Newfoundland National Convention, 18 November 1947, Debates on Confederation with Canada


November 18, 1947

Report of the Finance Committee: Economic Report Committee of the Whole

Mr. Job Mr. Chairman, I made a few remarks some days ago with regard to this Economic Report, but feel that I should supplement them with a few additional remarks.... First of all, I would like to say that the gloomy and pessimistic viewpoints so courageously and sincerely expressed by Messrs. Starkes, Vincent and Banfield have had the effect of slightly checking, but by no means obliterating my own optimistic view of the future. The gentlemen named have been in closer touch with conditions which are not so readily available to us city delegates. I believe, and certainly hope, that their pessimism is not justified. I can understand that the closer contact they have had with those unfortunate people, who have had a bad experience this year in connection with the fishery, has led them to adopt their defeatist attitude, but the actual all-round facts do not warrant the conclusions they have adopted. Their reference to lack of work in the woods, November 1947 NATIONAL CONVENTION 767 which I did not expect, came to me as a check on excessive optimism. It is evident to me that the Economic Report as presented is too optimistic, and I can only regard it as an excellent sample of a budget such as we might expect to come from an enthusiastic finance minister in a responsible government.
In the remarks I made previously, I stated that I agreed in a general way —please note the words "in a general way" — with the concluding paragraphs of the report, by which I meant those reading as follows:
(1) That Newfoundland is at present a self-supporting country based on sound economic factors;
(2) That all the evidence available to us indicates that this position of self-support will continue in the foreseeable future.[1]
I dislike this word of "self—support", mainly because we have not been asked to say whether the country is or is not self-supporting, nor is it easy to understand the meaning of the term "self- supporting", an opinion I expressed in the short ten page economic report which I myself drafted. In order to place on record my difference of outlook, I would like to quote the concluding paragraphs of the short report referred to, which was rejected by the chairman of the Finance Committee.
Mr. Cashin I rise to a point of order. It was not rejected by the chairman of the Finance Committee.
Mr. Job Which I "thought" was rejected.
Mr. Chairman I understand it was rejected by a majority of members. I understand there were two dissenting members.
Mr. Job I must confess frankly that the Major, as chairman of the Committee, stated the Committee would not introduce the report. If that is not a rejection, I do not know what it is.
Mr. Cashin While I was in the chair, I was only one member — there were nine others.
Mr. Job You were voicing the opinions of the others.
Mr. Cashin That means the others agreed.
Mr. Job They agreed.
Mr. Chairman Apparently the ideas incorporated in your report were not acceptable to the majority of members.
Mr. Hickman The ideas were acceptable.
Mr. Job The ideas were acceptable, but the report was not. It was considered to be insufficient, I suppose. These paragraphs, which as you will see were only conditionally optimistic, read as follows:
Your Committee feels that
(1) Although the economy of Newfoundland has not changed from being an export economy, it has gained considerable strength since 1934 by diversification, and there can be no possible doubt that at the present time, Newfoundland's finances and the earnings of the people are in a healthy economic condition.
(2) There is good reason to believe that in the foreseeable future, except temporarily through a re-adjustment period, satisfactory economic conditions will continue, always assuming that no world-wide collapse occurs.
I would like to make a short reference to the speech made recently by the member for Bonavista East, in which he voiced a very defeatist attitude towards the proposal to approach the USA in an attempt to secure some special tariff privileges. I consider my opinion on this subject, which I have voiced on several occasions, is at least as good as his, and on some future occasion... I hope to discuss this matter at greater length, and to be able to produce some evidence to show that if we can get down to a round table conference there is some chance of arriving at some useful conclusion which might be of lasting benefit to Newfoundland.
I would like to wind up these remarks by suggesting to all pessimists and defeatists that they read very carefully the last annual report made by our distinguished and energetic fellow citizen, Mr. Gerald S. Doyle, which was published in our newspapers a few months ago. I considered it, when I read it, an excellent tonic and cure for pessimism, and it deals with facts from Mr. Doyle's personal experience and close contacts all over the island.
Mr. Fowler ....I have studied the report and I submit that it is as honest and fair a picture of the situation as can reasonably be expected under the prevailing circumstances. I feel that the gentlemen responsible for this report are honest men who have the best interests of this country at 768 NATIONAL CONVENTION November 1947 heart, and are not trying to fool the people as some would try to have us believe. Due to the fact that Major Cashin is chairman of this Committee, he is entrusted with the unenviable duty of steering the report through the committee of the whole. This, I feel, tends to leave the impression that it is his report — in fact I have heard it referred to as such. They seem to forget that this report is submitted over the signatures of seven other gentlemen in addition to Mr. Cashin.... Now, regardless of to what extent any of these gentlemen contributed to the report individually, it is the result of their collective effort and represents the considered opinion of each and every one of them. I realise that their judgement is not infallible; that their estimates may not, in all cases, be accurate; but I submit that if they have erred at all, the error is on the conservative side. We have heard this report criticised, even ridiculed in this House — this, gentlemen, is the easiest thing in the world to do, and no doubt this is why some delegates indulge in it so frequently. But do they offer any alternative? No! They just seek to destroy the significance of this report for their own selfish purposes.
Mr. Smallwood Point of order. He says this report has been criticised, even ridiculed in this House and that those who are doing so seek to destroy the significance of the report "for their own selfish purposes". Now, that is pretty low.
Mr. Chairman That is a conclusion. There seems to be widespread here, for some reason or other, the unfortunate element of dishonesty. I do not know why it should be here at all. Why cannot there be an honest disagreement on any question? If it is the right of one man to view something optimistically, then a fortiori it is the right of any other individual to assume the contrary point of view. As far as I am concerned, Major Cashin and the members of that Committee, all members inside or outside the Convention, as far as I am concerned, are honest men.... Remember that criticism is a very natural thing. It may be favourable or unfavourable, it may be constructive or destructive; but I wish members would refrain from imputing dishonesty or ulterior motives simply because they find themselves in disagreement with opinions expressed by other members of the Convention. I do not feel you are justified in drawing that conclusion.
Mr. Hollett Does that apply equally to men who say a certain report is not an honest report?
Mr. Chairman In my decision, there is no midway position, I particularly stated, between right and wrong. As far as I am concerned, it is not right and it is not proper for any member to impute dishonesty to any other member simply by virtue of the fact that that member happens to express some opinions on a subject which are not universally shared by other members.
Mr. Jackman I think a lawyer can fool some of us and can get away with some disgusting propaganda.
Mr. Chairman My ruling is not open to question or debate. Kindly resume your seat.
Mr. Fowler I respect your ruling. I did not impute dishonesty; I remarked it did appear that way in some cases. I contend that if any person or group of persons sees fit to destroy something, they should be prepared to produce something better in place of it. I doubt very much their ability to do so.
Now, I do not accept this report as a guarantee, but I do accept it as a reasonable picture of our present position, and a reasonable estimate of what things are likely to be in the foreseeable future. The Committee gave us a good review of our industries and their future possibilities. They tell us that the industries dependent on our forests are expanding and that their products are assured of a steady market. Our mining industries are in full production and further development is even now under way. That the great wealth of Labrador will be developed in the not far distant future is common knowledge. We know that the timber resources and water-power of that vast northern dependency are sources of potential wealth which cannot be overlooked. I think that our tourist industry is capable of big development and that, given the necessary encouragement and assistance, may well become one of our chief sources of revenue. Our fisheries cannot be judged by the result of any one branch of that industry in any one season. We must take an overall view of the whole industry and if we do, we must admit that the fishing industry, as a whole, is on a sounder economic basis than ever before. It is more diversified. We are not so dependent on salt cod as we were in the past.... It is true that the Labrador fishery has not been good for the past couple of years, and this is indeed unfortunate for the men engaged. Had they November 1947 NATIONAL CONVENTION 769 secured average voyages, they would have fared well with prices ranging from $10.25 to $11.25 per quintal according to the grade. Those who were fortunate enough to secure a fair voyage had little cause to complain. I am not prepared to hold the Finance Committee responsible for the failure of this branch of the fishery. It is, in my opinion, prosecuted on an uneconomic basis, to say the least.
Mr. Chairman, I accept the conclusions of the Finance Committee as being fair and honest, based on sound judgement, good knowledge and experience. The critics say it is too optimistic. I do not subscribe to that belief. What right have we to instill fear and pessimism in the minds of the people? The order of the day is "nothing for nothing", and we should face the future with optimistic determination.
Mr. Jackman I have listened for the past eight or nine days to the arguments pro and con regarding the Economic Report. First of all, I want to put myself on record as agreeing with it. The people who made up this report are good Newfoundlanders, out to try and do the best they can for Newfoundland. They have no crystal balls to peer into the foreseeable future, as the term has been bandied around here. In fact there is only one country today which possesses that crystal ball, and that is Russia. In Russia today they know what they are going to do for the next five years. I know something about communism. I do not agree with it. I believe in democracy, but I do not think democracy should be put on the spot just because democracy cannot foresee what is going to happen in the next year or two. I heard some of the critics of this Economic Report refer to our finance ministers of the past and their budgets. In 1929 I saw people fall out of windows on one of the richest streets in the world, in one of the richest countries, because of false forecasts.... I had to walk with 14 million of my brothers in the richest country in the world, looking for work. Mr. Chairman, I want to be very brief. I have no wish whatever to retard the session. I want to get it over with. I am fed up with so much of what has been said here. There has been a lot of hot air. Let us get down to facts. I believe that Newfoundland is self-supporting. I will go further and make the belief stronger, and say that right here in this Convention there are men who are satisfied to put their money into Newfoundland. They have faith in Newfoundland, then why should not we? 1 think that as regards our own economy, it is based on a false foundation. I am sure it can be changed. I have to agree with the member from White Bay — there has to be a reorganisation, if you like, of our whole economy. I have faith that the people who employ labour today in Newfoundland are satisfied to do so. In other words, I have faith in labour, in the employer and in all our people, and I am sure we can make Newfoundland a much better place to live in than it was in the past.... I will tell you that there are 42,000 people in Newfoundland today who are thinking out their problems. I believe in responsible government and I believe these people want it. And I believe...
Mr. Chairman You are out of order.
Mr. Jackman I believe in our economy, our people, and I will be a Newfoundlander as long as I draw breath.
Mr. Hollett Just one or two remarks relative to something said here yesterday. There was one thing said by Mr. Bradley in speaking on the Economic Report, he said, "We are not here to espouse any particular cause". I thought we were here to espouse the cause of Newfoundland. We have heard it from Mr. Bradley, we are not here to espouse any particular cause. I would ask members of the Convention to note that. Whether he was referring to any particular form of government or the welfare of the people, I know not. But, according to Mr. Bradley, you must not espouse any particular cause.
Then in his analysis of the figures brought in by the Finance Committee, he did not elect to take 1897-1947. He thought it would not be fair to take in six years of war when Newfoundland enjoyed this false economy. So he put it back seven years, 1890-1939, and by so doing, instead of working out a surplus as the Finance Committee had done over that period of years, of $20 million ... by some manipulation or juggling he made out that this country had a deficit of $20 million. There was one particular statement which I expected Mr. Bradley to say, but which for some reason he did not say. (I wish Mr. Bradley was here today, I don't want to say anything behind anybody's back.) He did not elect to say anything whatsoever about a little war fought between 1914 and l9l8, which war, up to the present time, has cost this country up to $40-50 million. It would have 770 NATIONAL CONVENTION November 1947 been very nice if Mr. Bradley had drawn our attention to that fact. I presume everybody in this country knew there was a war in those years.
One other statement in reference to the bases. Mr. Bradley said, "The base agreement was signed under no compulsion whatsoever". In the first place I would like to point out that the base agreement was signed before the people of Newfoundland knew anything whatsoever about it. And we have been informed by people who were very close to things in those days, that when a couple of our Commissioners, very patriotically I thought, objected to signing these agreements on the grounds that something should have been put into it having reference to a future date when they might be considered, they were bluntly told by the Rt. Hon. Winston Churchill that he would have none of it — sign on the dotted line, or else. If that is not compulsion, I don't know what else to call it. More than that, they were signed without any reference at all to the people of this country. I just wanted to draw these facts to your attention, Mr. Chairman, I don't want them to go undisputed.
Mr. Bradley gave an excellent address yesterday, delivered in a masterly style for which he is well noted. I am not trying to make any defamation of his speech, but I wish to draw your attention to these little things, which may be very important to the future of our country.
Our friend, the Rev. Burry of the Labrador; with all due respect, I think he is more or less what we call half and half, or as we say in London, "an and awf'. He is half in favour of the report and he is half against it. He did say this though, and I got it down: "Those people who drew up this report and agreed with it, were not treating the people in a fair way". Now that compares so closely to a statement which has been made here before, that it was not an honest report, that I have, sir, to draw your attention to that also. "The people who drew up that report gave such a rosy picture that they were not treating the people of this country in a fair way." Now whether Mr. Burry meant to put it in that way or not I don't know, but that's exactly as he put it, and then he did go on to the homes in his own district, in Labrador. He deplored the fact that everybody on the Labrador has not got a Chesterfield instead of a home-made bench to sit or lie on. I think I ought to draw your attention to that because these chesterfields come after many, many years of civilisation, and when they do come I don't know that they add very much to the economy, or peace and happiness of the people who possess them. That is in the offing I thought, as far as Newfoundland is concerned, and as far as Labrador is concerned.
He did speak about unemployment insurance also, and I would like to point out that that unemployment insurance, as I understand it in a neighbouring country, does not touch the fishermen; so that if we are going to have unemployment insurance in this country, get something which is going to be of some help to the fishermen. I grant you that our fishermen have always had a pretty rough time of it, but they were always honest and rugged, and any time when a call came to fight for our King and country, they were the first to enlist. So the hardships and battles of life did not prevent them from being patriotic when it came to the point of defending that which they do enjoy, be it rough and tumble, be it sometimes hunger or whatnot. They did not hesitate at the call to arms, and they did not hesitate when it came ... to lay down their lives.... So I do not think that even the rough times that our people had, have in any way undermined their moral attitude towards life and Christianity, and that is much better, much greater than having a chesterfield in your front room....
I refer you to a statement made by Mr. Banfield yesterday, in which he referred to the people of Fortune Bay. I know a good many people from Fortune Bay, and I know you have not any better fishermen in this country than in Fortune Bay, and that nine times out of ten they make a good voyage, and a pretty good living. I am not saying all of them. In such a precarious trade as the fishery there have to be some failures. There have to be men who get sick during the voyage, and men who don't seem to run into the fish — even neighbours. They make trip after trip and don't strike the fish on the Grand Banks, but when they do they know how to catch it. And the Fortune Bay fishermen are some of the best we have. All right, they have poor years, but is there any reason why, in considering the future of this country and the general aspect of the economy, we should bring up isolated cases of this nature, and try to tell the rest of our people that this is a pretty rotten country to live in? I tell you it is November 1947 NATIONAL CONVENTION 771 highly unfair to the intelligence of our people to bring up these matters. Everybody knows that in this country, as in every other country, there are people out of work. I am told that last fall in the Maritime provinces there were 30,000 people out of work. They had some work in Ontario and Quebec, and as a result 3,000 workers in the Maritimes had to migrate to Quebec to get work. You have it there, in the USA, in Great Britain, and all over the world. Let us look at the general aspect and not pick out a few isolated cases. It is unfortunate that we have those isolated cases, but you will have them under whatever form of government you have to rule this country. You are bound to have them. If the Finance Committee were unfair in painting what has been called too rosy a picture of our economy, if they were not honest in that, does that smack more of dishonesty than getting up and picking out a few isolated cases, and holding them up to our people, and trying to persuade them that this country is rotten at heart?
That's all I have to say, Mr. Chairman. Major Cashin and his Finance Committee have done a good job. The things that were not in the report they left to the imagination of this Convention. They did not think they were talking to a crowd of children. Everybody knows about these isolated cases, and it is much more dishonest to bring in isolated cases, and try to convince our people that all is not right with the world.
Mr. Chairman I wish members would clearly remember that I am not going to permit imputations of dishonesty towards the Finance Committee, any member of the Finance Committee, or any member of this House.... I can express no opinion on the merits or demerits of the report, but in fairness to the compilers, I have to say that it certainly represents an honest to goodness endeavour on their part to present the potentialities of this country as they see them, and the fact that their conclusions may not be universally agreed to by no means lays the foundation for the allegation that they were dishonest in the discharge of what may fairly be regarded as a very onerous duty, to say the least. I hope that I will hear no more suggestions of dishonesty, or imputations of dishonesty....
Mr. Burry Mr. Chairman, I just want to make one short comment in reply to Mr. Hollett. I don't see by what stretch of his imagination he could charge me with even thinking that the Finance Committee was dishonest.... I think Major Cashin and his Finance Committee did that work with all honesty, sincerity and patriotism. I give them that credit, and I only hope that they can give me the credit of being honest, sincere and patriotic in my criticism.
Mr. Smallwood Mr. Chairman, I said last night that I had no intention of making any further contribution to this debate, and I don't intend to make a speech now. There are just two points made by Mr. Hollett in comment on the speech delivered here yesterday by Mr. Bradley, upon which I would like to offer my own interpretation. Mr. Hollett referred to the fact that Mr. Bradley took a period of 50 years of the government's history, beginning 1890 and ending 1939, leaving the war, this late war, out of the picture altogether. Surely it was clear to everyone who heard that speech that Mr. Bradley did that for a purpose, that he named his purpose, he described his purpose; he was examining the contention of the Economic Report that our present revenues are due to anything but the war.
Mr. Chairman As a matter of fact, on that point Mr. Miller rose to a point of order and I ruled on it, and said that it was obvious that he was setting out to prove that very thing, or trying to prove it.
Mr. Smallwood Yes, he pointed out how the Economic Report was claiming that our swollen revenues are due to anything but the war.... That was the whole point he was making, to show that the report was wrong in its conclusion, he giving his conclusion that the war did swell these revenues.
I would not be attempting, Mr. Chairman, to make any comment whatever on Mr. Bradley's speech if it were not for the fact that he is not here. He had not been out of doors for two weeks when he came here yesterday. He came here, delivered his speech and went back immediately to his room and had to change every stitch of clothing — he was soaking wet. He is not at all well.... Just this point about the government in 1941 signing the bases agreement with the United States government. Mr. Bradley said they had not done it under compulsion. I remember that he did say that, and I remember also that I got this impression from what he said: that it was not under the compulsion of the United States government, and I agree with him completely. The Government of 772 NATIONAL CONVENTION November 1947 the United States did not compel Newfoundland to sign that bases agreement. That is all I want to say in comment on what Mr. Hollett said. But a few days ago I gave notice of two questions to His Excellency the Governor in Commission. The replies have just arrived, and have been placed on my desk by the Secretary.
Mr. Chairman Do they have any bearing on this?
Mr. Smallwood Oh entirely, sir. If you remember, I gave notice on Thursday past that I would ask His Excellency the Governor in Commission to furnish the Convention with a statement showing the amount of the accumulated cash surplus of the Government of Newfoundland, up to 31 March, 1947. You will remember my reason for asking that question. Mr. MacDonald from Grand Falls drew the attention of Major Cashin to the fact that whereas in the Economic Report it was stated that our surplus is $35 million, there were other statements appearing in print saying that the surplus was $28 million. Major Cashin explained why he put the figure in the report, or why his Committee put it in the report, at $35 million. He hoped that the house was satisfied with his explanation. Apparently it was, with one exception. I was not satisfied, and I said so. I therefore gave that notice of question to the Governor in Commission, to ask what is the amount. Is it $35 million? Is it $28 million? Or what is it? Here is the reply, sir.
Mr. Chairman May I see it first? I am not questioning that, but is there a covering letter?
Mr. Smallwood Yes sir, there is a covering letter.
Mr. Chairman This is in reply to the question forwarded on my instructions under rule 39, by letter of November 15 to the Secretary of Finance. All right.
Mr. Smallwood I will now read from the reply: The accumulated surplus revenue at 31 March, 1947, was $28,645,800, distributed as follows:* That is cash at St. John's, and cash at the Crown Agents invested in sterling securities, provisionally earmarked for the redemption in 1950- 52 of sterling debt amounting to $3,200,000.
Loaned free of interest to His Majesty's Government in the United Kingdom, $7,300,000. Advances to finance dollar expenditure by His Majesty's Government in the United Kingdom, $200,000: a total of $28,600,000.
And then there are two notes, Mr. Chairman:
Note No. 1: The figure of $28,789,000 given in the budget speech was subject to audit. The figure of $28,645,000 now given is based on audited figures.
The second note has to do with the loan free of interest to His Majesty's Government in the United Kingdom, that is $7.3 million dollars. The note on that reads:
Note No. 2: In addition to this loan made out of revenue, a sum of $1,800,000 derived from the proceeds of the sale of savings certificates has been lent free of interest to the United Kingdom government.
I asked, you may recall, for the figures for the 31 March last, and also for the 31 December last, and their reply is that the figures for 31 December are not available. I don't know if Major Cashin has had a copy of this sent him or not.
Mr. Cashin No, I don't need it. I don't require them, I know all about it.
Mr. Smallwood The accumulated surplus at 31 March was $28,645,800. Now the sinking fund. I was rather shocked by the statement of Major Cashin that Newfoundland has been plundered of an amount of $1,750,000 on our sinking fund. If that can be shown to be true, the persons responsible must go to gaol. If anyone has plundered Newfoundland of $1,750,000, the guilty parties should go to gaol or there is no justice.
Mr. Cashin I agree with you.
Mr. Smallwood So being shocked and surprised by that rather startling statement I gave notice of another question to His Excellency the Governor in Commission, to give us an account of the creation, nature and operation of the sinking fund against the guaranteed stock, that is against our sterling debt, the debt that is guaranteed by the mother country. The answer reads as follows:
The Sinking Fund, Newfoundland 3% Guaranteed Stock, was created under Section November 1947 NATIONAL CONVENTION 773 3, Sub-section 3, of the Loan Account, 1933, which reads as follows: 'A sinking fund equivalent to 1% per annum of the total nominal amount of stock shall be established under the control of trustees to be appointed by or with the approval of the UK Treasury. The first payment to the fund shall be made at a date to be approved by the Treasury, not being later than the first day of July 1938, and the Sinking Fund monies and the income arising therefrom shall, subject to payment thereabout of the expenses of management of the fund, be applied for purchases of stock, or be invested in such of the securities as may from time to time be approved by the Treasury.' Under these provisions, trustees, the holders for the time being of the post of Permanent Secretary to the Treasury, Permanent Under-Secretary of State for Commonwealth Relations, and Governor of the Bank of England, were appointed by His Majesty's Treasury in the United Kingdom. The annual payment to the Fund was established at ÂŁ178,000 sterling, the first payment being made in June 1938.
Nature of Fund: The Sinking Fund is a cumulative fund which will provide for the redemption of a substantial proportion of the stocks at maturity.
Operation of the Sinking Fund: Payments of ÂŁ178,000 sterling have been made in each year since 1938 for credit of the Trustees' Account. The total amount of these payments up to 30 September, 1947 is, in sterling, ÂŁ1,780,000, which is being applied in purchase of the stock.
Mr. Chairman What did they mean there, "for redemption"?
Mr. Smallwood No sir, it does not mean that. I will explain in a moment. None of the stock has been redeemed. Under the covering statute, income arising from the income of the stock is held by the trustees. This has been applied in purchase of the stock. The total nominal amount of stock held by the trustees at 30 September, 1947, was, in sterling, ÂŁ2,071,477. At $4.04 to the dollar that is $8,368,000. That last figure is not my own computation.
I would like to say a word or two about that sinking fund. To begin with I want to say this: that in all the many years that we had a government in this country down to 1934, we borrowed many millions of dollars, but in all those years such a thing as a sinking fund, judging by their actions at least, never entered the minds of any of our governments. They just borrowed year after year, hoping that when each of the loans was gone through, either there would be a windfall or a stroke of luck, or else that they could go out on the market and borrow more to pay off the old loan as it came due; but there was no sinking fund. The first sinking fund was established in 1933 by law, and came into operation, as this reply tells us, in 1938. Now the idea, as I understand it, of a sinking fund is this: if a government goes out and borrows $5 million or $10 million, or any amount, for 20 years, or 25, or 30, or 50 years, they have to pay interest on that loan every year until it matures. But when it matures there should be some other money accumulated, saved up, in a pot or a sinking fund, to meet the loan when it comes due. If not all of it, then as much of it as is humanly possible. If you have 20 years to go, then in that 20 years pour into your sinking fund as much as you can scrape together, so that when the 20 years are up and the loan falls due, you will have something saved up to pay on your principal. And so in 1938 a debt of some ÂŁ70 or ÂŁ80 million sterling, held in England, was guaranteed by the government's own sinking fund. The loan comes due in 1963. Newfoundland has got to pay off that loan in 1963; she has to go out on the market and buy more money to pay off the old money, or she has to have a sinking fund.
Now Mr. Chairman, when you come to create a sinking fund there are two ways to do it. You can set aside so much a year, say 2%, or 5% of the principal, and every year you will pay it to the sinking fund.... What they did in this case was make it 1%. But 1% from 1948 to 1963 when the loan would fall due would be what?.... You pay 1% into the sinking fund every year for 20 years, from 1938 to 1963, and all you have saved up in our sinking fund to go against your debt when it falls due is 25%, and there is 75% left. So here is what they did. They appointed these trustees — one man from the Bank of England, one man from the British Treasury, one man from the Dominions Office. They are a board of trustees, representing whom? Representing the Government of Newfoundland and the bondholders, 774 NATIONAL CONVENTION November 1947 trustees for both, and their job is to administer that sinking fund. What they do is this: the government pays the 1% — £178,000 sterling — into the sinking fund. The trustees take that £178,000 and they go out on the market and go to John Jones and Thomas Smith or John Brown in England. John Smith is a man who has a Newfoundland bond. He owns that bond, he has paid for it, but he now wants to turn that bond into cash — he wants to sell it, so the trustees buy the bond from him, and they buy all the bonds they can get every year, up to the value of over $750,000, up to £178,000 sterling. In other words, when the Newfoundland government pays the trustees that 1% every year into the sinking fund, the trustees use the money to buy those very bonds. Now when they buy them, they own them, and the position today is that the trustees have bought year after year more and more of our Newfoundland bonds. But these bonds were not cancelled.
Mr. Chairman That was what I was asking you about.
Mr. Smallwood Yes, sir. They were never cancelled. They are not going to be cancelled until 1963, when they will all be cancelled. They will all be cancelled then, but until then the trustees every year take that 1% and use it to buy Newfoundland bonds in England from anyone who wants to sell them.... Every year when the Newfoundland government pays interest on that £17 million sterling of our guaranteed stock, the interest goes to the bondholders. Who are the bondholders? No. 1, all the public of England who happen to buy those bonds. No. 2, the trustees of the sinking fund. There are two classes of bondholders now — the public and the trustees of the sinking fund. The trustees receive their interest every year. What do they do with that interest? They don't put it in their own pockets. They use that interest to buy still more bonds. All that income from the sinking fund, whether it be the 1% they get from the government, or the 3% interest on those bonds that they buy, all that income goes to buy still more Newfoundland bonds, so what is happening? What is happening is this: the sinking fund is growing every year. It is growing on the one hand, and on the other hand the number of public bondholders is falling year by year. Carry it on long enough, and finally our whole public debt would be owned by the trustees, because they will have bought it in from the public. Is that good for Newfoundland or bad? That is the crux of the matter.... I claim it is a good thing to build up a sinking fund as much as you can, and have so much saved up to meet the whole principal when it comes due in 1963. Let us say they could have adopted half a dozen other ways of handling that sinking fund. The question is not whether that the right way, the best way, the question is who is doing the plundering, and how is the plundering being done?.... I for one am heartily sick ... of hearing statements made that the government — whom I do not like — is plundering and looting when it is not true and cannot be proved. I challenge any man to prove to us ordinary, simple-minded Newfoundlanders that the sinking fund of $1.75 million was plundered out of this country. I say now, on the authority of this document which is the official answer of the government, that every year since 1938 the trustees of that fund have used that money to buy in Newfoundland bonds. The Newfoundland government is paying interest on the bonds the same as they pay any other bondholder, and that interest is used by the trustees to buy still more bonds and pile up the sinking fund and make it grow as fast as possible, so when it comes due in 1963 they will have a good sizeable amount accumulated in the sinking fund to pay over. I say not one cent has been robbed. Not one cent has been plundered. The statement has been made that Newfoundland has been plundered of $1,730,000. It is a shocking statement.... If that kind of statement is allowed, and it has been going on for two years, you cannot blame the people for believing it, if it is not contradicted. There is as much truth in that accusation as there was in all the wild crazy statements that have been made in politics in the last 25 years about plundering, looting and graft. It is not made surely, without any sense of responsibility; surely not made in calm, reasoned tones or feelings, surely not. If Major Cashin can prove to us — he does not have to prove it, all he has to do is to give us a good case.
Mr. Chairman I want to remind members that we are not sitting as a court of judicature. We are a fact-finding body.
Mr. Smallwood I agree with your remark ... we are a fact-finding body. One of the facts is, has Newfoundland been plundered of $1.75 million November 1947 NATIONAL CONVENTION 775 in our sinking fund? I say that statement is not true on the basis of the reply. Not a cent has been plundered, and in common fairness that statement must be proved or it must be retracted. We must draw a line somewhere with these charges of graft, of corruption and plundering. Talk of faith — how can we have faith if $1.75 million can be robbed and nothing done about it? Or if we can sit back and smile, as if the amount plundered is so much chickenfeed, and is so commonplace that we can afford to take it in our stride and forget about it? I am not going to forget about it.
Mr. Chairman What steps can the Convention take in the matter? If there has been any suggestion of criminal libel, that is a matter of no concern to me or to the Convention. The person or persons who made it, if called upon to prove it or otherwise, would have to go before a jury of peers. We are not sitting as a court of trial. I am Chairman of a fact-finding body. I wish all reference to libel would be dropped, as there is no suggestion that we are going to try it.
Mr. Smallwood I am not suggesting legal action, I am suggesting this: Major Cashin made the statement in public session ... that Newfoundland has been plundered of $1.75 million in our sinking fund — a most serious, grave, shocking statement, calculated if not disproved, if accepted as truth, to undermine all confidence and all faith in Newfoundland. Therefore what I suggest is either Mr. Cashin should proceed to prove his statement or withdraw it.
Mr. Vardy I see absolutely no reason whatever for Major Cashin to prove his statement. Mr. Smallwood has not proven that Major Cashin was incorrect. He has not shown us how much of the sinking fund was spent in England to redeem or buy up Newfoundland bonds. That document does not state that. Therefore he has not proven whether or not we lost money. Mr. Smallwood has not proved that Major Cashin was wrong when he said we had lost $1.75 million.
Mr. Chairman Again I want to remind members that as far as I am concerned, so long as the proprieties of debate are observed, no member is going to be placed in a position where he has to defend his opinions. Major Cashin has expressed an opinion. If he chooses to defend that opinion, that is a matter for his discretion. Certainly as far as I am concerned, the question as to whether or not he proves it or disproves it is entirely up to himself. Again I want to say the proof of any statement made here, libellous or otherwise, is a matter with which I have no concern as a Chairman of this Convention.
Mr. Miller I wonder if each member will be supplied with a copy of the government's answer? I would much prefer to read it myself.
Mr. Chairman I will have them tomorrow. I am assuming that Major Cashin will wind up the debate by dealing with questions directed to him during the course of the debate. Therefore ... I would like it to be understood that if no member occupies the floor, I will assume that no member desires to address himself further on the Economic Report. I will thereupon call upon Major Cashin to wind the matter up. If any member has anything to say on the Economic Report, I wish he would take the floor.
Mr. Cashin In view of the fact that there are several questions outstanding to which I have not received answers, I am not in a position to go ahead and finish this aftemoon....
[The committee rose and reported progress and 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:444. [Volume II is not in The Confederation Debates Collection]
  • *
    Cash at Bank of Montreal, St. John's $17,000,000
    " Crown Agents for the Colonies 900,000
    Total Cash $17,900,000

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