Report of the Ottawa Delegation
Proposed Arrangements for the Entry of Newfoundland into Confederation
Committee of the Whole
Mr. Smallwood Mr. Chairman, we adjourned
on Thursday last with the thought that today we
would deal with prospective expenditure and
revenue of the government of the Province of
Newfoundland, should we become a province of
Canada. It was understood that I would bring in
today some figures and statistics that might indicate generally the expenditure that
the provincial
government would need to make, and also the
revenue that it might expect to take in to meet
those expenditures.
On their desks, members will find the first part
of that estimate,
[1] namely the probable expenditures of the provincial government of Newfoundland. On
the revenue side I have not, as yet,
had the figures mimeographed. I have them here
in front of me. Before we can get to a consideration of the revenue side they will
be
mimeographed and placed on the desks of the
members. I ought to make one or two points clear
before we come to an examination of the expenditure table.
The first point is this: that confederation does
not mean that Canada would take Newfoundland
over and run it, because Canada is a federal union
of nine provinces — Newfoundland would make
the tenth. A federal union, wherever it does exist
in this world, means only a sharing or dividing of
responsibilities and powers; so that confederation would mean that the powers which
our
government now has would be divided. We
would have some powers, and the Government
of Canada would have some, and the responsibilities and burdens our government now
has
would be divided. Our government would carry
some of the burdens and the Government of
Canada would carry some. Now, confederation
may or may not be a good thing for this country.
One thing, however, is fairly clear, that if there
are advantages from confederation for the people
of Newfoundland, confederation is still not a
good thing if the government of the Province of
Newfoundland is not able to pay its way. Or put
it this way: we might get many advantages from
confederation. These advantages might be considerable, but they will all fall by the
way if the
government of the province is not able to collect
enough revenue to pay the cost of those things
which the government of the province would still
have to do, even with confederation. Not only
that, the government of the province must be able
to pay its way without imposing too great a
burden of taxation on the people; without costing
the people too much in taxes; and again without
stinting on those public services, which the
government of the province would have to
carry.... The government of the province would
still have its public services to render to the
people of Newfoundland. Confederation, therefore, to be of real benefit, must not
only give the
people of Newfoundland certain advantages and
benefits from the Government of Canada; it must
December 1947 NATIONAL CONVENTION 961
also be possible for the government of the
province to carry on provincial government services without diminishing them, without
reducing the level and standard of public service; and
to do that without imposing on the people too
heavy a burden of taxation. In other words, the
total amount of taxation that is placed on the
people of Newfoundland ... must be such as they
can carry without too great a burden; and in the
second place that burden of taxation put on them
by the Government of Canada and the Government of Newfoundland together, must fall
equitably and fairly upon them, and above all must
not constitute too heavy a burden for our people
to bear. Now the question is, can the Province of
Newfoundland, should we become a province,
pay its way? That is what we are met today to deal
with.
Now I am not a prophet, nor am I the son of a
prophet, and when I was born I was not given the
gift of second sight. I cannot see through a stone
wall more than any other man, and in these
figures which I have tabled today I am not
pretending that these are and must be the exact
expenditures of the Province of Newfoundland....
The amount may be larger and may be smaller. I
based these figures upon common sense, and
upon what knowledge I have of the public services of Newfoundland as they exist today,
and
are likely to exist under confederation. With these
criteria as a yardstick, I hold that the government
of the province can and will pay its way, balance
its budget, and do it without imposing too heavy
a burden of taxation on the people, and without
reducing the standard or level of public services.
Sir, what I have done is this. I have divided the
public finances of this province, if we become a
province, into two classes: on the one side expenditure, and on the other hand what
money the
government is likely to take in year by year to
meet these expenses. I have done something else.
I have taken a period of eight years for both.... My
reason for that is that one clause of the terms
offered by the Government of Canada provides
that within eight years of union that government
will appoint, not might, or may, but will appoint
a royal commission for the purpose of looking
into our financial condition; that it will examine
and reassess our financial position to learn
whether the subsidies from the Government of
Canada are large enough or not; whether we can
go on for more years into the future with the same
subsidies, or whether these would need to be
increased. As, therefore, our whole financial
position would be reviewed and reassessed
within eight years of union, I hold that at the least
we must see our way clear to balancing our books
and breaking even for eight years at least....
Therefore my figures are based upon a period of
eight years, and I have gone a step further; I have
taken the eight years and divided them in two,
having therefore two periods of four years each,
and the house will see, as we go on, the reason
why.
I hope after that preliminary explanation that
the members have their copies of the current
estimates before them, because this whole document now on your desks of probable expenditures
by the Government of Newfoundland as a
province is based upon the actual estimates of the
present government for the present fiscal year,
which ends on March 31, 1948. In my memo, on
the first page, it states, no. 1 — Mr. Chairman, I
notice that many of the members have not got the
current estimates before them. I believe in the
Secretary's office there is a pile of them, and it
might be a good idea if they were secured and
distributed to the members so that they could
follow the thing a little more intelligently than
they could do otherwise.
Mr. Smallwood If there are not quite enough to
go round it might be possible to share between
two or three members, considering that some
members already have copies of it here now.
As the first page is rather simple, I will
proceed with it even while we are waiting.... In
the estimates you pass by everything until you
come to item 3, namely "War loan if $1.5 million
at 3.75% interest, $56,250 a year interest on that
loan", "Victory loan...total interest per year
$265,000." That of course refers to the public
debt that would be Newfoundland's public debt
if we became a province. The terms say that
Canada would take over the external public debt;
the internal public debt, that is, what the Government of Newfoundland owes the people
of Newfoundland, the Government of Newfoundland
would hold on to, and to pay the interest on that
each year would be $265,000. Then, "Sinking
and redemption funds on the first war loan of $1.5
million... grand total per year of $376,250." That
962 NATIONAL CONVENTION December 1947
is the first item of expenditure that the government of the province would have to
meet.
Then turn over to page 17, incidentally on
page 16 you will see why this is not in my
memorandum, these things are not federal. The
federal government will pay the salaries of the
Governor, and of the two judges of the Supreme
Court, and the salaries of the magistrates of the
District Court. All these would be paid by the
Government of Canada, so that brings you to
page 17, Department of Finance. You see what I
have done there.... I ought to say, in connection
with those items, that the Department of Finance
would naturally be a smaller department than it
is today, because so many things that department
has to do now would then be done by the Government of Canada.... The same thing applies
to the
Comptroller and the Auditor General.
Then we pass on to the next page. "Travelling
and miscellaneous expenses — $4,700. General
contingencies. Rental, statistical machines —
$4,500." The explanation of that, of course, is
that the machines are costing more than that to
rent, but the same machines would be used for
both federal and provincial purposes. There
would be no need of putting in additional
machines, and that would cut down the cost to the
province. "Printing and Publishing...$287,698 a
year."
Mr. Hollett Mr. Chairman, I wonder would
Mr. Smallwood mind if I asked him a question
on that point?
Mr. Smallwood I would appreciate, Mr. Chairman, if Mr. Hollett, and other gentlemen in the
Convention, would permit me to run through the
entire lot. The members have just had it before
them, and the longer they have it before them the
better they will be able to follow it, and to put
questions. For that reason, if the House would
permit me to read through the entire document
and members make notes as they go, I think we
would get further ahead.
Mr. Chairman Would you mind, Mr. Hollett,
just making a note at this time?
Mr. Hollett In that figure of $287,000, under
this heading of the Department of Finance, there
is an amount of $186,698. I see what Mr. Smallwood has done. In the Black Books, he
has taken
$101,000 from provincial expenditure and
passed over to Dominion expenditure, now he
has passed it over to provincial expenditure
again. That was the question I wanted to ask you.
Why?
Mr. Smallwood The reason is that the other
table in the Black Book is one we drew up before
we went to Ottawa at all, and before we knew
what we know now. Knowing what we knew
then, we thought that civil servants that the
Canadian government would take over, would
have their pensions paid by the Canadian government, whereas the actual position is
that civil
servants on pension now, or up to the date of
union, will continue to have their pensions paid
by Newfoundland; but the Government of
Canada will pay civil service pensions to its own
employees in Newfoundland when they come to
be pensioned, for the time that they will have
been working for the Government of Canada, but
for the period preceding their becoming federal
employees the provincial government is to pay
their pensions.... I will pass on to the Department
of Home Affairs. Then the Department of Education. I have taken the entire vote of
that department, and if you turn to page 39 you will see the
grand total vote this year of the Department of
Education, which is $3,622,300. That includes an
amount of $500 in reconstruction for the...
Mr. Smallwood I beg your pardon, isn't that
what I said? $500,000 for the erection of new
schools, and reconditioning of old ones, is included in that $3,622,000. I have eliminated
the
half a million dollars from the vote, although it is
not to be supposed that eliminating it in my table
that there is any idea that the half a million dollars
would not be spent; it would come under another
heading...
Mr. Hollett Excuse me. under what other heading would that $500,000 come?
Mr. Smallwood Under any heading that the
government of the future cares to put it under.
That is entirely a matter of government policy.
Mr. Smallwood We will deal with that when we
come to revenue. We are dealing only with what
the Government of Newfoundland, as a province,
would spend. When we come to the question of
where and how the government would get the
money to meet these expenditures, then we will
deal with that in whatever detail you like.
Mr. Hollett Excuse me, but it would be an expenditure wouldn't it?
December 1947 NATIONAL CONVENTION 963
Mr. Smallwood Because it is not ordinary expenditure; even at the present time, it is
reconstruction expenditure.
Mr. Hollett I see, you have another budget for
that have you?
Mr. Smallwood It does not follow at all. Now
the Department of Justice. "Administrative
$48,906...Supreme Court, $27,934." That, of
course, does not include the salaries of the judges
of the Supreme Court, the federal government
would pay that. These are other expenditures of
the court which the Government of Newfoundland would have to pay: "14 assistant
magistrates — $38,374 a year." The reason for
that is that in the estimate you will find under
4 (1), under the heading, "Magistrates", seven
district magistrates, and then you will find, 14
assistant magistrates. As these seven district
magistracies would become county courts, or
district courts, and be paid for by the federal
government, Newfoundland would then have to
take care of the 14 assistant magistrates. So here
in this table of mine, "14 asst. magistrates —
$38,374 a year, three shorthand typists...".... The
penitentiary is the $69,533 that we are presently
spending, but the difference between $69,500
and $34,500 is accounted for by the fact that the
cost of operating the penitentiary would be
shared by both governments, which would represent a saving to the Government of Newfoundland.
"Travelling Magistrates — $17,900" ...
Mr. Hollett Excuse me, I take it the 14 magistrates are going to do more travelling than the
21
do now. Is that correct?
Mr. Smallwood No, that is not all travelling of
magistrates.... The total vote is $22,900, and I
have reduced it to $17,900, because seven of
these magistrates would become county court
judges, and they would do less travelling than
assistant magistrates, because they are established mainly in the urban and industrial
centers,
whereas the assistant magistrates are stationed
along the coast, and have much more territory to
cover.
Mr. Smallwood B-5 in the estimates? $17,000,
and that is for the travelling of magistrates,
Mr. Smallwood No. It is that whole vote of
$22,900, reduced to $17,900 by the reduction of
$5,000 to account for the travelling costs of county court judges. I have taken the
whole vote in the
estimates here and reduced it merely by $5,000....
"Penitentiary Supplies, etc. — $10,000." That is
reduced from $45,000.... "Court House,
St. John's...$1,053,409".
Then next, the Department of Natural Resources. This will take a little more explaining,
because there will be great changes under
confederation in that department.... The total vote
for Agriculture, that is salaries, is $76,942, but
items A-4-8-9-10 would be federal. They would
be for the government experimental farm, which
would become federal, and therefore these
salaries are to be omitted from that vote. There is
a note here on page 4 of my memorandum which
explains that.
Division of Land Development, Ranger Service, note 2, explains that. We have, in Newfoundland,
84 Rangers. Any province gets from
the federal government numbers of Royal
Canadian Mounted Police. The Government of
Canada charges $1,000 a year to a province for
each Mounted Policeman, the full cost to the
province. It costs the Government of Canada
much more than that.... We can get 50 of them,
but that does not mean 50 existing RCMP being
brought into Newfoundland from Canada. It
means that 50 of our Rangers can be enlisted in
the RCMP, given their training and stationed in
Newfoundland, and they will cost $50,000. Now
that reduces the number of Rangers from 84 to
34, and the saving is $278 per man on 50 men,
which brings the vote for Rangers down to
$93,540, and you will get the same a little further
down when it comes to supplies, etc., for
Rangers. There is also a reduction there.
"Division of Crown Lands and Surveys —
$l7,090..."
Mr. Hollett Excuse me, before you go on, have
you an item of expenditure for the training of
these 50 men?
Mr. Smallwood No, it would not be a provincial
expenditure, it would be federal. The training of
RCMPs is done by the federal government,
which pays for it.
Mr. Higgins Mr. Smallwood, it is not very important, but wouldn't it be $1,200 instead of
$1,000 per man?
964 NATIONAL CONVENTION December 1947
Mr. Smallwood My understanding is $1,000,
but I was speaking from memory. It may be
increased to $1,200, I have not heard that.
Mr. Smallwood Well, that would make a slight
difference in this particular vote. Instead of
$93,000 it would be something over $100,000.
"Division of Crown Lands and Surveys."
Now I have down $17,090, and in the estimates
it is $33,000, and the reason is that items 74, 75
and 76 and 77 would be federal. They would be
employees of the federal government, and paid
for by the federal government, which would
reduce the vote to what it is here, namely
$17,090.
"Co-operative Division...Division of
Fisheries, $112,442." That takes quite a bit of
explaining, Mr. Chairman. The Division of
Fisheries in the estimates amounts to $926,000,
almost a million dollars, and it is reduced here to
$112,000. Now the reason is this: many expenditures would be federal and not provincial.
The
cost of these services would be paid by the
Department of Fisheries in the Government of
Canada....
Ranger Division. Now there again a saving is
made in the vote for the Ranger Division. The
total is $92,500. You can see what it is.... That
total vote is for 84 Rangers. You take 50 Rangers
off, because you don't have 50 Rangers, they
become RCMP, and the total comes down to
$37,500 on the province.
Mr. Hollett While you are on that point, the
provinces don't have the RCMP unless they want
them?
Mr. Smallwood Well, to begin with you are
right, they do definitely put a number of RCMP
into each province to fulfill certain federal police
functions.
Mr. Hollett ...But that does not reduce the number of Rangers does it?
Mr. Smallwood No, but over and above the
number here for federal purposes there would be
a number for provincial purposes, rented or hired
by the province.
Mr. Higgins You have no definite assurance
that you can get them?
Mr. Smallwood No difficulty at all in getting
them, Mr. Ilsley assured us of that.
Mr. Smallwood It is Canadian government
policy. It is normal policy, there would be nothing new in it.
Mr. Higgins There was no assurance that I
knew of that you could get them.
Mr. Smallwood It may be that Mr. Higgins has
no knowledge of such assurance. I can't say that.
I have it.
"Division of Crown Lands and Surveys,
$26,400".... That reduces that vote from the
$120,000 that it now costs us down to $26,400,
because the federal government would carry the
rest. "Expenses of Trade Commissions... ships
built". Now it was said here in the Convention
some days back, I think by Mr. Crosbie, that the
federal government pays a ship building bounty.
I confess I have no knowledge of that, and
whether they do or not I have included here the
full bounty on ships, which is $140,000.
"Labrador operations..."
Mr. Northcott Mr. Chairman, as we have only
one stenographer we should have a few minutes
recess.
Mr. Smallwood Yes, well as this is nearly completed I thought we might finish. "Encouragement of
Agriculture".... The total expenditure for
the Department of Natural Resources would be
$1,279,500.
[Short recess]
Mr. Smallwood Mr. Chairman, when we had to
recess we had just finished the Department of
Natural Resources. On the bottom of that same
page is the Board of Liquor Control, $134,100,
and then we have only two departments left, the
Department of Public Works and the Department
of Public Health and Welfare. "Department of
Public Works, Administrative... Building
Division". Note 1 at the bottom of the page
attributes one quarter to be paid by the other
government.... Public Buildings ... one third of
the total vote to the federal government, leaving
two thirds to be met by the provincial government. "Roads $1,270,000.... Printing,
Stationery,
etc." ... one third of the vote to the federal government, leaving $165,000 to the
provincial government....
Department of Public Health and Welfare,
"General Hospital, $295,446." Now you will
notice in the estimate with regard to the General
Hospital that they have deducted an amount of
$50,000 from the vote for staff that they have not
got, but I have included that $50,000, and I have
December 1947 NATIONAL CONVENTION 965
kept the whole vote for the General Hospital to
the top, namely $295,000.... Sanatorium, the
same thing applies there, in the estimates the
government has taken off $65,928 for a staff that
they have not got, but I have kept that in.... Public
Health Laboratory, $32,634, and I ought to explain that the scientific laboratory
down in Maggotty Cove is paid for by two departments of the
government, one is the Department of Public
Health and Welfare. They spend $32,000 to
maintain that laboratory, that is the personnel
down there who work in the department, and the
remainder is operated by the Department of
Natural Resources, and as such that part of it
would be federal, and so it was not included in
the Department of Natural Resources, this
amount is included under Health and Welfare....
Anti-TB service, $47,749. Well, the same
thing applies there as in the General Hospital and
the Sanatorium. The government, in their present
estimate, have deducted $17,000 from the
amount for the anti-TB service for help that they
have not got, but I have included the full amount,
making it $47,749.... "Assistance to Indigent Persons, $750,000." Now there is a note
at the bottom. That $750,000 is one quarter less than is
voted in the estimates of the government for the
present year, and that is deducted because of the
fact that when family allowances and old age
pensions are paid to so many, many thousands of
people in Newfoundland it is a fair assumption
that the vote for indigent persons will not be the
$1 million that is in the estimates this year, but
$250,000 less than that; and I think I am being
very, very conservative when I lop off only
$250,000, in view of the fact that something like
$11-12 million will be paid over to the
Newfoundland people by the Government of
Canada in family allowances and old age pensions... "Allowances to Widows", There
again, I
think we would be justified in lopping off some,
in view of the many millions of dollars that will
be spent by the Government of Canada in social
welfare here in Newfoundland, but I have not
lopped off any. "Old Age Pensions." The estimate is 10,000 old age pensioners who
would
receive $30 a month. Of that amount $7.50 a
month would be paid by the Newfoundland
government, and $22.50 a month by the Government of Canada. Well, 10,000 old age pensioners
at the age of 70 and over at $7.50 a month by the
Government of Newfoundland would be
$900,000. Now, we have in Newfoundland
something over 12,000 persons of 70 and over
who, from the standpoint of age at least, would
be eligible for the pension, but I estimate that
2,000 of the 12,000 would probably not be
eligible because they would not meet the other
tests, namely their income, so I put it at 10,000
who would be fully eligible for old age pensions,
and 10,000 of them at $7.50 a month from the
Government of Newfoundland would be
$900,000. "Hospital and other grants." There is a
note 6 in addition. It refers to orphanage grants,
$46,200. That's the full vote that the government
now gives, but it is to be noted that in addition to
that $46,000 a year that our government gives
orphanages, that the orphans themselves would
receive family allowances. "Maintenance and
Equipment of Hospitals and Institutions,
$859,000." It is now something over $1 million
that is voted, but I have lopped off an amount
from that, one third in fact, on account of the
savings and economies that would result from
confederation ..... "Ambulance and Transport
Service...Genera1 Public Health", and from that,
sir, I have deducted, according to note 8,
$100,000 from L-13. The whole vote for that is
$465,000 the government has voted this year, and
from that I deducted $100,000, making the vote
therefore $365,500, and the total vote according
to this estimate, for the Department of Public
Health and Welfare per year is $5,214,868.
And so, sir, we come to the Recapitulation.
"Public Expenditures of the Government of Newfoundland if we become a Province of
Canada....
Grand Total, $14,188,775 a year." That is the
expenditure of the provincial government of
Newfoundland per year — $14,188,000. But if
we were a province we would have our own
House of Assembly, and these members of the
House of Assembly, whatever number they
might be.... I estimate $200,000 a year to cover
the cost of the legislature of the Province of
Newfoundland and then I add on to all that
$750,000 to cover increased expenditure by the
government, and to cover new services which we
have not got yet, but which we are going to have,
and which will cost so much a year to operate. I
have added $750,000 for that for the first four
years of union, and the grand total, then, is
$15,138,000 as the amount that the provincial
966 NATIONAL CONVENTION December 1947
government would spend each year —
$15,138,000 a year to cover all expenses of the
Government of Newfoundland each year for the
first four years of confederation.
The figures given are an estimate.... On the
average to spend $15,138,000 a year for the first
four years.... Now we come to the second four
years. We start off with $15,138,000, and I add
to that another $500,000 a year to cover increased
expenditure and new services, so that on existing
ordinary expenditures of the government, on
things that would be provincial if we became a
province, I have added for the eight years
$1,258,000, added on per year for the first eight
years of union, $1.25 million to cover the growing public services of the country
which will call,
of course, for additional expenditures each year.
So that's the first half of the story, and the
longest part I may say. The government of the
Province of Newfoundland would spend, that is
the money it's got to get to break even, for the
first four years of union, average $15,138,000 a
year, and for the second four years of union it has
to get $15,600,000 a year, and if it does not get
it, it cannot balance its budget, it cannot break
even.... I don't need to remind you of why I have
taken eight years, because within eight years of
union there is to be a complete reassessment, a
financial review, to see if the subsidies are, or are
not, enough to enable Newfoundland to pay her
own way.
So now we come to the revenue side, to see if
it is possible and practicable to get that much
money to meet the expenditures of Newfoundland. I am sorry that I have not been able
to
get this mimeographed. I promise you it will be
on the table by tomorrow afternoon, and every
member will be able to study it at his leisure, but
I completed typing it only about half past two this
afternoon, after being working on it since
Thursday last week, and it is only since lunch
today that I got it completed. Now, if you will
turn to your estimates on the revenue side, in the
beginning of the book.
Mr. Hollett Couldn't we wait until we get the
mimeographed copy?
Mr. Smallwood No, we have to get so much
done and this will only take a short time...
Mr. Smallwood It's so short that you can write
it down as I read it. It's so short.
Mr. Smallwood You take it down, and I
promise you tomorrow you will have it on your
desks. Now, if you will turn to page 6 of the
estimates, you will find that the present year our
present government has estimated, under the
Department of Finance, that they will take in a
revenue of over $400,000. I estimate only
$71,600 if we become a province. These items
are: no. 1, inland revenue stamps $60,000, but I
have only estimated $50,000, because some of
that would be federal.
Mr. Smallwood No, I beg your pardon, I happen to know what I am talking of, time will tell
that.... It is, nearly all of it, on legal documents.
Nearly all of it. Now some of these legal documents would be federal, but most of
them would
be provincial in character. Therefore I estimate
that $50,000 of the $60,000 would come to the
province, and then also the $l4,000 for item no. 2
would remain, and that gives you a total of
$71,600 to the province from the Department of
Finance....
Mr. Cashin What about the interest on our exchequer balance?
Mr. Smallwood I have that covered, but not
under this heading; you will find it further down.
Major Cashin will see the reason for that when
we come to it. Then you go on to the Department
of Posts and Telegraphs, on page 8, and from that
department the only revenue we would get, as a
province, would be 10 and 11, tax on cablegrams
and code messages, and tax on land cables and
wireless stations, $15,000 and $72,000. All the
rest would be federal. If it were collected it would
be by the federal government, but the provincial
government would collect $87,000.
Mr. Higgins The provincial government only
gets nos. 10 and 11?
Mr. Smallwood So there might be, but I am
talking now of provincial government revenue.
Department of the Assessor, we would get
$20,000 out of $10.5 million, and the items would
be nos. 4, 5 and 6, namely $1,500, and $17,000
and $1,500; right, that is $20,000.
December 1947 NATIONAL CONVENTION 967
Mr. Smallwood Yes, three amounts, $17,000
and $1,500 and $1,500, isn't that $20,000? Yes.
Now go on to the Department of Home Affairs,
and I make it $25,000, and that comes all from
one item, number 6.
Mr. Smallwood Can't you? I think the government can classify its income in any way it cares
to do so. There is no law on that.
Mr. Cashin You can pass a law on anything.
You can pass a law to legalise murder.
Mr. Smallwood There is no law in existence
now. In fact there is a law which says that all
revenue of the government must go into the CRF
— Consolidated Revenue Fund.
Mr. Chairman You are not justified in interrupting at this point at all. He is endeavouring to
present his estimate of probable revenue. However incorrect in your judgement he may
be, I
think it is in the interests of all concerned that he
should continue, and then, of course, you may
address yourselves on it.
Mr. Smallwood Mr. Chairman, I would like to
say that it is the law of England, Canada, and
Newfoundland, and most countries in the world,
that every last dollar and every last cent that that
government collects...
Mr. Hollett I rise to a point of order. Major
Cashin was not allowed to press that point, and
now Mr. Smallwood is going ahead and stressing
that point.
Mr. Chairman That is not a point of order at all.
Mr. Smallwood is endeavouring to present certain figures and explain them, and, until
he
finishes his explanation, I don't think it is right or
proper to interrupt him at all. It is not a question
which lends itself to a point of privilege. As a
matter of fact, if we are going to deal with questions of privileges I hold that he
has a right to go
on without interruption.
Mr. Smallwood What I am saying is, that it is
the law of the land that every dollar and every
cent that the government receives, let it be conscience money, let somebody die and
leave them
money, let it be taxation, a loan or interest
received back on loans it made, whatever money
the government receives must go into the Con
solidated Revenue Fund. When you put it into
Consolidated Revenue Fund it is your decision as
a government what particular sub-heading you
will place it under. The sub-heading that the
Government of Newfoundland has placed it
under is the Department of Home Affairs, namely
"Repayment of Loans", that is from the Housing
Association, etc., and so I have done the same
thing, and I am prepared to argue that with
anyone on the face of this earth, that it is proper
to include that amount as revenue of Newfoundland, and the amount is $125,000.
Department of Education, I have taken the
complete amount, $66,800. Department of Justice, $30,000, that is all for one item,
fines and
forfeitures. The Department of Natural Resources is at page 11, the first thing is
Fisheries, and
we get none of that. We skip that, that's federal.
They pay the costs of running it, and they get
whatever little bit of revenue comes in against it.
Forestry. The total vote is found in item 7, Timber
Lease Rentals, $82,000; no. 8, Timber and Sawmill Royalties, $20,000; no. 9, Sawmill
Licenses,
$6,000; no. 10, Inland Fishery and Game Licenses, Fines, etc. $40,000; and no. 11,
Waterpower Rentals, $3,000. I have added to that
$20,000 a year on the average for the first four
years of union, because that is our public domain,
timber, water-power and the like. It is necessarily
from public domain that most provinces get a
large part, if not most, of their revenue, and I hold
that that should be steadily increased, not exorbitantly, not oppressively, but that
the Government of Newfoundland should aim as a deliberate
policy to get more and more revenue out of the
private exploitation of the natural resources of
our country.
Under the heading of Agriculture the only
item is $200, and that's agricultural grants and
leased rentals under the heading of Miscellaneous, $7,500, because most of that Miscellaneous
is federal.
Mr. Smallwood Well, dog licenses, $2,500, and
other items making up a total of $7,500. So that
from the Department of Natural Resources the
combined revenue to the government is
$180,500. Have you got that down?....
Mr. Smallwood Forestry, $151,000; Agriculture, $2,000; and Miscellaneous, $7,500, and the
968 NATIONAL CONVENTION December 1947
total for that department's revenue is $180,500.
Now we come to the Department of Public
Works, which is page 12 in the estimates. No. 1,
Revenue, they now estimate $35,000, but that is
for the supply of printing and office equipment,
etc., to all departments of the government, but as
some of these departments would not be provincial but would be federal, naturally
our provincial
Department of Public Works would not supply
them, or get revenue less than it now gets because
there would be fewer departments, so I have cut
that in three, and made it $11,900.
No. 2, Licenses for motor vehicles, drivers
licenses, etc., $325,000; that calls for a little
explanation. That is licenses for motor vehicles,
cars, trucks, bikes and buses, drivers' licenses
etc. In 1945-46 the actual amount of revenue that
the government got under those headings was
$182,000, but this year they have estimated for
$200,000, and they have actually taken in over
$260,000 already.... The revenue from motor
licenses and drivers' licenses is shooting up as
more roads are built and more motor cars and
trucks and buses are coming into use. More
people are driving, more licenses are paid, and
revenue is going up very rapidly under that heading, and so, for the first four years
of union, I have
put it down at an average of $325,000 a year from
motor vehicular and drivers' licenses.
Item no. 3 is examination fees for drivers'
licenses. I have left it at $300. I might have put it
up a bit, but I did not. Item no. 4 is payments from
the Dominion Steel and Coal Corporation for
roads on Bell Island, that's $4,000, and I have left
it at $4,000. Number 8 is fees for inspection of
boilers and machinery. I have increased that only
$500 for the four years. Number 9 is rentals of
mineral leases, royalties, etc., $90,000, and if I
had anything to do with the Government of Newfoundland I guarantee you now that by
the time
we had spent four years in union that would be
easily a lot more than $90,000, but I am leaving
the figure that the government gives. It is scandalous and it is disgraceful that
it is only $90,000.
Number 10, mining prospectors' licenses, $500.
The grand total revenue for the Department of
Public Works is $439,800. Has everyone got that
down?
Then we come to the Department of Public
Health and Welfare, on page 13 of the estimates,
and I have taken the whole revenue, $327,500,
with the exception of one item, no. 6, the receipts
from the merchant navy hospital, $15,000, which
the province would not get. That would go to the
federal government ... so the amount is $312,500.
The Board of Liquor Control I have got down at
$1 million.
Now the next item is gasoline tax. I don't
know if the House is familiar with it, but some
amazing things are happening in this country in
connection with gasoline. I suppose it is due to
the fact that more roads are being built, and that
roads are being made better, but the income of
the government from gasoline is shooting sky
high. I will give you an example. The revenue
from gasoline at the present time is got from
customs duty. They collect one cent a gallon on
fishermen's gas, 14 cents a gallon on ordinary
gasoline off the Avalon Peninsula, and l6 cents
a gallon on the Avalon Peninsula. and the total
amount in 1941-42 was $600,000. Last year, it
was getting up towards $l million. The exact
amount was $922,000.
Mr. Smallwood Yes, on gasoline alone, not
counting kerosene, or fuel oil and bunker oil or
anything of that character, and it is not counting
gasoline imported into Gander for use by transatlantic or any other aircraft. That
is revenue
collected in that one year just on gasoline, and so
I have put what I claim to be a most modest
figure.... Of course under confederation we
would not collect any customs duties on gasoline,
but we would substitute a gasoline tax, a direct
gasoline tax. Now in my estimate I did not include any tax whatever on fishermen's
gasoline,
or what is commonly known as "Acto". I think
that as that gasoline enters directly and basically
into two of the basic industries of the country, that
that gasoline ought not to have any tax whatsoever so far as customs duty is concerned.
Mr. Smallwood Yes, one cent a gallon. I think
that should be completely free of tax by leaving
out fishermen's gas and industrial gas, which is
quite a lot different from the gas we have in this
chamber, which is not very industrious or industrial either, but taking ordinary gas
used in
motor cars, trucks, buses, motor cycles and the
like, the figure for the first four years of union,
$1 million a year revenue from gasoline is, I hold,
a modest and conservative estimate. And the total
December 1947 NATIONAL CONVENTION 969
is $3,333,200. That is the total revenue by taxation that would probably have to be
imposed on
the people of Newfoundland each year by the
provincial government for the first four years of
confederation. Now just hold that figure in your
minds, gentlemen — $3,333,000 in taxes.
Remember the word "taxes", revenue from taxation put on the people of Newfoundland
by the
provincial government each year for the first four
years of union.
Now we can get along and sort of draw a
balance sheet, and I want to make it very clear
that in the first place I am dealing with the first
four years of union now, until I tell you, and I
want to make it clear that these figures are
average. I cannot see, not having the gift of
second sight, exactly how much revenue the
provincial government would take in in the first
year, or the second or the third or the fourth, I can
only estimate an average. We start off. If you
would like to draw a balance sheet, gentlemen,
take paper and write down: expenditure —
$15,138,775. Now where are we going to get
that? Now make another column — revenue —
from taxation on our Newfoundland people, put
on by the provincial government, $3,333,200.
That's taxation we are now collecting. That's
under taxes which we already have and which we
will have still if we become a province. They will
still be Newfoundland taxes.
Mr. Crosbie The federal government collects
taxes as well?
Mr. Smallwood Of course, but today we are not
dealing with federal government revenue, but
only provincial.
Now surplus — $600,000. That is assuming
that we take our entire surplus, our cash surplus,
taking it at $28 million, converting all of it to
dollars and putting it on deposit with the Government of Canada at 2 5/8% interest,
which they
offer to do. $28 million accumulated cash surplus
... assuming that the provincial government drew
out of that each year an average of $3 million for
the purposes of the province. That would leave
so much in the fund each year drawing interest at
2 5/8 per cent. I have worked out the table if you
would like to hear it.... I have called it $600,000.
That's for the first four years of union. $600,000
interest on our surplus at 2 5/8 percent.
Now the third item, refunds, $254,950. I will
explain what that is. The Government of Canada
will pay to Newfoundland $666,000 on account
of Gander. The House will remember that the
Newfoundland government is under contract to
pay the Canadian government $1 million for their
share in Gander. It cost $25 million, and we
agreed to pay $1 million. We have paid $333,000,
and we have to pay another $333,000 this year,
so that is $666,000 which the Government of
Canada will pay back to the province. Now you
will also remember that the Government of
Canada has agreed to pay back the cost of the two
boats
[1] that are being built in Scotland now, not
including the
Cabot Strait, and that's a total of
$1,373,000 that these boats are costing us that the
Government of Canada is going to pay back in
cash. Now the two amounts put together, for
Gander and for those two boats, is $2,039,600.
Mr. Smallwood No, divide that by eight years
and it comes to $254,950, which is what I have
down as refunds. I could not think of a better
name so I called it "Finance".
Mr. Smallwood Well, call it what you like.
Major Cashin will have lots of opportunities to
put all kinds of names on it.
Mr. Hollett You mean $254,950 from Gander
and the boats, is that what you mean?
Mr. Smallwood Divided by the first eight years
of union, so that is per year $254,950. Now the
Tax Rental Agreement, $6,820,000. Have you
got that down? Now put down another item of
$50,000, and I hardly know what to call it.
Mr. Smallwood I may be pretty dumb, I have
that reputation, but I was born that way: the name
I have called it is "Gas and Electricity", and the
position is this: under the Tax Rental Agreement
the federal government, in addition to the payments it makes, pays back to the province
half of
the corporation tax that the federal government
collects from companies in Newfoundland
whose main business is the sale of electricity, gas
or steam. Now there is no company that I know
of in Newfoundland selling steam, but there are
970 NATIONAL CONVENTION December 1947
companies selling electricity and gas...
Mr. Smallwood Yes, we are selling gas and
steam both, but I am afraid we are not selling it,
we are giving it away.
Mr. Cashin And getting $15 a day for distribution.
Mr. Chairman I think, Major Cashin, if you
don't mind you might indulge yourself less...
Mr. Smallwood It may be a joke to Major
Cashin, but it is not a joke to many people in this
country, which I think he will find before he is
many years older.
Mr. Smallwood Well, sir, he invited that. I put
that down as $50,000 a year, being half the corporation tax that the Government of
Canada
would collect from all companies in Newfoundland whose main business is the sale to
the
public of electricity or gas. Now the transition
grant is $2,843,750.
Mr. Smallwood That's right. That's the transition grant. That is got in this way: in the first
eight
years of union the Government of Newfoundland
would receive from the Government of Canada,
under that one heading $22,750,000. Divide that
by eight, and it is an average per year of
$2,843,746. Now, add these up, and it will come
to $13,901,900. Now that would be, for the first
four years of union, the revenue of the Government of Newfoundland as a province from
all
sources, under all headings ... which leaves the
provincial government short of balancing its
budget, short $1,236,875. That amount, if it were
got by the provincial government, would enable
it, in the first four years of union, to balance its
budget and break even; and that amount has got
to be got, and that is the amount in fact of new
taxation that would have to be placed on the
people of the province, and I say "new", not
additional. I do not say additional taxation, I say
new taxes. $1,236,875 and you would balance
your budget for those four years, and in doing so
the total picture would be this: the total provincial
taxation on the Newfoundland people:
$4,570,075; the total non-tax revenue, total
revenue to the provincial government not from
taxes: $10,568,700; and the two together, added
up is $15,138,775. That is the first four years of
union.
Mr. Cashin If I might interupt for a moment,
Mr. Smallwood has given us a lot of information
in connection with these figures, and there is no
record, except the reporter here of course, and the
only thing we have got to look at or read is the
expenditures and revenue. There is no explanation on it at all. I take it he should
have a set
speech, and I think every member should have a
copy of it.
Mr. Smallwood These figures of revenue are in
great detail, and you will receive it tomorrow on
your desks in mimeographed form in very considerable detail.
Now, finally, I come to the second four years
of union, and again the figures are the average
each year for the four years. Expenditure
$15,138,775. Now add to that expenditure, to
cover new services and increased expenditure,
another $500,000, and your grand total expenditure for the second four years, per
year, is
$15,638,775.
Mr. Hollett Now you are budgeting for four
years from now are you?
Mr. Smallwood The second four years, average
per year. It is average per year remember.
Mr. Chairman He is on the fifth of the eight
years, the second four year period.
Mr. Smallwood The second four years of confederation, so you start off needing to raise each
year for these four years $ 15,638,775. Where are
you going to get it? Well put down revenue, and
under the heading of revenue put down taxation,
$4,570,075. Now put down additional taxation,
that is not additional taxation, but additional
yield, additional revenue from existing taxes.
Forestry, $200,000. Motor licenses and vehicular
licenses, and drivers' licenses and the like, an
additional $150,000. Liquor, additional,
$250,000.
Mr. Smallwood That's right. Gasoline tax additional, $250,000. Now, so far as motor licenses
are concerned, that $150,000 and gasoline tax,
that extra $250,000, and the $400,000 per year
extra revenue from roads in the second four years
December 1947 NATIONAL CONVENTION 971
of union, by which time we should have in Newfoundland a lot more miles of road than
we have
at the present time and therefore a lot more cars,
buses, trucks, and a lot more drivers and a lot
more gas consumed, and if we should have a
tourist trade a very great increase under these
headings, but I am putting them down at what I
consider to be modest and conservative increases.
Mr. Hollett May I interrupt you there, Mr.
Smallwood? You say in the second four years we
will have much more roads than we have now...
Mr. Smallwood Yes, we have a road building
program now. All these deal with ordinary expenditure.
Mr. Smallwood No, I have not cut out. Don't
forget I have also pictured for you $3 million a
year being withdrawn from accumulated surplus.
Some of that will be spent on roads no doubt.
However, to go on.
Mr. Smallwood That would be capital expenditure, or extraordinary expenditure, or reconstruction.
It would not be ordinary, but when a
government sets out to build new roads you can't
call that ordinary expenditure.
Mr. Smallwood That's right, any extraordinary
account, etc., is not in this.
Mr. Hollett Well, you have taken some from the
surplus to build roads. What do you call that?
Mr. Smallwood No, I have not taken it for any
purpose. If we put $28 million on deposit I have
imagined that we draw out $3 million a year. I
have not said a word about what we would spend
it on.
Mr. Hollett That, as I see it, is to balance your
ordinary budget isn't it?
Mr. Smallwood To draw the interest, not to
draw capital account from your deposit. I have
not said a word about what that $3 million a year
would be drawn for, obviously for reconstruction
and capital expenditure which does not appear in
this at all. The total then in taxation on the people
is $5,420,075. Now that is the total of these items
I have just read.
*
Mr. Smallwood Now just put this down please:
total provincial taxation, revenue from taxation:
$5,420,075; total revenue from non-tax sources:
$10,218,075; and add that up. I see I have not
added it. It is a total of $15,638,150.
Now, I just have one more observation to
make. It is this: if, and I say "if," these estimates
are reasonably correct, reasonably realistic, it
would mean that in the first four years of union
— no, I have got to go a step further — if these
figures are reasonably correct and if the federal
government's figures of their revenue are
reasonably correct $20 million that they would
collect from us, and $4.5 million that the provincial government would collect from
us, would
give us a total of $24.5 million for the first four
years of union — per year that is — $24.5 million
grand total taxation on the Newfoundland people,
put on by the federal government and the provincial government. That would be a per
head taxation of $75 on the average. It does not mean that
every child and every infant and every man and
woman, boy and girl would pay $75, but on the
average it would be a per capita taxation of $75
per head. That is for the first four years of union,
972 NATIONAL CONVENTION December 1947
and for the second four years of union $77 per
head. Now how does that compare? If you go
back to the year 1943-44 in Newfoundland our
per head taxation was $90.
Mr. Hollett Excuse me, may I interrupt you?
You are not forgetting are you, that the federal
government are still going to collect income tax,
and...
Mr. Smallwood I just put that in at $20 million,
the whole of it at $20 million, prefacing my
remark by saying that if we can assume that the
federal government has estimated $20 million as
the amount that they would collect in taxes, as a
realistic estimate, a fairly correct estimate; if we
can assume that ... for the sake of argument...
Mr. Hollett Excuse me, what would be the taxation per head then?
Mr. Smallwood I have just told you, assuming
that $20 million that the federal government
would collect from us in the first four years of
union, and the $4.5 million each year that the
provincial government would collect from us,
that is a total of $24.5 million, or $75 per head.
Now I said that, but I am glad that Mr. Hollett
made me say it again. To tell you the truth I am
glad I had the second chance to say it. Now then,
compare that with the per head taxation that we
had on us in 1943-44. Our government taxed us
in the year 1943-44, $28.5 million. Our population that year was 317,000 souls, and
so our per
capita taxation was $90, in 1943-44. Now take
this present year. They tell us that the taxation put
on us this year by our Newfoundland government
is $40 million.... Our population is 327,000 souls,
that is $122 per head. $122 per head is our taxation here in Newfoundland this very
year, $122 a
head on the average, remember. We know there
are thousands of people in Newfoundland that are
not paying $122, and there are other thousands
that are paying $2-3,000 a head, but on the
average it is $122 a head today, whereas if my
estimates are anywhere near the truth, and if the
Canadian government's estimates of what they
will take from us are anywhere near the truth, the
two of them together would be $75 a head from
the Newfoundland people....
Now go on for the next four years of union. In
the next four years, every year, the provincial
government taxation would be $5.5 million and
the federal taxation $20 million, which is $25.5
million altogether that the two governments
would take from us, which is $77 a head compared with $122 a head this very year.
Now
somebody is going to say to me, and very fairly,
"Aha, your provincial estimate may be somewhere near the mark, but we don't agree
with the
Canadian government's estimate of $20 million."
Major Cashin thinks it is 20% out. In other words,
if he were making it he would add another $4
million to it, and make it $24 million that the
Canadian government would take from us. All
right, I will go a step further and put $5 million
on it. Then what do you get? I will stick $1
million on provincial taxation and another $5
million on federal taxation, and the per head
taxation then is $93 ... compared with $122 per
head that we are paying this very year, and I agree
that we are paying far too much. $40 million is
far too much to take out of these 327,000 living
souls. Too much.
Well, sir, that's the story. I could go on and on
and on like Tennyson's brook if there was any
end of it. Tomorrow I will have these figures of
revenue mimeographed, and they will be on
every man's desk with the notes that I explained
as I went along to explain these revenues. I hold,
in conclusion, that if we become a province of
Canada with our own provincial government,
with the Government of Canada taxing us and the
Government of Newfoundland taxing us, two
governments taxing us where we only have one
government taxing us now, I hold that the provincial government will pay its way for
the first eight
years of union, and that's all I am required to
show. I don't have to go a day beyond the first
eight years, because, inside of eight years there's
to be a royal commission to assess, or reassess
our financial position to see if we need more
subsidies. I hold that I have shown that for the
first eight years of confederation the provincial
government of Newfoundland can pay its way,
and can do so without putting burdensome taxation on our people. I will take that
back, all
taxation is burdensome. Further, sir, they can pay
their way without reducing our public services,
but on the other hand, instead of reducing them,
increasing them, giving our people more and
better public services than we have now: that the
provincial government can do that and pay its
way for the first eight years of union, and sir, that
being the case, I think I have shown what I was
expected to show, and there is not much point in
December 1947 NATIONAL CONVENTION 973
my saying another word at this time.
Mr. Hollett On that point may I ask Mr.
Smallwood what is the per capita tax the average
Canadian citizen in Canada is paying today?
Comparing our per capita tax of $122 per head,
what is it in Canada today?
Mr. Smallwood What I was doing was to compare our present per capita tax with what would,
or might be, our per capita tax under confederation. I was not comparing it with taxation
in
Canada now or any other time.
Mr. Hollett That is a very good comparison to
make. We will be Canadian citizens then, and I
take it we would pay the same taxation as Canada
pays now.
Mr. Chairman I think, in view of the fact that
Mr. Smallwood has not been able to prepare his
estimates of probable provincial revenues it
would be just as well to receive the motion to rise
the committee and ask leave to sit again tomorrow, particularly in view of the fact
that members
may be hampered in the debate until they receive
this information. It won't be available until
tomorrow. In addition to this, if it were agreeable
to members, I would like to get a motion to
adjourn until tomorrow afternoon, in view of the
fact that there is business of a private nature that
I would like to take up with members, and if it
suits you and is to your convenience I would like
to hold the meeting this evening at such time as
may be decided upon by the Convention.
Mr. Butt I am prepared to move that the committee rise, but before doing so, I was wondering
if we could get copies of Mr. Smallwood's
speech when it is done by the stenographer?
Mr. Butt Even so I think we ought to make
some effort to get that done, because, from my
point of view, it has some of the most amazing
statements I have heard in some time. Also I
would like to ask one question of Mr. Smallwood, one single question. In your item
of
Refund, I think you counted on $666,000 from
the federal government...
Mr. Butt I see. I am sorry. I just point out that
no payments have been made according to the
Auditor General's Report.
Mr. Smallwood The payment will be this year
we are in now. The first payment was this current
year. That's why we won't see it in the accounts.
I move that the committee rise and report
progress and ask leave to sit again tomorrow.
[The committee rose and reported progress, and
the Convention adjourned]
