Newfoundland National Convention, 8 December 1947, Debates on Confederation with Canada


December 8, 1947

Mr. Smallwood Mr. Chairman, I give notice that I will on tomorrow ask His Excellency the Governor in Commission to ask the Government of Canada if they would assist the National Convention in its consideration of the proposals for union by explaining in some detail the basis of computation of the table in Annex IV, showing probable federal revenue from Newfoundland in the event of union.

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. Chairman There are not enough.
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. Miller $500,000.
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. Hollett But where will they get it?
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?
Mr. Smallwood Obviously.
Mr. Hollett Why is it not included here?
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. Higgins What is B-5 in the estimates?
Mr. Smallwood B-5 in the estimates? $17,000, and that is for the travelling of magistrates,
Mr. Higgins And isn't your $17,900 the same thing?
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?
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. Higgins "...the cost would be $1,200."
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. Higgins Where did you get that assurance?
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 Excuse me, is this revenue?
Mr. Smallwood Yes.
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. Hollett We want that before us.
Mr. Smallwood It's so short that you can write it down as I read it. It's so short.
Mr. Hollett All right, you go slowly will you?
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. Cashin All of it 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 That's right, a total of $87,000.
Mr. Higgins There's another tax.
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.
Mr. Cashin It's $18,500 if I know how to add.
Mr. Smallwood No, it's $20,000 I make it.
Mr. Cashin Three amounts?
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. Cashin You can't include that in the revenue.
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. Cashin Oh, go on!
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. Cashin Dog licenses.
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. Hollett Would you itemise them again?
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. Cashin On gasoline alone?
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. Hollett Is it paying anything now?
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. Hollett What is that for, two boats you mean?
Mr. Smallwood Yes.
Mr. Hickman Would that be every year for four years?
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. Cashin Frenzied 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. Cashin That's pretty dumb.
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. Cashin The Convention is selling steam.
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. Chairman Never mind that now.
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. Hollett That's the average you mean?
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 No, I have no set speech.
Mr. Cashin Well it's no good.
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. Hollett For eight years?
Mr. Smallwood For eight years. Only I am not budgeting.
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. Hollett What would that be, another $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. Hollett But you have cut out...
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. Hollett That would be reconstruction wouldn't it?
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. Hollett But that's an ordinary budget.
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. Hollett $625 out?
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. Smallwood No.
Mr. Hollett Why?
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. Chairman It will take a week, I understand.
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. Chairman We have only one reporter.
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]


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] The detailed projected provincial budget submitted by Mr. Smallwood could not be found. See Volume II:522 for a budget reconstructed from the debates and newspaper reports. [Volume II is not in The Confederation Debates Collection]
  • [1] The Bar Haven and the Springdale, which were sister ships.
  • *
    Taxation $ 4,570,000
    Forestry, additional 200,000
    Motor licenses, additional 150,000
    Liquor, additional 250,000
    Gasoline tax, additional 250,000
    Total provincial taxes on the people $ 5,420,075
    Now added to that, from your surplus 299,375
    (See it's come down, it was $600,000 for the first four years, but for the second four years it is $299,375)
    and from refunds, the same amount 254,950
    and Tax Rental Agreement 6,820,000
    and Transition Grant 2,843,750
    and grand total revenue of the government each year for those four years is $6,638,150

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