual economic position of this island to the
constitutional issue? I presume that will be borne
out later. For the moment we are to concern
ourselves with the subject matter before the
Chair. The question to which each delegate must
give his considered opinion is simply: can I accept the report of the Economic Committee
as
being in my opinion a true and accurate picture
of the island's economy? Or, to put it shorter,
what is my interpretation of the term "self-sufficiency"?
It does seem dangerous to talk about experts,
but I hold to the opinion expressed by several
others, that the Committee, lacking the services
of an economist-statistician, were greatly handicapped in that they had no reliable,
authoritative
statistics at their command, to enable them to
even remotely indicate the basic soundness of our
economy. By way of clarification, there is in this
report an assumption based on the estimates
given the Ottawa delegation by the Railway
management that our Railway is worth $72 million, and the question naturally arises,
is this a fair
and proper estimate?.... The Report of the
Forestry Committee, on which committee I actively served with Major Cashin, made a
provisional estimate of the earnings of our forest
resources as not less than $30 million. Can this
evaluation be safely projected into the future?
And in this respect, have we or have we not
reached our productive peak? Fisheries valued at
$30 million; isn't it true that the vagaries of this
industry, the many uncertainties surrounding it,
are of such a nature that not even a prophet could
predict as to whether the product of this industry
will have even a nominal market value say five
years from now?
We are self-supporting. Time was when such
a revelation would make the man in the fishing
boat, the man in the street toss his hat into the air
and cheer. It might even have been heralded by a
roll of drums. Yes, Mr. Chairman, a budgetary
surplus, propped up by a healthy looking balance
sheet, does show a very promising, rosy picture
for the faithful, who do not require an absolute
gilt-edged guarantee of our solvency.
Let's talk about the economy of the fishery, in
particular the codfishery, for that phase of the
industry employs many more men than do the
other branches. I believe in our fisheries so much
that for the past two years I have been investing,
when l was told by a big business friend of mine,
a Water Street financier, I am looking at him now,
that it was dangerous going, and maybe he was
666 NATIONAL CONVENTION November 1947
right. So now I am going to give you first-hand
information as to just how sound the Labrador
branch of the codfishery is at the moment — I
shall call the play exactly as I find it, November
1947 edition. With the past I have little concern,
rather I am concerned with what we shall eat and
wear in the years that lie immediately ahead. So,
with the indulgence of this House, I'll get district-
minded and talk of things as they really are in my
constituency of Bonavista North, and I understand this goes for all of the northeast
coast, for,
as said a gentleman speaking yesterday, "A
country is as self-sufficient as its people." Now
permit me to refer you to the Economic Report,
page 30:
Summarising what we have said with
regard to our fishing industry, it would seem
that the outlook for the Newfoundland
fisheries is anything but discouraging. Indeed, judging from the evidence available
and the opinion of those qualified to speak, it
would seem that we have entered upon a new
era-the era of modernised methods, faster
production and more profitable markets. And
it is not unreasonable to say that the adoption
of methods which have brought prosperity to
such a country as Iceland, cannot fail but
bring similar results to the 30,000 of our
people engaged in the fishing industry of
Newfoundland
Now the junior member for "B Block" will
have the temerity to give his frank opinion, based
on first-hand knowledge of this phase of the
industry. The economy of the Labrador cod-
fishery is so shot to pieces that the individual
fisherman at this moment is just one shortjump
ahead of the dole, and if there is to be any
Labrador fishery next season, if the Labrador
fisherman sails up the coast in a schooner, he will
go only with a guarantee of his security, or, to put
it plainer, he will go only with a guaranteed
minimum salary at the end of the voyage. I have
an interest in three schooners which this year
prosecuted the fishery, and the 30 men on board
these schooners each one declared the day he
arrived home, "Not again brother, my last trip",
and do you wonder? The season coming as the
smashing climax to a cycle of three bad years, the
fisherman is fed up. Schooners are being put on
the block, codtraps are being auctioned. Is this
encouraging? I'll pause here for a moment and
ask that question of my hard-boiled, industrious
old friend, fishing master Capt. Billy Winsor of
Wesleyville. He gave up the fight discouraged,
after 40 years up coast, and he's as good a fisherman as ever trod a deck. I'll pause
and ask that
question of hard-driving fishing skippers, Capt.
Malcolm, and Charles Rodgers of Fair Island; I'll
ask that question of the shoremen in Cape Freels
and at Musgrave Harbour, who wondered what
they'd do with the fish when they told them about
the convertibility of sterling. I'll ask the chap in
Newtown with whom I talked ten days ago, who
told me his summer's catch of fish was in his
store, and he wanted flour and couldn't get it.
Yes, Mr. Chairman, I'll ask them the question,
and am well content to await their replies, and
quite satisfied to abide by their decisions.
I am not suggesting that government or vested
interest can make fish swim at specific periods in
specific harbours, so that our schooners may
secure substantial loads; but I do want to point
out that the Labrador phase of the industry
employs a lot of our people, and 1 am not satisfied
in my own mind that the fishery generally is
anything but discouraging. The Labrador fishery
at the moment is flat on its back; some fishing
skippers have lost everything, and sharemen-
fishermen have given up all plans of going back
to the coast. This is not exaggerated. Look up
your papers and read the schooners advertised for
sale. I am conversant with every angle of this
industry, and if this house, or the Commission of
Government wants some corroboration, they
have only to have a look-see around the northeast
coast of Bonavista Bay, and it will be put to them
in very strong terms. Modernise your methods,
centralise your fisheries, establish dollar credits,
invoke the Marshall Plan, transform and
refashion, my prayers go with your petitions in
this respect, gentlemen of the Economic Committee, but your vested interests, or your
government had better bestir themselves, for it is later
than you think.
Allow me to summarise; 1947 finds thousands
of our fishermen with an average seasonal catch
of 30 quintals per man, valued at less than $11
per quintal; 1947 finds our fishermen, all fine
adaptable fellows, seeking employment in the
woods, to try to augment their meager earnings;
and the last straw that breaks the camel's back,
this past week I talked with Labrador fishermen
November 1947 NATIONAL CONVENTION 667
coming back from the camps to destitute families,
told, "Sorry, no work, our camps are filled."
Moreover last Saturday I was told by a responsible official of one of the large paper
companies,
"We have reduced our cut this year", and tragically enough, one of the reductions
was in the
Bonavista Bay area.
The value of our total productive economy is
entirely dependent on the economy of countries
thousands of miles away. The welfare of my last
fisherman friend down on stormy Cape Freels is
entirely dependent on the economic standing of
the Italian, the Greek, the Spaniard, living in
continental Europe. We have no internal markets
for our products, and if we did, what could
300,000 people eat anyhow? Thus I submit that
our economic set-up has no similarity in the
western hemisphere. I don't know the solution to
this big problem of our fisheries. Probably my
able friend Mr. Crosbie has something to offer,
but this I do know, that solving the problem will
require capital expenditure on a large scale, be
the source the vested interests or the state. Otherwise, the poor forgotten fishermen,
every last
man of them, must just patiently endure and
quietly wait, till chance or somebody else comes
along to redeem their fortunes. I'm finished with
the fisheries Mr. Chairman and gentlemen, but
before closing, I want to say without any hesitation, that I advocate state control,
or government
subsidy for this industry, and I am not a communist.
I shall briefly touch on this budgetary
proposed expenditure — page 10 of the report —
and here I note the figures "Public Health and
Welfare—$6,250,000." A lot of money, but with
our expanding health service is this enough?
What of the actual needs of the far-flung communities remote from the modern capital
of St.
John's? You can't provide a hospital for every
settlement, but they should have at least a nurse
for every ten, and if you think we have that you
had better look up your statistics. What about
those hundreds of known cases of TB vainly
awaiting admission to our sanatorium? Are these
unfortunate young people to be refused a chance
to lead useful lives again? At the moment there
is lack of space, and lack of nursing personnel.
Have we enough cottage hospitals, have we
enough doctors?
Education — proposed expenditure,
$3,750,000. What of this? Is it a fact that there
was a shortage of teachers this year? Are there
still many ungraded teachers occupying positions
in our schools, and what of the teachers themselves, overworked and underpaid? Is
the compensation they receive adequate to their needs or
in keeping with the standards of their profession?
I'll pause here and ask that branch of the civil
service just how much longer they will have to
endure this injustice. The Finance Committee did
increase the grant a little, subject, of course, to
their resuming the administration of the government in the future.
Public works, proposed expenditure $4 million. I agree with the member for Bonavista
East
that this is very inadequate. What of the people
between Hare Bay and Musgrave Harbour, some
20,000 of them? They have been walking 40
miles to reach civilisation for the past 50 years,
and they recently signed a petition begging the
powers that be to consider their request for a road.
Must they go on for the next 50 years still beating
through the 40 miles of wasteland to hear the puff
of a train? I shall not touch on the economy of a
merchant marine fleet, as proposed by this Committee, I leave that to the member for
Trinity
South, my good friend Captain Bailey.
The Economic Report is no unworkmanlike
muddle. Coupled with a very businesslike financial statement, it reveals in the opinion
of its chief
sponsor and the signatories, a balance sheet
which shows unmistakably that this country is
self-supporting. But after a close examination of
both reports, and applying an altogether different
interpretation to the term "self-sufficient", I cannot agree that this country is
self-supporting.
Mr. Higgins Mr. Chairman, referring to the
remarks of the last speaker, when he described
his membership in the "B Block" I wonder if that
should not be "P Block" or "Pessimistic Block",
because all we have heard from that block so far
has been pessimism about the future of Newfoundland. I don't know whether the other
members of that same block are going to speak in that
same manner, but if they do, to me it is not a fair
criticism of the facts we have had put before us
in the report and the facts we know ourselves.
I propose to deal briefly with the report as we
have it.... It is relatively unimportant, at least it is
to me, whether capital expenditures are put in
ordinary expenditures, or whether ordinary ex
668 NATIONAL CONVENTION November 1947
penditure are put in capital expenditures; and
may I say again it is relatively unimportant
whether Major Cashin, as the former finance
minister, made an error in his budget, and underestimated or overestimated his expenditure,
or
whether his predecessors or his successors did the
same thing. I suggest, with all due respect to the
Finance Committee, what is important is what
was our position in 1934, and what is it today?
Because, as you know, the terms of reference ask
us to go back to 1934, and study the changes that
have taken place in the economy and bearing in
mind the extent to which the revenues of recent
years have been due to wartime conditions, to
examine the position of the country from that
time on. That is what I propose to do very briefly.
I presume that nearly every member is going to
have something to say. We have had two very
long, very well-delivered speeches — one extremely pessimistic, and one extremely
realistic,
in my opinion. But these points come to me in the
survey of the 1934 - 1947 period. In 1934 I
believe we owed $100 million.... And today we
owe, deducting our liquid assets, $35 million. In
1934 the people had $25 million in the Savings
Bank, today they have $80 million. In 1934 our
people had insurance worth $52 million, today
they have insurance worth $100 million. The
cash surrender value of this insurance in 1934
was worth $9 million, today it is worth about $22
million. Today we have fixed government assets
of something in the vicinity of $140 million. Now
the Finance Committee gives our fixed assets in
the vicinity of $110 million. I believe they have
not added in the value of Gander airport, and the
cost of it should be the value of it. We may not
be able to put it on the block and sell it for that,
but I am putting in the cost of it as the value of
it.... Included in that, of course, is the $72 million
value that has been put on the Railway. That
value has been put on by the management of the
Railway. I don't know where you could get any
better value for the Railway than by going to the
Manager and asking him, and I must say that I
think it very unethical of Mr. Smallwood to suggest that we, as the Ottawa delegation,
gave
figures to the Canadian government which we
knew to be incorrect.
Mr. Smallwood Point of order. I did not say, and
I did not suggest that the Ottawa delegation had
given the Government of Canada any figures or
any information knowing them to be incorrect,
and I ask Mr. Higgins to withdraw that remark.
Mr. Chairman That is so. The figure of $72
million, so stated Mr. Smallwood, had been
handed to the Ottawa delegation, because it was
received from the Railway management.
Mr. Higgins Mr. Smallwood did say that we
knew we were fooling them when we gave it to
them.
Mr. Smallwood I did not, and I ask Mr. Higgins
to withdraw both remarks, this one and the one
before. I' will read my comment to you if you
don't.
Mr. Higgins If you don't like it, or if you don't
prefer to take my word for it, you can have the
stenographer read it back.
Mr. Smallwood I will have the stenographer
read it, or the recording that went over the air, or
anything you like. I hope, Mr. Chairman, when
he finds that I did not say them he will withdraw
them.
[In the absence of a transcript, the Chairman was unable to rule on Mr. Smallwood's
point of order. Mr. Higgins agreed to withdraw the remarks so that debate might continue]
Mr. Higgins You need not thank me, Mr. Smallwood. To revert to our figures from 1934 on, our
revenue from 1934-35 was $9,624,000. Our
revenue in 1946-47 was $37,250,000. Our expenditure in 1934-35 was $10 million, and
our expenditure in 1946-47 was $25 million. We have
had a surplus of revenue over expenditure now
since 1941, and you all know that expenditure has
not been curtailed. Therefore there can be no
doubt whatsoever that at the present time at least
this country is self-supporting, and we have been
self-supporting since 1941. I say also that I am
satisfied that our present high expenditure, our
present high revenue, is due in a large measure to
war expenditures. I think we must all agree to
that, but I am prepared to agree with the Finance
Committee's contention that our continuing high
revenues are, in a large measure, due to the
growth of our main industries and general world
conditions. I am satisfied that if, as it must, the
exchange problem can be handled, that these
revenues will continue comparatively high. I am
prepared to agree with the Committee's figure of
$30 million as a fair revenue for the foreseeable
November 1947 NATIONAL CONVENTION 669
future.
What of the future? The best forecast that can
be made is only an opinion. I am prepared to
accept the opinion of the Committee as to the
future. They have given us what was described, I
believe in one of our documents at Ottawa, as an
educated "guesstimate", and I believe today in
the letter we have had from the Hon. Mr. King he
describes it as an "informed guess." Whether it is
an "educated guesstimate" or an "informed
guess", it is as good as any statistician-economist
can do for us at the present time. However, to go
back to this "guesstimate". Let us look at what
the businessmen think of the future, because
that's the only way we in this country can gauge
what the future is likely to be. If the businessmen
of the country are willing to put money into their
businesses, backing the future of the country,
then we can be fairly safe in saying, "These men
do not take chances with their money unless they
have a fairly good idea of what they are doing."
Mr. Higgins Yes, Mr. Hickman, I agree you are
a philanthropist in a big way. You are building
that big service station in the west end, and that
big garage in Corner Brook just because you are
a philanthropist. Also in the fish industry there
continues to be a lot of money and equipment put
into it in the last two years. You realise there are
today 18 modern plants in operation. Is that correct, Mr. Chairman? I am not quite
sure if it is 18
or more modern fish plants.
Mr. Higgins Compared with five in 1939 and
two in 1934. Do you see the new herring plant
being built by Connors Brothers at Petries, as
well as a garage? Do you see that hard-headed
businessman Mr. Crosbie blowing his money
into the fishery for fun, into the herring and the
whale fishery? How do you View these new
fishery corporations that are being incorporated
all over the place?
Then we go to the other of our main industries,
mining. The Committee says that the future appears to be good. As far as we can gauge
that is
a fairly correct assumption. The present market
for Bell Island ore is good, and if the apparent
rapid depletion of the Spanish ores is correct, and
assuming continuous large scale production by
British industries, then we can look for a more
extensive market in the United Kingdom than
before the war. Also you know Germany was one
of our biggest customers before the war, and it is
not outside the realm of possibility that she may
not be a good customer again. The known deposit
at Buchans is good, I believe, until at least 1956,
and possibly more, but that is apparently the last
word we have had. But as you know that mine
was supposed to have been closed any time
within the last ten or twelve years, closed permanently, and they have found new bodies
of ore
constantly. The operations at St. Lawrence have
demonstrated that the area is one of the biggest
fluorspar fields in the world. The Asbestos Corporation of Canada has recently been
investing
their money in our deposits here. All I intend to
say with respect to the ore deposits of Labrador
is that they may very well profoundly alter the
whole economic position, as the Bell Island and
Buchans mines have already done.
With respect to agriculture it is most heartening to know that the Director of Agriculture
estimated our products this year are worth $14-15
million. The Finance Committee, in my opinion,
has been most conservative in estimating die
value of the tourist industry. When on my holiday
in Canada the past three months, I made a particular study of the tourist possibilities
of the
island, and I am quite convinced, as was my
friend Mr. Smallwood as well, that the tourist
possibilities of Newfoundland really have a
wonderful future.
Mr. Higgins As I said earlier, the Committee's
"guesstimate" of the future appears to me to have
a good background. I am prepared to accept the
report as presented, and I submit that we are now
in a sound, satisfactory financial position, and we
have every reason to believe that we will continue
to remain in that position in the foreseeable future.
Mr. Butt Mr. Chairman, there is one point in this
report which I don't think Mr. Higgins quite
stressed enough, one particular section of it. According to the Amulree Report in
1934 the gross
public debt was $101 million, and the gross
public debt at March 31, 1947, was roughly
$83,993,000, but here's the solid fact that could
have made a great deal of difference to us. The
interest payment on our public debt in 1934, I
believe, was $5,200,000. It did not include any
670 NATIONAL CONVENTION November 1947
provision for sinking fund. In 1947, as at 31
March, the interest payment was $3,545,000, and
it included a sinking fund provision of $903,380.
The point I am making is that there is a permanent
and continuous benefit as at today of over $2
million, the amount that we will not have to pay
out for interest. If we had had that $2 million
which we were paying out prior to that time it
would have made a very great difference to the
future of this country. I suggest that on that point
alone we ought to watch very carefully, because
we now have a continuous benefit of something
like $2-2.5 million, and it is being reduced all the
time. Further than that, it looks as if the sinking
fund payment can be kept up for the foreseeable
future. I am not going to try to define the foreseeable future, but we are reducing
our debt by
$8-900,000 a year, and we only have to find, as
at March 31, $2.6 million against $5 million in
1934....
Mr. Hollett Major Cashin, may I ask a question
through you to Mr. Butt? What was the sinking
fund provision in 1947?
Mr. Butt The sinking fund provision for 1947
was $903,000.... The real point is that we have a
continuing benefit.
Mr. Cashin I think I ought to further explain this
sinking fund. When the Financial Act was passed
in 1933 the sinking fund was to be paid in 1937,
amounting to 1% of the total sterling indebtedness. The total sterling indebtedness
is
ÂŁ17,790,000, therefore the annual sinking fund
amounted to ÂŁ177,950, or in dollar exchange (at
that time it was $4.80) it amounts to $854,160,
but the point I am trying to make is this, that each
year the sinking fund went across to Great
Britain. It was invested, as we are told in the
Auditor General's report at any rate, in the actual
payment of the debt. In other words they got it in,
but the following year that amount was not taken
off the principal. I agree with that to a point, but
the following year we sent over more money
paying interest on the debt we had redeemed, and
what is the result? Today I estimate, sometimes I
make mistakes, but I estimate that Newfoundland
has lost $1 million on that sinking fund loan
during the past ten years, because if you take
ÂŁ177,000 and compound it annually at 3% you
will find that if you work it out at present dollar
exchange it will go over $9 million.... In all, we
have paid in sinking fund approximately $10
million, that is if you include interest on it, but
we have only got the benefit today of$8.5 million
on the other side, consequently Newfoundland
has lost by the handling of that sinking fund $1.5
million since 1937.
Mr. Smallwood Would you take that step by
step and explain, if that is so?
Mr. Cashin Take down ÂŁ177,000 yourself and
figure it out for yourself, because you don't
believe what I tell you. Somebody take it down.
ÂŁ177,000 at 3% annually, and compound it for
ten years, and find out what it is and check it with
the present sinking fund in London, and see
where you are. I have gone to the trouble to do it,
and I have had it checked by the bank, and I think
I am fairly accurate. I state now that we have lost
$1.5 million.
Mr. Smallwood Not the mathematical total of
it, but in principle, how did we lose $1.5 million?
1f we have, it sounds like a crime firm has been
committed against the country. Has this country
been robbed?
Mr. Smallwood But it has been done out of $1.5
million. Will you explain it?
Mr. Cashin All right, I will explain it to you.
You have a note agreement for $1,000 and at the
end of the month you pay $100 and you renew it
for another month. Is the bank going to charge
you interest on $1,000 when you go to pay it the
next time? No, on $900, but we have been paying
it out, sending the actual interest on the sinking
fund overto England. I will explain in my opinion
what is happening: the money was sent across to
England and it bought in our principal; when it
went over the next time they were not able to buy
it in, and they did not invest the sinking fund to
bear interest, and that's where we lost money, and
they did not reduce it from the principal. You can
take these estimates for the last ten years and
under the consolidated fund services you will
find that the 3% guaranteed stock for this
amounts to ÂŁ17,790 to date.... I hold that when
that stock was bought in, that the next year when
we bought in ÂŁ177,950 worth, it should have been
deducted off here, and that's where I say we lost
$1 million at least.
Mr. Smallwood Well, is this the picture? To put
it very simply, we will say I owe $1,000, say I
borrowed $1,000 from you...
November 1947 NATIONAL CONVENTION 671
Mr. Smallwood Neither have I, but say you
loaned me $1,000 and I agreed to pay you 3%
interest on that $1,000 every year, so the first year
comes around and I pay you the interest.
Mr. Smallwood Besides that, I am supposed to
put aside so much in the bank to meet that principal of $1,000 in say ten years, so
that is $100 a
year.
Mr. Smallwood The first year rolls around and
I put in $100 for sinking fund, and I pay you the
interest of $30. Is this what you mean, that at the
end of the second year I have put another amount
into the sinking fund, which reduces it by what?
Say the sinking fund is another $100, all right that
reduces it to $800, but I am still paying you
interest on the $1,000?
Mr. Cashin Oh no, you are not, you don't owe
me $1,000 now, you only owe me $800.
Mr. Smallwood Well, in this illustration 1 am
the country, and you are the bondholders in
England.
Mr. Cashin Well, the bondholders don't get the
money.
Mr. Cashin You don't understand it, and your
talk is driving me crazy. You don't understand it,
and it is impossible to drive it into your head.
Mr. Smallwood I am very thick-headed and
very dumb, but I am trying to get this straightened
out. Where has Newfoundland lost it?
Mr. Cashin She has lot it in interest I tell you,
by the trustees of the sinking fund not investing
it when it went over there.
Mr. Cashin They did not invest it at all, and we
have lost interest on it.
Mr. Cashin Sure. When they bought it in the
interest was ÂŁ177,950. The next year when we
sent over interest, the interest was paid into the
sinking fund. The next year they sent over
another ÂŁ177,950, and they might not have been
able to buy it in, and consequently they got on
interest on it, but you are sending interest over.
Mr. Smallwood We are sending interest over,
not on the sinking fund, but on the portion of the
debt that they did not buy in. Is that because they
could not buy it in?
Mr. Cashin I don't know, because here's the
position. We have asked for a statement of account, and the sinking fund, and all
you can get
is two lines in the Auditor' General's report.
Mr. Hickman I don't think the reporter can go
on any longer.
Mr. Cashin I move that the committee rise, we
are getting tangled up in a lot of figures here, and
report progress, and ask leave to sit again tomorrow.
[The committee rose and reported progress, and the Convention adjourned]
