Newfoundland National Convention, 9 December 1947, Debates on Confederation with Canada


December 9, 1947

Report of the Ottawa Delegation Proposed Arrangements for the Entry of Newfoundland into Confederation Committee of the Whole

Mr. Smallwood Mr. Chairman, I have nothing in particular to say at the moment. The figures I tabled yesterday are before the House.[1] I assume members will want to discuss them.
Mr. Hickman Mr. Chairman, as you know, we only went through this proposed budget of revenue and expenditure, as it would be under a province, yesterday afternoon, and it has not given us much time to study it. But in going through it there were a few notes I made, and I have only got a few comments on it for the time being. I can appreciate Mr. Smallwood's difficulty in bringing it in, and he did very well with what he had to work on. I am glad that the Finance Committee did not have to bring in one like it, because, while that was torn to shreds, I think we would go for years before we would be allowed to forget one like this.
On the expenditure side there is $15.1  million, I think, for the first four year period. In that section there was an item of $3.1 million for Education. That is the same amount as contained in the Commission of Government estimates for 1947-48. I don't think that is sufficient. I have not got the figures yet to give you what will exactly be required, but I think you will find that that will be increased considerably in the estimates for 1948-49. I understand the Department of Educa 974 NATIONAL CONVENTION December 1947 tion will ask for, whether they get it or not, another $1 million, and they will require as a minimum say $500,000.
On the Public Health side we find that figure has been brought down to $5.2 million-odd, from $6,274,000. Some of that cut was explained and been taken care of. The department, however, will not be able to get along under present conditions on, not just the cut to $5.25 million, but it would not be able to get along with the budget made by the Commission of Government amounting to $6.25 million. We have got these extra hospitals, the General Hospital which is not yet completed, the sanatorium at Corner Brook, which will be a 250-bed hospital, and the Western Memorial Hospital. The late Sir John Puddester told us in committee here about 12 months ago that even with what they were spending then and would spend this year, they would require considerably more money to maintain the service, and that the maintenance cost would be considerably more. I think, if my memory serves me correctly, that it would run at least another $1 million more. I may be wrong, perhaps Major Cashin will remember.
Mr. Cashin $1 million.
Mr. Hickman So that would bring it up to about $7 million odd. And I understand now that they anticipate another million extra, which will be a difference of about $2 million as I see it; but put that conservatively, and call it $1 million or $1.5 million. Now there is no provision, except at the end of $500,000, for expenditure in the province for new services.
Mr. Smallwood $750,000.
Mr. Hickman $750,000, yes. Well, these hospitals all have to be finished, equipped and staffed. There is no provision made for the extra staffing; the only provision there is $750,000 each year for total new reconstruction. Now members will remember, in the early days of the Convention, we were given a reconstruction program by the Commission of Government, and in there they planned to spend $59 million or $60 million in ten years. That would be about $6 million per year that they had planned, providing the funds were there, to spend on reconstruction. Supposing we cut that in half, making it $3 million for reconstruction; yet in this budget there is only $750,000 provided for all new services or reconstruction.
Mr. Smallwood No.
Mr. Hickman Yes. Wait a minute I am coming to that. Now if you take these items, I note there is Education which roughly is $500,000 over and above what is in the budget, there is Public Health, which we figured at $2-2.5 million over and above the provincial budget. We will cut that down to $1.5 million, which will bring it down to $6.7 million, which is slightly more than required on today's basis. The reconstruction which the Commission of Government had provided for at $6 million for the next ten years, we will call only $2.5 million, on that total it brings us to a $4.5 million expenditure, and I have tried to be conservative in this, $4.5 million over and above the expenditure which Mr. Smallwood provided for in yesterday's budget. If you add that to the $15 million expenditure which he anticipated you get approximately $19.5 million. That would be our expenditure if we have to spend on the same basis as we have the last few years, if we maintain the same services. There is no large provision there for relief, but I will come to that later on.
Now turning to the revenue side of the budget, included is the total repayment of the amount that the Newfoundland government will have paid to the Canadian government for Gander, which I think he said was around $600,000. Anyway the total amount we paid to them we will get back, plus the money paid for the ships being built right now in England for the government here. That shows a revenue of $255,000 a year. Mr. Smallwood said he was prepared to argue in this Convention or with anyone outside it that that should go into this current revenue. As far as I am concerned Mr. Smallwood can argue forever on that point, but I will never be convinced that repayment of the money paid for Gander and the money for the boats, taken from the money we accumulated, belongs to current revenue. I know that last year the government did that, but they were wrong too, like Mr. Smallwood. You can argue till the cows come home, but it is not the right principle. I have yet to see a balance sheet that did not separate capital from ordinary expenditures. That $255,000 per year which is revenue shown in this provincial balance sheet should come out of it. It is not earnings of the province, it is not current revenue, it is repayment of money that we expended.... It is not current earnings, and similarly there is $125,000 in there per year as December 1947 NATIONAL CONVENTION 975 repayment of loans from the Housing Corporation. That is in exactly the same category, it is a repayment of a loan, and is not earnings. That makes a total for those two items alone of $375,000.
Now the total revenue under the provincial set-up for the first four years is shown as $13.9 million, and if you deduct that $375,000 you will find that you have a net revenue of $13.6 million. There was a deficit on the first four years anticipated by Mr. Smallwood at somewhere around $1.2 million, and if you add this $375,000 you will find that on his figures there would be a deficit of $1.5 million, but that deficit is based on an expenditure of only $15 million for the province. I contend, sir, on the figures I gave in the beginning, and they must necessarily be only estimates at the present time, the expenditure will be $19.5 million, call it $19 million, and the revenue should be $13.5 million; that leaves you a deficit on the provincial accounts of $5.8 million, or call it $5 million; not a deficit of $1.2 million, but over $5 million.
I realise that in mentioning reconstruction, Mr. Smallwood did say, when the question was raised on roads, that $3 million would be withdrawn annually from the surplus of $28 million which would be deposited with the Canadian government, as provided in the Grey Book, at an annual interest of 2 5/8%.... If we withdraw that amount for eight years we would withdraw $24 million. Now the surplus is only $28 million. On page 3 of the Grey Book we have to freeze one-third of that, which we can't touch. That's part of the terms. If we freeze one-third, that's over $9 million, that brings it down to $18 million surplus. So you can only draw your $3 million a year for six years, not eight, and the last two years you can't have anything to draw, if I understood his explanation yesterday.... I contend that we should not touch that surplus; it should be there for some day when we may need it. There has been no large amount provided for emergencies, or able-bodied relief. I hope we won't see the dole, but there is nothing for that. Because if times are going to be poor, and there's going to be bread lines or soup kitchens, no matter if we are on our own or with Canada or the United States, our surplus should not be touched. We should not start off presuming that we are going to use $3 million of it each year. If we do that, and there is no provision in this budget for reconstruction other than using the surplus each year, I am afraid that we have built our last hospital and our last mile of roads.
As I said at the beginning, these remarks are only general because I have not had time to go into it; but this struck me at a glance, if this budget was to be the one we would use under confederation, I can very well see why one of the clauses was put in, that in eight years they would set up a royal commission to review the financial position of Newfoundland, and to recommend the form and scale of additional financial assistance, because we will need one. We will be insolvent, or so close to it that, perhaps, our only "out" would be to transfer the Labrador, for a price, to Quebec or the Canadian government. If that is the best budget that can be brought in, and the best hope for our people, I can't hold out very much hope for it. I would say that it was rather a defence of the terms offered. I can't see any equitable basis in that budget. I can see a deficit that we will have to withdraw $3 million a year from our surplus to meet, not for reconstruction but to pay off a deficit.
There was another question, the gasoline taxes, licenses for motor cars and drivers as a source of revenue, which Mr. Smallwood anticipated would be considerably increased, particularly in the last four years of the first eight. I don't know how we are going to increase it with our present mileage of roads. The estimate in the budget brought in by Mr. Smallwood shows $1.25 million for roads, expenditure for the year. The current estimate of the Commission of Government shows just over $3 million. Now that's been cut practically $2 million. I realise that we can use some of the withdrawals from the surplus to build roads, but I contend that our surplus should not be touched for that purpose. I fail to see where we can, out of revenue, do any construction on roads, or any other such service. Those taxes we are going to collect from motor cars and gasoline, clear of the fishermen's tax — I can't agree that we are going to get as much as Mr. Smallwood anticipates. The license for a car is only $12, and the driver's only $3, and we have got to have quite an influx of tourists, and a personal income of the people that is going to be exceptionally high, to be able to increase the income from gasoline and licenses, unless we 976 NATIONAL CONVENTION December 1947 raise the rates, which of course is just increasing the taxation on the people.
As I explained, I did not have time to make a clear study on this, I would like to reserve the right to have a little more to say later on.
Mr. Smallwood I appreciate very much the fair- minded spirit in which Mr. Hickman has made his preliminary analysis of the figures I brought in here yesterday. He has not shown any animus or bad feeling, he has spoken very fairly, and I appreciate that, but, as he has said himself, he has not had time to think about these figures and I am afraid that the remarks he has just delivered are very good proof of that, because otherwise four- fifths of the things he would never have said.
I made notes as he went along. Road maintenance. In this estimate we have $1.25 million a year for roads. That's only to maintain roads, not to build roads, and if you turn to the estimates of the Commission of Government you will see that that is their estimate for maintaining roads — not building them.
Mr. Hickman speaks about our surplus. In this estimate of mine I have pictured our $28 million surplus, which may be $30 million. It is proposed that the offer the Government of Canada has made be accepted, that that surplus be put on deposit, at 2 5/8% interest. Now should that be withdrawn once we would put it on deposit drawing interest every year, or left in there? Well, there are two schools of thought on that. One is, as Mr. Hickman just said, it should be left in there for the rainy day. What rainy day, sir? He says when there may be bread lines and unemployment and destitution in the country. That's one school of thought — leave it for the rainy day. The other school of thought is this, and it is the one I have followed: not to leave it there forever, but to draw it out each year and spend it in such a way as not to have the rainy day. All right, when the laughing is thoroughly over, I will explain what I mean.
Throughout the world, in larger countries than this, countries where the science of government has been carried to a much finer degree of excellence than in Newfoundland, even under Commission of Government, the idea has become well developed of what they call "timing grants" — to spend public money that has been accumulated as surplus (and if you have not got a surplus, to borrow it) on public projects for the purpose of taking up the slack in private industry. A depression means that private employers can no longer employ men because they cannot make a profit, and many become unemployed. Fishermen don't fish because no one will supply them, and no one will supply them because there is no money to be made out of fish, so you get a depression; and when private capitalists are no longer able to employ the people or keep them fishing, then the government, with public money, takes up the slack. That's a well-developed policy and principle. We are told that many governments have reconstruction projects on the shelf, ready to be put into operation at a minute's notice, just ready to call for contracts, and one way to prevent a depression is by public spending at the time when private spending has come to an end. Instead, therefore, of leaving your $28 million or $30 million surplus there on deposit until you have got unemployment right on your hands, draw it out so much per year and spend it for the purpose of taking up the slack that has been created by the failure of private enterprise. That is the school of thought to which I adhere. Whether you draw out three or two or one million dollars a year, is a matter for a future government to decide. I would point out however, that if you don't draw it out at the rate of $3 million a year, your interest earning for the government will be that much greater each year, and your income from interest would be higher than is shown here, because what is shown in my table is the interest on the balance of the surplus that would remain each year after you had withdrawn $3 million....
Another point I want to deal with that Mr. Hickman has made, and I dealt with it yesterday. I would expect any businessman anywhere in this Convention or in this country or out of it, to speak exactly as Mr. Hickman has spoken, because very few businessmen in the world appreciate the fundamental difference in public finance and private finance. Very few appreciate the difference between a corporation balance sheet and the balance sheet of a government — all the difference in the world, and until we get that point clear in our minds, we are wasting our time talking about public finance. Sir, a government's accounting is about the simplest thing in principle and outline in the world — it is simply a cash account. No government has a balance sheet, a profit and loss account, it is simply a cash ac December 1947 NATIONAL CONVENTION 977 count. The law provides that every single cent that comes to a government in a year must go into the Consolidated Revenue Fund, every single cent no matter what it is. It may be conscience money, it may be $1.30 that someone cheated the government out of and he sends it in anonymously, and that $1.30 by law has to go into the Consolidated Revenue Fund. If the government borrows money, what it borrows has to go into the CRF. If it gets interest on money that it loaned to somebody, and that somebody now pays back interest each year, that has to go into the CRF. Every cent that the government receives in any shape or form must by law go into the CRF. Now when you put it there, you can call it this, that or the other. Within the CRF you can set up various subsidiary funds, but the CRF is the government's money. That is what it takes in. Not one cent can be paid out of the CRF except on the authority of Parliament. Not one cent can be paid out of it except what Parliment orders. In a country like Britain you have two men who are appointed by Parliament itself, the Comptroller of the Treasury and the Auditor General. The Comptroller is there to see that every cent goes into the CRF, and that not one cent is paid out without the consent of Parliment. The Auditor General audits the accounts and sees that they are audited in the various funds. Here in Newfoundland the two jobs are done by the one man.
So what kind of thinking is it, what kind of argument is it, to quarrel about whether or not the interest payments that the government receives from the Housing Corporation, or anyone else that the government has loaned money to should not be counted as revenue? Every cent the government receives is revenue. It may not be revenue received by taxation, but every cent the government receives is revenue. So please, no matter what private organisation of business or finance may do, no matter what is their system of accounting, no matter what their system may be of balance sheets, it has nothing to do with public accounting.
Now if Mr. Hickman, or any other gentleman in this Convention, is disposed to doubt what I am saying there is a simple way to solve it. Go down to the public library and take up any of the 50 books that are there on public finance; not private, or corporation, or banking finance, but public finance. If you don't want to spend that much time, as I have done, reading dozens of books on public finance ... go down to the Auditor General, or the Fiance Commissioner, or anyone who has any knowledge, practical or theoretical, and you will find out if what I say is true or fooling. So I say this: the Housing Corporation, or other housing outfits who have had money loaned to them in the past and who now pay back interest and principal for many years to come, that money is income and revenue for the Government of Newfoundland, no doubt about it. Do you suppose that with the best Auditor General that we have ever had in our lives, do you suppose that with a Commissioner for Finance who is a practical financial man, that when they show revenue from the Housing Corporation as revenue, that they don't know what they are doing? Of course they know what they are doing. They are following orthodox and established public finance practices.
Now similarly, the other point that Mr. Hickman made was this: the Newfoundland government agreed a year or so ago to buy back from the Government of Canada whatever they own out there in Gander — equipment of all kinds. They got for $1 million what it cost the Canadian government $25 million to put there. They agreed to pay that in three annual installments of $333,000. The Government of Canada says they will pay that back if we become a province, so in two years that means $666,000 which will come in to the Government of Newfoundland in cash. On top of that the Newfoundland government placed an order in Scotland to build three boats, one of them is the Cabot Strait on duty now, and the other two are still being built and will be done very soon. The Canadian government says that if we become a province they will pay back the cash we paid out for these two boats. It is a couple of million dollars, or more.... That is revenue of the government. Now let us say that we are the cabinet. We say, "All right gentlemen, we just received a cheque from the Government of Canada for $2 million, what will we do with it?" Mr. Hollett and Mr. Hickman give their ideas. To begin with we have no choice, it has to go into the CRF, but now what will we do with it? Will we spend it all the first year, or in two years, or eight years? According to my plan we divide it by eight, and spend $255,000 a year. Now what is wrong with that? We are the cabinet, and we 978 NATIONAL CONVENTION December 1947 decide that we will spend it in one year, or 50 years, or not spend it at all. Whatever the government decides, that is it; except that of course, after the cabinet decides, it has to be brought into the House of Assembly.... Now don't let's hear any more about that. It's bad enough to have to bring in a budget, without having to educate men on public finance. I take my hat off to Mr. Hickman, but although he has had a lot of experience in private finance, he has had very little in public finance.
The next point, he says I have not got enough in this estimate by $500,000 for Health and Welfare, and for the government's reconstruction policy, $2.5 million. Well, that's a good one — the present government's reconstruction program of $2.5 million. Since when has Mr. Hickman become a convert to the present government's reconstruction policy? The day that this Convention opened, every member here was presented with what was called "A Proposed Reconstruction Programme", every year for ten years. We remember Mr. Wild, Commissioner for Finance and Customs. Major Cashin brought in a resolution, and we adopted it, and Mr. Wild came up to a private session of the Convention and he was asked a question about this reconstruction programme — $59 million or $60 million dollars for ten years. "Where do you propose to get the money for that?" Every member remembers what he said: "Oh that's just a programme that we think should be carried out, provided the money were there to carry it out with". I doubt if there is one member in this Convention who would take that reconstruction programme and agree with it. Out of $60 million how much did they propose to spend on the fishery? $1 million wasn't it? On roads I think it was $12 million. There is not a man who agrees with the government's reconstruction programme, and Mr. Hickman does not agree any more than I do. But now he comes to the debate, and it is a different story: $2.5 million you have to spend on the government's reconstruction programme. It is very convenient to use it although he did not agree with it. I apologise for being so long, but I will come back to it later.
[Short recess]
Mr. Smallwood Mr. Chairman, I will just take a couple of minutes to finish what I was saying before the recess. On this estimate of mine, the total expenditure of the provincial government for the first four years of union would be $15.1 million a year, and for the next four years it would be $15.5 million or $15.6 million a year, and Mr. Hickman claims that it is $2-3 million short; but my answer is this: it is not short, that these dollars that he claims should be added on will be spent all right, and probably should be spent, as this country has not got enough public services. We know that, and spending $15 million a year for the first four years, and $15.5 million for the next four years would not create any new services at all. I would ask you to take notice that provision is made, in these four years, for the cost of up-keeping new services that we have not got now, but those amounts do not cover the cost of putting the new services there. But Mr. Hickman claims that the cost of creating these new services should be shown in the new cost of government on the ordinary account side. I hold the exact opposite. We need more schools in Newfoundland; a lot of schools that we have now need to be repaired and improved. We need new roads and a lot of new services; new hospitals, and a number of new things, which if we are to get them at all will have to be got by the provincial government. Some will be gotten by the federal government: bait depots, etc., would come under them, but under the provincial government a number of new services have to be got. I admit that, and I hold that the ordinary expenditure of the government year by year should cover the cost of keeping up any public services we have, but the cost of new public services — roads, hospitals, schools — should not, and does not need to be included in ordinary expenditure. They should be on extraordinary, special, capital, reconstruction, or whatever you like to call it; and for that we have money to do the job. We have $28 million; when this fiscal year is over we may have $30 million, which we can put on deposit and draw interest on it, and draw out of that sum some amount each year to build new schools, new roads, new hospitals, and new public services. That is what that money would be for, and the amount that you would draw out every year to spend on capital account should be decided by the general conditions of the country. In other words, you should time your spending. Now it's been held, and I think rightly, that one mistake that our present government is making is to be December 1947 NATIONAL CONVENTION 979 spending that public money on capital account, building schools, hospitals, bait depots and roads now, when the need, from the standpoint of giving employment, is not so great as it may be in the future, and our government is following the exactly opposite course from that adopted by most governments around the world. Most governments do this: when times are good they tax high and collect all they can; and when times are bad the money that they collected they spend when it is needed most, to take up the slack by private employment.
My contention is that $15 million a year for the first four years, and $15.5 million a year for the second four years is ample to cover the ordinary expenditures of the government of the province, and that anything extraordinary should be spent out of capital account. We have a capital fund for that very purpose.
Finally, I want to say this: I don't want to do Mr. Hickman an injustice, but I must say that he gives me this impression that the surplus should be laid aside and forgotten until we get the bread line. He said, "When you get bread lines on the mainland of Canada and the United States, you will have them in Newfoundland". Now that means destitution and unemployment, and he says we should save the $28 million or $30 million until that day. The impression I got is, "Don't touch your surplus until your people are destitute or nearly so, and then spend it for dole." If I got that impression wrongly he will correct me, and I will be glad, because I find it hard to believe. He is a practical and determined Newfoundlander, who is old enough to remember what we went through from 1930 to 1940, and how we spent millions of dollars on dole, and he could not welcome that again, just spending it on dole. I think he would agree with me the better way is to spend the money before the dole days come on public works such as road building, the construction of buildings, etc., so as to create employment. Let's all hope and pray to God that there will be no need to ladle out dole again in this country. The very sound of the name turns your blood cold, when you remember the dole days from 1930 to 1940. Let's hope that we will spend that capital, timing it right, so that there will not be any need to pay dole.
Mr. Hickman Mr. Smallwood at the beginning brought in a little dig which I don't think is right. He said it was plain that I did not study this. I did not need to study it. I could gather it quite easily yesterday afternoon, and the few notes I made then are quite clear. Now, on this question of surplus I would like to correct Mr. Smallwood, and I know he did not intentionally misunderstand what I said. I did not intend to say that the surplus should be saved until dole days, or until the people are on relief. I think it should be saved until the revenue drops, not until dole, and then it could be used for special expenditure. If for eight years we use $3 million a year we have $12 million gone, but we have got to keep $9 million, as one-third of it is frozen under the terms of confederation....
Mr. Smallwood No, that's not quite right.
Mr. Hickman What is it then?
Mr. Smallwood None of it is frozen.
Mr. Chairman The section reads: "One-third of the surplus at the time of union shall be set aside during the first eight years of union, either in trust or on deposit with the Government of Canada at Newfoundland's option, withdrawable by the Newfoundland government as required only for expenditures on current account in order to facilitate the maintenance and improvement of Newfoundland public services, any unspent portion thereof at the end of the eight-year period to become available for the unrestricted use of Newfoundland."
Mr. Hickman That's my point. My original point was that it could not be used for reconstruction, not that part.
Mr. Chairman No.
Mr. Hickman Well, there won't be enough to take it out for eight years, and $9 million is in England, and I don't know how we can get that for a while. I don't want to get into an argument, but I will say this: that the Government of Newfoundland prior to Commission government did not throw everything into the one hat. They did keep ordinary expenditure separate from capital expenditure, and whether the governments today do it or not, I still contend that it is the wrong thing to do. There would be a lot of governments who would be better off if they ran their governments like a private business. There would be fewer debts. Again, on this question on which Mr. Smallwood spoke, the repayment of the money from the Gander and the boats purchased in England. After we have spent that for this eight 980 NATIONAL CONVENTION December 1947 year period, it is completely dissipated. It is gone. It is my opinion— Mr. Smallwood has his— that this should not go into current revenue, but into accumulated surplus, not surplus that we may get as a province, but surplus that we will be left with if we become a province.
In reference to roads, I know that the $1 million allowed in Mr. Smallwood's budget was for maintenance. I have looked at all these figures. That was my contention, that there was only $1 million for roads, and that has to be for maintenance. It is going to cost us $1 million under the provincial set-up for roads, but what I was saying was that there was nothing for new roads that will bring in taxes on cars and gasoline and drivers' licenses.
Now, sir, on that reconstruction, Mr. Smallwood gives me credit for now believing in Commission of Government policy. If Mr. Smallwood has followed me closely, I brought out the fact that that deficit of approximately $5.8 million would be brought about by reconstruction at the rate of $2.5 million, and the educational cut, and the public health cut, if we maintain the present standards that we are doing today in reconstruction; and I presume it would be the purpose of any government in the next few years to carry on as we have been doing to finish the buildings we have started, and complete these services. That was my point, if we continue. But if you want to wipe out the $2.5 million, and take the estimate I originally made of $2 million for public health, and $1 million for education, it still brings it up to $18 million, and that's without any reconstruction deficit. You have the same thing, and that will bring it up to a $4 million deficit. You have got to add that to the $1 million already provided for in Mr. Smallwood's estimate. That brings it to $5 million that you have got to get from the people in some form in addition to the taxation they have to pay to the federal government. I think that clears up what Mr. Smallwood and I have to say.
Mr. Butt Before we go any further there is one item I would like to see cleared up, that figure under Public Works for road maintenance. Now under heading 1 of sub-heading E, page 61...[1]
Mr. Chairman Pardon me, Mr. Butt, there is altogether too much noise, 1 can't hear members when they are addressing the Chair. Will you kindly refrain from noise in the galleries?
Mr. Butt All the headings with the exception of E-4, in my opinion are all maintenance, in spite of the fact that improvements and reconstruction of roads and bridges were under that heading. I will explain the difference. The maintenance of roads, that is the first item of $1 million, will be the pay for any maintenance men who are filling, cutting, spreading gravel, etc; under E-3, the improvement and reconstruction of roads and bridges, there is a slight separation. It could very easily go into maintenance of roads and bridges, because that would include such things as the replacement of ordinary bridges by, say, concrete bridges, and the replacement of ordinary wooden bridges by new wooden bridges. It would also take in side cuts where you have sharp curves. You would take these off and you would also fill in, for instance, where you have very soft ground, so that if we are going to improve our roads at all — and there is an important point to remember, by improving and not putting it under ordinary maintenance, you are thereby saving a lot of money in the future by upkeep of roads. On this sub-heading alone, apart from the $1 million and a very small section which would be used in the construction of new roads, roughly $2 million is today being spent on what I consider poor maintenance, and I think $1,270,000 is quite wrong. I would go a little further, and if my memory serves me wrong I would like to be corrected, but I believe that when we were discussing the Transportation Report, it was said by one gentleman that Sir Wilfred Woods gave it as his opinion that $2 million would be needed to maintain the roads that we have at present.
Mr. Smallwood No.
Mr. Butt That is exactly what he said.
Mr. Smallwood No, when the present existing road program is completed.
Mr. Butt Well, it is complete.
Mr. Smallwood It is not.
Mr. Butt Certainly it is. I hope I have drawn a clear picture as to what these two votes are for. Ordinary maintenance, such as driving the grader over and throwing down a bit of gravel, as against cutting off curves, side cuts, filling in soft spots, and concrete bridges, etc, which are all part and parcel of maintenance of roads, and are not for new construction at all. So I think it is out at least December 1947 NATIONAL CONVENTION 981 $500,000.
Mr. Smallwood There is a slight difference of opinion between Mr. Butt on the one hand and the Commission of Government on the other. If Mr. Butt will turn to paragraph 94 of the estimate, the Newfoundland government's own estimate, not mine, the third item from the bottom, which is the three year reconstruction program of the present government; the third item from the bottom — $1.75 million. Now Mr. Butt regards all that as ordinary expenditure on maintenance of roads, whereas the government regards it and treats it as reconstruction expenditure, part of a three year reconstruction program, and the amount I have down of $1.27 million per year is the govemment's ordinary maintenance of roads as they now exist. But roads that will be built from the time that we would become a province, would be extra or special, or reconstruction, or capital, and the maintenance of them would have to be ordinary expenditure.
Mr. Butt There is one way the Convention could settle a matter of that kind — call in the men who are doing this job in the government. The actual fact is that that money is all required for maintenance unless you are going to leave your roads exactly as they are today.... I don't speak definitely on matters of this kind unless I know whereof I speak. I say this is out by half a million dollars.
Mr. Hollett I find myself in a very peculiar position, in that Mr. Bradley moved, "that the Convention resolve itself into a committee of the whole to further consider and discuss the proposals received on November 6 from the Right Honourable the Prime Minister of Canada"; that is what this committee of the whole is supposed to be doing now. What are we doing? We are discussing a proposed budget brought in by Mr. Smallwood. The whole discussion is out of order, but we are at it, and we may as well continue it.
Mr. Chairman If you don't mind, Mr. Hollett, I would like to make my position clear. Mr. Smallwood has, if not at the request of the Convention, at least by and with their consent, introduced this for the purpose of breaking down some figures that were received from the Prime Minister of Canada. I have not ruled that he has the right to do it, but he has done it at the request of some members of the Convention, and I have allowed it to go.
Mr. Hollett That may be so, but I maintain that he has not broken down these figures, but has brought in new figures. I propose to go through this, including also the Black Book and the Grey Book as time goes on, and for that purpose I want to start at the beginning of the proposed budget brought in by Mr. Smallwood and make an inquiry.
On page 15 you will notice "Trustee stock not converted...on these two loans", one up to 1950, and that amounts to $80,569 and the other in 1952 amounts to $42,806, What I can't find out in the estimate is if any provision is made to pay the interest on these two loans. I know that $3 million has been set aside in Great Britain to wipe out these two loans at maturity, one in 1950 and the other in 1952, but I do say that our government in Newfoundland, be it as it is now, or be it under confederation, has to supply enough money to pay that.... Your provincial government will have to pay the interest on that $80,000 and $40,000 and some odd from 1950 to 1952. What I would like to ask is, why Mr. Smallwood has not made any provision for that in his proposed expenditure?
Mr. Smallwood In reply to Mr. Hollett, if he is prepared to wait until I have talked to the Finance Department I will give him a very complete answer.
Mr. Cashin There is no answer beyond the fact that the government is transferring the interest on this money semi-annually, June 30 and December 31, and in this provincial budget these two loans have to be taken care of as to interest. Now there is $3,232,000 at 2.5% set aside in the Bank of England to meet this loan of $3.5 million. We figure that as the loans mature the interest which will be accumulated on these two amounts will be sufficient to pay them off, but at the present time the interest is being transferred to London to pay these, consequently I realise, and Mr. Smallwood realises, that it is immaterial. It does not matter whether he goes down to the Finance Department or not, it is left out. Until 1950, or from then until 1952 it is $40-50,000 or more.
There is another thing while I am on my feet. I find in the Black Book, volume II, page 56, the total expenditure in this budget for the Finance Department, if I can make it out, because I never 982 NATIONAL CONVENTION December 1947 saw a budget like this in my life. We have here an amount to disappear of $2,228,500, and that includes three Commissioners. They are going to disappear. The Secretary of the Commission will disappear; grade I clerk, $2,000, in the Finance Department will disappear; the assistant secretary will disappear. Two grade III clerks are disappearing, the private secretary to the Commissioners is disappearing, $2,000, the telephonist is disappearing, the statistical officer is disappearing, the clerk grade III is disappearing.... Then there is a slice off the Auditor General's department. Now the point I am making is this: all these people that are going to disappear from the Finance Department will be absorbed by the Finance Department of Canada...
Mr. Smallwood No, not the Finance Department.
Mr. Cashin Well, where will they go?
Mr. Smallwood Well, now, I will tell you.
Mr. Cashin These people were to be paid off from the Finance Department of Newfoundland and put into another department. These people will be laid off, and their salaries are considerable, apart from the Commissioners there's 11 people laid off from the Finance Department who will have to find employment in some other department of the Canadian government. Twelve or 14 are laid off, and we don't know where they will be fitted in. They might transfer them to Victoria, anywhere from Vancouver to Halifax.
Mr. Smallwood No, that would not be allowed.
Mr. Cashin Why?
Mr. Smallwood Because in the Civil Service Act the Government of Canada must employ civil servants in the province where they are ordinarily resident, so that the civil servants they would employ in Newfoundland must be people ordinarily resident in Newfoundland, those in British Columbia must be ordinarily resident in British Columbia. That's the law.
Mr. Cashin Well now, "Employees of the Government of Newfoundland in services taken over by Canada as provided for in clause 5 above will be offered employment in the corresponding Canadian service under the terms and conditions governing employment in that service, but without reduction in salary or loss of pension (superannuation) rights acquired under Newfoundland law." As I read that they will be offered jobs in the Canadian civil service, and there is nothing to say as to what part of Canada they will have to go to. The Finance Department down here will be closed up, and the headquarters of the Finance Department will be in Ottawa. They will not have a branch down here. They will have an assessor's department down here to collect income tax, but they will not have all these financial people down here, because the headquarters will be in Ottawa.
Mr. Smallwood There will be a Customs Department here.
Mr. Cashin Yes, there will be a Customs Department here, and how many will be laid off, particularly if we read these figures given by the Canadian government themselves, which says they are only going to collect $2 million in customs duties here, and let's see, how many people have we in the Customs?
Mr. Hollett 256.
Mr. Cashin Yes, 256 people to collect around $2 million. They are going to collect $2 million, well $3 million altogether including excise on tobacco and liquor, and they will still employ 256 people to do it, when we only employ 256 to collect $30 million! There will be people let off from the civil service and we have had proof during the discussions of this from Ottawa. The Railway will receive the same treatment. It's hidden in the Black Books, but it is in secret documents which we are supposed to have, and we find that there will be lay-offs in the Railway unless we are not able to read English.
Mr. Smallwood As I put a question to the Government of Canada on that, why make a statement until the answer comes back?
Mr. Cashin Because they answered it themselves.
Mr. Smallwood Not in the official statement.
Mr. Cashin The Black Book has nothing to do with it. In these discussions we have discovered there were other documents given to you by the Ottawa government, and in one of these documents it was pointed out and intimated by one of the Canadian officials of the CNR that they thought that the Railway was overstaffed. That's what it meant in rough English. Consequently they have it in the back of their heads that when they take it over, they will lay off people over there, but for official purposes they did not mention it here. There are a lot of other secret documents that will have to come out before this is December 1947 NATIONAL CONVENTION 983 over. Mr. Smallwood There are not any.
Mr. Cashin There are. You told us about some in the Steering Committee the other day.
Mr. Smallwood The first I heard of it — only the one showing the public debt of Canada.
Mr. Cashin Why was it not in the Black Book?
Mr. Smallwood Well, we have it.
Mr. Cashin Yes, but it has to be blasted out of you. There's other documents they have going back two or three years, and we should have them.
Mr. Smallwood I don't know, and if any other member knows of any secret document I ask him to name it. There are seven of us, and I don't know of any document going back three years.
Mr. Higgins I believe what Mr. Cashin is referring to is the one you referred to in the Steering Committee the other day.
Mr. Smallwood What document?
Mr. Higgins That Blue Book.
Mr. Cashin You mentioned some document we have not seen, and I think we should have it.
Mr. Smallwood That's true.
Mr. Cashin We did not send you people up to Ottawa as a beggarly delegation — we sent you to Ottawa representing what I consider a fairly prosperous country, and what you did, you went up with your hat in your hands and said, "What are the best terms you can give us?" That's what happened. I bring that out right now, but as I go along I just want to make this clear: I find now that there's ten or 15 people who will be laid off, but there is nothing definite laid down as to where they will be employed. Those people who are included in the Black Book will find that when the provincial government (if we ever get one, and I doubt it) takes over the affairs of the province, that their jobs are gone, and they will have to go with their hats in their hands looking for similar employment.
Mr. Chairman Before you take your seat, I would like to draw your attention to the fact that the document which occasioned so much mystery was, at my request, turned over to the secretarial staff, and is being mimeographed at the moment, and I understand it will be available to members tomorrow or the next day at the latest.
Mr. Cashin I hope we get them all.
Mr. Smallwood I want to make a very brief reply to Major Cashin. He says that in the Finance Department 12 or 14 men and women who work there now would ... be out of their jobs. That is true, but I would draw Major Cashin's attention to the fact that here in Newfoundland the Government of Canada would open up a number of federal departments over and above the departments we have here now, that they would take over and run.... I estimate that the Government of Canada, after taking over certain public departments that we have now (and in taking them over they take over with them the employees that are in them) would have to take on at least 1,000 civil servants in the new offices and departments that they would have to open up, and any civil servants ... who would lose their jobs would have the first offer of employment in these other Canadian government departments that would be opened up. It is true that in departments that would become provincial departments there will be fewer employees, so many will have to go; but they and many more will be taken on in entirely new federal government departments that will be opened in Newfoundland.
One other point only: Major Cashin tells us that the number of employees in the Customs Department is 256. I do not dispute that 250-odd are employed in the Department of Customs to collect $20 million a year off the people of Newfoundland. I hate the sound of it, but they will need employees to collect that money. Let me tell Major Cashin that if the Government of Canada, when it takes over the Customs Department, if in taking over the Government of Canada collects only $2-4 million a year, they will need just as many employees as there are now to collect $20 million.... You will have exactly the same number of customs ports of entry, so therefore you will have the same number of collectors and tide waiters, the same number of customs watchers and searchers, and clerical staff. We are an island, and confederation will not change that. If I am wrong, and they can get along with 200, well then the 56 will have the first chance of being employed in the other departments of the federal government.
[Short recess]
Mr. Hollett Mr. Chairman, I was asking
Mr. Smallwood a question when the floor was more or less taken away from underneath my feet. Of course we have to put up with these things. One is dubious about saying anything here today, 984 NATIONAL CONVENTION December 1947 but if you say anything at all you are tried, as it were.
This budget which he has brought in starts by leaving out an expenditure of $123,000 which would have to be found by the provincial government, some of it up till 1952. I asked him why he left that out, and his reply was that if I would give him time to see the finance minister he would be able to reply. Now is the finance minister of this country at the present time responsible for this budget? Is not this Mr. Smallwood's own budget?
Mr. Smallwood Yes.
Mr. Hollett In that case I cannot understand why Mr. Smallwood cannot answer me now. I can understand a man forgetting it, as I understand that $123,000 has to be spent as soon as you get it.
With regard to the probable expenditures under consolidated funds service A, if you would put $499,625 you would be practically correct. We come on to the Department of Finance, and that has been spoken to by Major Cashin and Mr. Hickman. One of the things that did strike me was that in the Black Books there was $1,000 allowed for civil service pensions. Mr. Smallwood in the goodness of his heart has added $101,000 to that, because he suddenly discovered that the provincial government will be responsible for the present civil service pensions.
Mr. Smallwood If you would allow me, responsible for pensions of those who have been working for the Government of Newfoundland up to the time of union, and for those who become federal employees, for that portion of their pension earned up to the time of union.
Mr. Chairman If you don't mind Mr. Smallwood...? I would like to say, Mr. Hollett, that your criticism was just and proper, that the floor was taken away from you, and it arises from the fact that I permitted two men to occupy the floor at the same time.
Mr. Hollett Thank you, Mr. Chairman. I note that we have 256 employees in the Customs at the present time. Apparently most of them will be done out of employment. Posts and Telegraphs, 1,031 civil servants, most of whom will be retained. A good many of these will probably find themselves without work. Assessor of Taxes, 31 civil servants. Coming down to the Depart ment of Home Affairs, I notice under "Travelling and Miscellaneous" Mr. Smallwood has the figure $2,300. I understand it is $9,800. Probably Mr. Smallwood would make a note and tell me why he has lopped off $7,800. There is another note in the estimates which provides $10,000 for war graves in Europe. It is just possible that if we go into confederation, that the war graves will be taken care of by the federal government, but I have yet to see any mention of that in the Black Books. I would like to be sure on that point too.
Education, too, has been spoken of this evening. The estimate calls for $3,622,300 for the present year. $514,000 of that amount was allocated by the government for building of new schools throughout the island, and for repairing schools. Mr. Smallwood has cut off $514,600.... Again I maintain that we have no right whatsoever, simply because the remainder of Canada does it, to cut off an allocation which has been made for the education of our children. The education of our children has been backward. You and I grew up in those backward days, with the rain beating in through the roof and the snow through the windows — not at the same time, I suppose! Do you remember those days?.... Mr. Smallwood will say no more repairs to schools, no more erection of school buildings, if we are going into confederation. I would suggest that instead of the $3,107,700 which Mr. Smallwood has cut out for Education, it should be $4 million, because we all know that the Education Department today is budgeting for a $4 million expenditure next year. Why should we deprive this country of that budget, simply to become a part and parcel of the Dominion of Canada?
We come on to the Department of Justice. There's this little matter of the magistrates, 21 at the present time and they are receiving $70,181. Mr. Smallwood has cut that down to $38,374, simply because he says the other seven will become county magistrates. Whether they are county magistrates or district magistrates I think makes very little difference. It has not yet been proved that these district magistrates will receive their stipend from the federal government. I am doubtful whether you can get along in this country without 21 magistrates. You can call them what you like, whether they are assistant magistrates, or district magistrates, I feel sure that December 1947 NATIONAL CONVENTION 985 a magistrate is somewhat lower in the judicial circle then a county magistrate in the Dominion of Canada, so I see no reason why that should be cut down. Shorthand typists, is cut down to three which means that three will be done out of work.
Now I come to the Constabulary, $526,830. Mr. Smallwood very magnificiently has left that as it is. I have been dealing with constables and police officers for 25 years, and I know the conditions under which they live, and I know the salaries they are receiving even today, and when I tell you that a constable of 15 or 20 years experience receives $1,550, and a second grade clerk in the department here in St. John's with one year's experience gets $1,500, I ask you, are these constables being treated right? Mr. Smallwood thinks they are. We won't increase that vote, we will leave it as it is.
Penitentiary. Mr. Smallwood says the federal government will pay half that amount. The allocation is now $25,000, and it is cut down to $12,500. I take it that's the amount that is required to service and take care of the penitentiary as it exists today. We all know that that penitentiary is inadequate. I don't think any of you gentlemen would get a bed there tonight if you wanted to. How can you cut down your expenditures? Most of these men are sent there by the magistrates, and I take it under confederation our people are not going to become saints, and some will have to take temporary residence down there, and the amount of $25,000 is only just enough to get along. As a matter of fact, I don't think it is ample. The travelling of magistrates is cut from $20,000 to $15,000. Why? Magistrates, or county magistrates, are they not going to travel? It there not just as much travelling in this country for the magistrates under confederation as at the present time? How can he cut $5,000 off? These are only small amounts, gentlemen, but all added together will show you just how much we need to run this country, even as it was. General justice, $25,100 in the estimates, Mr. Smallwood has cut off another $5,000 there. Maintenance and operation of vessels. Last year that took $11,200. I don't know what vessels that refers to, unless it is the vessel which takes the Supreme Court around the island. I don't believe they can do it less than that, or we will have no Supreme Court travelling around the island from time to time. If we are going to have that we will need $11,200, and not the $5,600 which Mr. Smallwood has put down for the maintenance and operation of that vessel.
Penitentiary supplies. The vote is $45,000, and Mr. Smallwood has cut it to $10,000. I don't know how. The penitentiary will have prisoners, and has to be serviced and have supplies. How can we do it on $10,000 being a province of Canada? You will see that if you add these amounts, and the amount already placed there by Mr. Smallwood, that the estimated expenditure as made by our own government under the heading of Justice, which was $1,177,700, is little enough, so I would suggest that instead of $1,053,000, you really must leave that figure of $1,177,700. That is as far as I care to go this afternoon, because there are other men who would like to speak.
Mr. Smallwood I would like to reply to Mr. Hollett. He says there are 256 men or women working in the Customs, and he says that most of them will be done out of work.
Mr. Hollett I did not say that, I said some of them.
Mr. Smallwood Will you turn to page 5 of the Grey Book, clause 17, and the heading says "Government Employees." I will read it to you. It does not say that they will take over part or some of them, but it says: "Employees of the Government of Newfoundland in services taken over by Canada as provided for in clause 5 above will be offered employment in the corresponding Canadian service under the terms and conditions governing employment in that service, but without reduction in salary or loss of pension rights..."
Mr. Hollett Where?
Mr. Smallwood Look at clause 5 and you will get a list of them. Clause 5, sub-clause 1, Newfoundland Railway, Newfoundland Hotel, Customs and Excise, etc, and in any department they take over they will take the employees with them, and obviously some of the employees of the Customs department will not lose their jobs. That's quite clear isn't it?
Mr. Hollett Well, some of them.
Mr. Smallwood So Mr. Hollett will not say that any more.
Mr. Hollett I rise to a point of order. Mr. Smallwood is deliberately misquoting me. On that point I fail to see that they are going to need 986 NATIONAL CONVENTION December 1947 256 customs officers to do the work after confederation.
Mr. Chairman Yes, your statement was that there were 256 employees presently employed down there, and you went on to state your reasons as to why some of these employees should lose their jobs.
Mr. Smallwood My reply was just as clearly that none of them would lose their jobs. I hope that no one else will say that in the Customs or any department ... any of these employees would lose their jobs; so let us hear no more of that.
War graves. It is perfectly true that in the Grey Book or the Black Book there is no specific statement to the effect that the Government of Canada would maintain war graves in Europe. Does anyone doubt that the Government of Canada does look after war graves? It is not looked after by the province, but by the federal government. It comes under Veterans' Affairs, which is a federal job.
Mr. Hollett says I have dropped $500,000, but I would ask Mr. Hollett to turn to page 94 of the estimates of the Government of Newfoundland, the third item down, D 8 and F 4, and he will find that a total amount of $514,600 is a reconstruction expenditure by the government, part of their three year reconstruction program; not permanent but a program to spend $500,000 on the building of new schools and reconditioning old ones, and the building of regional libraries. So as it is only a reconstruction program I have omitted it as an ordinary expenditure, the idea being that it should be under capital expenditure — reconstruction expenditure...
Mr. Hollett Excuse me, have you got a capital account in that budget?
Mr. Smallwood No, it is an ordinary account budget, the ordinary expenditure for eight years, year by year. Anything else would have to be special. Now Mr. Hollett says that we have so many magistrates, and that I have cut seven of them down. That is true, because seven of them would not cease to be magistrates, but they would cease to be provincial and become federal. They would become county court judges, whose salaries are paid by the federal government. So, as the federal government would pay the salaries of seven magistrates, that would be seven magistrates that the provincial government would not have to pay for. The same thing exactly applies to the travelling. I have reduced the amount for travelling by the seven magistrates because the federal magistrates are not only paid their salaries, but their travelling expenses as well. Then Mr. Hollett notices that I have cut down the travelling expenses of the Supreme Court. I have, for a very good reason — that the salaries of the judges of the Supreme Court are paid by the Government of Canada, and so are their travelling expenses. It is a federal charge, a federal expense.
Mr. Hollett Why the $5,600, then?
Mr. Smallwood Speaking from memory, without looking it up for details, it is an amount of $5,600 lopped off of how much?
Mr. Chairman $11,000.
Mr. Smallwood Possibly I should have lopped a lot more off, and in leaving what I have left as a provincial government expenditure probably I have been too generous. Possibly it won't cost quite as much as I have said. If so it will be another little saving.
I think that's all Mr. Hollett said, except the question he raised before, of those two debts that Newfoundland owes that are coming due in 1950 and 1952, against which the government has placed money over in England. Why I have not put the interest in, I have told Mr. Hollett I will give him the answer tomorrow. Perhaps I have made a mistake, but at all events give me an opportunity to look into the matter, and if I have made a mistake there's nothing to add. I have gone a long way in giving you some estimates of what the Government of Newfoundland would spend for the first eight years, and what would be their revenue for these eight years, and done it in considerable detail. It is entirely possible, not being minister of finance, and not having even a secretary that I have made a mistake. I have got hundreds of letters in my house that I have not had a chance to answer. Give me a chance, and tomorrow morning I will look into it, and tomorrow afternoon I will confess it very frankly. They say that open confession is good for the soul, and my soul needs some confessing after 14 months in this Convention.
Mr. Higgins With respect to these budgets, as Mr. Smallwood recollects, the Ottawa delegation made a budget before going to Ottawa. They followed the same lines as the budget being brought in now, with the exception that there is a December 1947 NATIONAL CONVENTION 987 difference in the figures. I can understand why the difference in expenditure may arise, but frankly the difference in the expenditure from the one we made up rather puzzles me. The first gave an accounting for expenditure of $13,920,000. When we got to Ottawa, after some consideration we increased that budget by $500,000. If I remember rightly the budget for expenditure that we finally presented was $14,420,000. That is as you have it in your Black Book. Now on the revenue side we had a revenue of $3 million. That is apart altogether from this $1 million tax that we added on afterwards, a special tax...
Mr. Chairman Mr. Higgins, if you don't mind, I must remind you that it is nearly six o'clock, and if I don't get a motion to rise before that time I will be leaving the Chair at six o'clock as I am required to do.
[The committee rose and reported progress, and the Convention adjourned]


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



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

Notes de bas de page:

  • [1] Volume II:522. [Volume II is not in The Confederation Debates Collection]
  • [1] Of the government estimates.

Personnes participantes: