Newfoundland National Convention, 10 December 1947, Debates on Confederation with Canada


December 10, 1947

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

Mr. Higgins Mr. Chairman, when we adjourned yesterday, I was referring to budgets that had been made by the delegation prior to their going to Ottawa in June... Now we made two "guesstimates" going to Ottawa, one was to do with expenditures and one with revenue. There has been a difference in both these budgets, from the ones we made up and the ones that are before you today, and it is in that connection that I would like some explanation... Now if you will begin on page 56 of the Black Book, part II, you will probably follow me a little more intelligently. It is "Probable Division of Existing Newfoundland Public Expenditures"....
[Mr. Higgins then went on to compare the estimates of probable provincial expenditures and revenues prepared by the Ottawa delegation and printed in the Black Book, with the estimates submitted by Mr. Smallwood on December 8]
....I merely draw your attention to these [changes] because frankly the way it appears to me is this: that when these estimates were made up by the committee going away, they did the best they could with what they had. They had no clerical help from the department concerned, even though application was made, but we did the best we could. Now I submit to Mr. Smallwood that he was faced with increased expenditure, and he had to find increased revenue for it, and he has apparently stepped up the figures that the committee prepared, and I would like an explanation as to why he did mat.
Mr. Smallwood Mr. Chairman, Mr. Higgins has gone to great trouble to compare the estimates of revenue and expenditure made up by the Ot tawa delegation before we went to Ottawa, with the estimates of revenue and expenditure that I brought in here on Monday. Frankly I do not see the point. I do not see what point there is in comparing two things which are not comparable. Before we went to Ottawa we felt that we ought to have some idea of how much money the Government of Newfoundland would have to spend each year, if we became a province, and what would likely be the revenue to go towards that expense. We felt that we ought to do that. We did it according to the best of our knowledge at that time. We spent three months in Ottawa, and we learned a lot, and on the basis of what I learned I brought in here on Monday estimates of what the Province of Newfoundland would likely have to spend per year. and estimates of what the revenue from all sources would likely be.... What relation there is or can be between the two, apart from a purely academic relationship, I fail to see. As I have said several times in the last two or three weeks the estimates of expenditure and revenue that we made up before we went to Ottawa, that appear in the Black Book, are out of date...
in introducing these estimates on Monday. I took, I believe, from 3.30 - 5.30 pm to read them, and to explain various items that differed materially from the government's own current estimates... The basis of comparison should be between the estimates that I brought in here Monday and those of the government as they exist in the current estimates. That is a fair basis of comparison from the standpoint of expenditure. Now from the standpoint of revenue I grant you. the 988 NATIONAL CONVENTION December 1947 government's own current estimates for this year are only in part a fair basis of comparison ... because in my estimates the revenue is divided into two kinds — on the one hand revenue got by taxing the people of the province, and on the other revenue from non-taxation sources. From the standpoint of the taxation sources it is fair to compare my estimates with the estimates of the government. From the standpoint of non-tax revenue, the government's estimates do not furnish us any clue or any guidance whatsoever.
I would point out that the estimates that I brought in estimate that in the first eight years of union the government of the province would spend $123 million; and I would point out further that $83 million of that ... I estimate would come to the government not from taxation sources at all, which leaves $39,960,000, call it $40 million to come to the government from taxation on the people of Newfoundland; and ... in respect of that item it is fair to compare it with the government's present current estimates in the Blue Book; but with respect to the $83 million from non-taxation sources there is no basis of comparison, because those are based upon the terms in the Grey Book. Now while I am on my feet, I want to reply to Mr. Hollett.
Mr. Higgins Before you reply to Mr. Hollett, I wonder if you would mind answering those two specific questions I asked? Whatever we learned in Ottawa or did not learn in Ottawa, I would like to know how licenses for motor vehicles and drivers has been increased from $250,000 (some of us do not like that estimate) to $325,000? Can you tell me that?
Mr. Smallwood I do not mind answering that specific question. When we were drafting our estimates of possible revenue for the Province of Newfoundland before we went to Ottawa, there was, as Mr. Higgins has said, some difference of opinion as to how much we should estimate to be revenue from vehicular licenses on motor cars, trucks, buses, and from drivers' licenses. My contention, and the dispute, if there was a dispute, between some members of the delegation and myself, was that we should raise that amount. Now who was right and who was wrong? I was right.
Mr. Higgins Why?
Mr. Smallwood I will show you why I was right and the others wrong.... The government itself in the Blue Book estimates for the current year $220,000. The year before they raised $180,000, so this year they estimate $220,000, and to date they have taken in over $260,000. Now who was right and who was wrong?
Mr. Ballam You were right.
Mr. Smallwood Of course I was right.
Mr. Higgins It is a long way from $225,000.
Mr. Smallwood All right, this current year they have taken in already over $260,000. They only estimated for $220,000, and my estimate of $300,000-odd is not for this year, or next year, but an average for each year for the first four years of union; and during those years ... there will be more roads in Newfoundland ... there will be more miles of road in 1948 than in this current year, and each year there will be more mileage, there will be more motor cars, especially, sir, if we get confederation, because they will come in duty-free from Canada. There will be more motor cars, and more drivers, and it is a perfectly fair and conservative estimate to do what I have done, to estimate for the first four years of union $320,000 a year where the government this very year has taken in already over $260,000. I have already given that explanation. Mr. Higgins sat behind me here while I did it on Monday afternoon. It is true I was back on to him, and I can't guarantee that he was here every moment, but I explained all these points on Monday afternoon. Why go all over it again?
Mr. Higgins I don't think you explained that particular point.
Mr. Smallwood I explained that point in considerable detail, exactly as I did it for the past four or five minutes.
Mr. Chairman As a matter of fact I recall distinctly Mr. Smallwood stating: "Already this year the government has received $265,000". Then he went on to say, "I should not say 'already this year', because for all practical purposes we must assume that there will not be much additional revenue raised in this respect between now and the end of March next year".
Mr. Higgins Where are the roads going to come from, Mr. Smallwood?
Mr. Smallwood Now I pass on, Mr. Chairman, and reply to Mr. Hollett.
Mr. Higgins If you don't mind, with all due respect, I don't like to be brushed off as easily as that.
Mr. Smallwood Well, I do not like being brushed off, but I have an intense dislike to being insulted, strange maybe.
Mr. Chairman Just a moment, Mr. Smallwood, so that I can deal with the propriety or otherwise; why do you feel that you are being insulted because Mr. Higgins has asked you where the additional roads are coming from?
Mr. Smallwood I was not referring to that. I do not regard that question as an insult. I regard this as an insult: I spent from 2:30 to 5:30 pm explaining these points, then to be asked by a gentleman who sat here three or four feet from me right throughout that period ... all these same questions over again. It is insulting to me.
Mr. Chairman Mr. Smallwood, on that point I cannot sustain you. Whether or not Mr. Higgins was here, and if he is merely asking you to recapitulate or reiterate information you have already given the House, at the worst it can be merely construed as a waste of time; but I have no knowledge of Mr. Higgins being here at the time. I have to deal with the tenor or substance of his question... I find nothing insulting in the question itself. Whether or not Mr. Higgins was here and heard that and is now asking for information that you have already given the House on Monday is something I am not prepared to rule upon... If you don't mind, Mr. Smallwood, would you have any objection to answering Mr. Higgins' question?
Mr. Smallwood Mr. Chairman, in reply to Mr. Higgins I will now ask him a question. Will he please tell me what roads are being built in Newfoundland, what are budgeted for, how many were built in 1947, how many are budgeted for in 1948? And I have as much right to ask him as he has to ask me. He was a member of the Ottawa delegation, and l was a member of the delegation. Am I going to sit here, or stand here and be treated as though I was a stranger and he was a stranger? We were both up to Ottawa together. Now I will ask him the question. Please answer, Mr. Higgins.
Mr. Higgins Mr. Chairman, Mr. Smallwood made the budget, and there are no roads in the budget. Now Mr. Smallwood, will you tell me what roads were built here for the past 20 years, year by year, and name where they are, and what it will cost to maintain them, etc.
Mr. Chairman Mr. Smallwood, there is no item in the budget or estimate covering roads as such, but indirectly you did raise the position by virtue of the fact that you did predicate your estimate of increased revenue upon the position that more and more roads are to be built in the passage of time... Therefore I feel compelled to hold that while there is no direct reference to it, it is introduced into the picture by virtue of the fact that you predicate the higher figure upon the assumption that more and more roads will be built.
Mr. Smallwood Now I will answer Mr. Hollett, if he is ready.
Mr. Higgins Are you going to answer my question?
Mr. Smallwood No. I am not answering it, and I am not going to answer it. Let any man who was not on the delegation ask me an honest question, and I will give an honest answer.
Mr. Higgins All right, Mr. Smallwood, then you...
Mr. Smallwood If Major Cashin asks, he is a man, and I will answer.
Mr. Chairman Now, now, Mr. Smallwood.
Mr. Smallwood I am not going to be insulted. I have stood it for three weeks from a fellow colleague on the Ottawa delegation; he can sit back and discuss that delegation, and treat me as if I were a member of it and he was not. The whole country is talking about it. Now let Major Cashin ask.
Mr. Cashin Well, I am going to put it this way: I take it that Mr. Smallwood means that when roads are built they are going to be built out of capital, not out ofcurrent revenue. Is that right?
Mr. Smallwood That is under union.
Mr. Cashin Yes, under confederation, they are built out of capital.
Mr. Smallwood Yes.
Mr. Cashin Yes. That's just the point. Now if we go into union, if we ever do, and I don't think we will, there is supposed to be $30 million roughly in cash in our accumulated surplus earned from monies owed by the Housing Corporation and individuals, therefore you take $10 million of that money and you deposit it with the Canadian government, which is to be spent on current account only. That leaves $20 million balance, which is supposed to be capital account, from which you would spend, 1 take it, to build these roads. Now there is over $9 million of that 990 NATIONAL CONVENTION December 1947 in England today. There's going to be another $5 million or $6 million this year spent out of this surplus to pay for fish, that's $15 million, consequently you have $5 million left of your accumulated surplus in Newfoundland. Now the way road building is going these days, $5 million is not going to increase it very much, and unless and until you got your sterling converted into dollars, and we have not been told in any of these terms here whether or not the Canadian government is going to convert this sterling back to dollars for us, I can't see how you can do much road construction with $16 million in Great Britain and just $5 million here in capital account, a lot of which will have to be taken probably for various other matters of capital expenditure.... That's the point I want to know, if there is any arrangement between the Canadian government, Newfoundland government, and the Ottawa delegation to the effect that all this money we have in sterling will be converted back to dollars, and when it will be converted; because if you have not got it converted you can't build many roads, because you have no surplus on your provincial budgeting, you have deficits.
Mr. Smallwood I appreciate the point made by Major Cashin, and the gentlemanly way in which he has made his point. Major Cashin and I are becoming like...
Mr. Chairman We will stop this commotion in the galleries right away. Members will please remember that this is an investigation of a very serious matter by the members of this Convention and no members, or anybody outside this Convention is entitled to participate in the debate at all, therefore we are not concerned with the approval or disapproval of any person in the gallery, and I don't want to hear any further commotion there. Go ahead, Mr. Smallwood.
Mr. Smallwood Mr. Chairman, as I said here on Monday, this where the note on page 2 says, "This assumes that the accumulated cash surplus of $28 million has been converted into dollars and placed on deposit at 2 5/8% with the Government of Canada, and that an average of $3 million a year is withdrawn during the first eight years of union for the purpose of development in Newfoundland."
Mr. Cashin Excuse me, in order to get 2 5/8% from Canada, you have got to convert it into dollars. How is that going to be done? Is the Canadian government going to do it, or is the British government going to find the dollars when we become a province? Because you can't find it unless you convert it first.
Mr. Smallwood I agree that that is true. Major Cashin will understand, and he will appreciate the position I take, when I say that in view of his very well-known stand that we will never get back our interest-free loans from Britain, and that it will never be converted into dollars, that I feel like saying as little as I can humanly say on that point, as to how the sterling will be converted into dollars and by whom. I will say this, that I have no doubt whatever that our sterling, that part of our accumulated surplus that now lies in sterling or will lie in sterling at the time of union, will be converted into dollars; because, as Major Cashin points out, the Government of Canada agrees to receive on deposit from Newfoundland at 2 5/8% interest, only the part of the surplus in dollars.... It is important therefore, that the sterling be converted to dollars. I have no doubt, none at all, that that will be done. I don't want to say more than that, and furthermore I am not going to be forced to say any more than that.
Mr. Higgins May I go on? If Mr. Smallwood will not answer me maybe someone else will. I am still on this road question, and I would point out to you that the gasoline tax has been increased from the amount we figured it at, $750,000, to $1 million, that is $250,000 more, and there is $75,000 more on the items that I outlined a minute ago, and that $325,000. I still ask Mr. Smallwood where are the roads coming from in four years, or eight years, to make that increase.
Mr. Smallwood Mr. Chairman, was Mr. Higgins not in the House when I said...
Mr. Hollett Before we go into that, as we have only one reporter, could we have a recess for a few minutes?
[Short recess]
Mr. Smallwood Mr. Chairman, I would just like to say a word or two in general about this question of roads. This year, on June 24, the Cabot Highway was opened.[1] This year they began to complete the road from Gander to Lewisporte, and the road from Corner Brook to Port-aux-Basques, and they had planned to con December 1947 NATIONAL CONVENTION 991 tinue these roads next year. They also began the road on the Burin Peninsula. These are roads which almost certainly will be completed before we become a province at all, except the stretch from Stephenville Crossing to Port-aux-Basques. That would have to be one of the first roads to be completed after union, because until it is completed to Port-aux-Basques, Newfoundland would not get the new ferry on the Gulf, and our tourist trade depends to a very large extent on our getting that ferry.
I think it is common knowledge that a lot of roads were commenced this year and will be finished next year; and that in the course of the next few years the mileage of motorable roads in Newfoundland is going to increase steadily and considerably, which, in view of the fact that last year the government took in $900,000 in gasoline taxes, and in this current year will touch the $1 million mark, it is pretty conservative, for the first four years of union, to put gasoline revenue at only $1 million, and for the second four years to stick another quarter of a million on it and say that revenue from gasoline will increase in Newfoundland between 1947 and 1955 only by $250,000. So I hold that it is a most cautious and conservative estimate, and it would not surprise me at all, not at all if, by 1955, revenue to the province from gasoline, for use by motorists, would be up to $1.5 million, rather than $1.25 million. Now yesterday, Mr. Hollett drew my attention...
Mr. Higgins Can I go on for a minute before you answer that question? I would like to finish...
Mr. Smallwood I have said I am not going to answer a whole lot of questions by Mr. Higgins. I have made an exception in two cases, but I am not going to be made the victim of courtroom tactics, and be subjected to cross-examination by a fellow delegate. Anyone else, yes, but not by a fellow delegate.
Mr. Higgins It is a little awkward, but I would like to ask a couple of questions if it would be all right.
Mr. Chairman I rule that Mr. Higgins is entitled to ask his questions at this time.... I don't want that to be misconstrued to mean that I am ruling upon the propriety or impropriety of the questions. If Mr. Smallwood's answer to all or any of these questions is that the knowledge is already known to Mr. Higgins because he was a member of that delegation, well of course that is a matter for Mr. Smallwood to decide himself. I therefore hold, Mr. Higgins, bearing in mind what I have already said, that you have a right to put your questions.
Mr. Higgins I said, sir, that I made a mistake. The budget that we have for revenue in the Black Book was not made before we left here. We made a budget before we left, but the budget that is in the Black Book was a budget made by the entire delegation while we were in Ottawa. Now I am dropping the roads, as it is a pretty hot bridge, and I would like to have an explanation of why the item Home Affairs has been increased from $50,000, as arrived at by the delegation in Ottawa, to $125,000?
Mr. Smallwood Mr. Chairman, I answered that in great detail on Monday, and not only that, but the result of it was an exchange of questions between Major Cashin and myself which led me to deliver a talk on what it was proper to call revenue and what was not proper to be called revenue. So, having given a complete explanation on Monday, and again yesterday, I don't propose to do it again.
Mr. Higgins Why was the revenue increased from $50,000 to $120,000?
Mr. Smallwood As I have already explained that on two occasions this very week, yesterday and on Monday, I don't propose to answer it again today.
Mr. Higgins The question was never asked. The question was merely asked should it go to capital or current account.
Mr. Chairman On that point there was, if I remember correctly, an exchange between Major Cashin and Mr. Smallwood as to the propriety of including expenditures of that sort in current account. I must say that my recollection is that Mr. Smallwood...
Mr. Higgins I only asked how did the increase arise. That's all. Nothing more.
Mr. Chairman Have you anything to say, Mr. Smallwood?
Mr. Smallwood No, I have nothing further to say.
Mr. Higgins Well, can I have one more question and then I will sit down? The item of Forestry was increased from $151,000 to $171,000. Now $20,000 is neither here nor there, but I would still like to know how that increase was arrived at.
Mr. Smallwood Now, sir, I am ready to reply to Mr. Hollett if everyone else is ready.
Mr. Higgins I take it I am not going to have an answer to that?
Mr. Smallwood I have already answered that question and I am not going to answer it again.
Yesterday Mr. Hollett drew to my attention the fact that in the government's estimate there appears an item which does not appear in this estimate of mine. It is in respect of the 3.5% loan, 1950, ÂŁ569,796, and the 3.5% loan, 1952, ÂŁ302,731, interest ÂŁ30,539, or $123,378. I did not include that in my estimate of provincial government expenditure, and Mr. Hollett wanted to know why I had not done so.
I said yesterday that it might turn out that I had been wrong in not including it, and if I was wrong I would confess so frankly, and I do now confess that I ought to have included that amount on the expenditure side, and I thank Mr. Hollett for drawing my attention to it. It is not an extremely important item. The interest on the one is ÂŁ10,596, or $42,000 a year, and the interest on the other is ÂŁ19,943, or $79,770 a year. Now one of them comes due in 1950 and the other in 1952, so therefore, if you have my estimate of provincial government expenditure by you, you might add in respect of the first two years of union $123,378 a year. And in respect of the next two years of union, $42,808. You see, after the first two years of union the first loan would have been paid off, and there would be no further interest to pay on it, and we would still have two years to go on the small loan, which is $42,000 a year interest, and in two years that would disappear; so that averaged over the eight years, that would, be $41,000 a year average, or averaged for the first four years it would be $83,000. So as I have done it by averages, you might add to the expenditure for the first four years of union $83,172 a year.
Mr. Fogwill Mr. Chairman, I want to ask Mr. Smallwood, a question in respect of the civil service pensions of those civil servants employed by the Government of Newfoundland today, who would be employed by the Government of Canada if and when we become a province, and in relation to their employment, to their years of service in the Government of Newfoundland. Under clause 17, subsection 2:
Canada will make all necessary payments in respect of such pension rights and may deduct from any subsidies payable to the Province of Newfoundland any payments made in respect of pensionable service of such employees with the Government of Newfoundland.
Will those deductions be made in the form of payments to the civil service pension fund of Canada, or will they be made in respect of the accumulated service in the Government of Newfoundland, and would those civil servants be paid for part of their service under the Civil Service Act of Newfoundland, and part under the civil service pension fund of Canada? Would they be paid for as contributions into the civil service pension fund of Canada, that's what I want to know.
Mr. Smallwood I have Mr. Fogwill's question very clear. I will sort of review the whole position so that everyone will know what we are talking about. Mr. Fogwill would not mind that, would he?
Mr. Fogwill Don't make it too long.
Mr. Smallwood I will make it as long as necessary to make it clear to everyone, and no longer. Let us assume that on the day of union the Government of Canada employs certain people. That is the first time they become civil servants employed by the Government of Canada in Newfoundland. Say at the Railway they take on new men. Well, it is employees of the Government of Canada, it does not say civil servants in the clause. You passed the words. "Employees in departments or activities taken over by the Government of Canada."
Mr. Fogwill That is those persons who have acquired pension rights under Newfoundland law, therefore I was confining my remarks to actual civil servants.
Mr. Smallwood All right, we will deal with that alone. In departments of the Government of Newfoundland which the Government of Canada takes over, after they have taken over, they take on a new man we will say. So far as his pension is concerned, the Government of Canada is responsible for that as long as ever he works for the Government of Canada. But they will also be taking over men who are already in these departments, who are now civil servants of the Government of Newfoundland, and have acquired certain pension rights by working so long for the Government of Newfoundland. They go right on December 1947 NATIONAL CONVENTION 993 being civil servants of the Government of Canada. Now what Mr. Fogwill wants to know is this: who pays the pension of such a man in respect of the period that he worked for the Newfoundland government?.... The answer is the Newfoundland government pays it. Now second, about this deduction. You will notice that the word is "may". If the Government of Newfoundland fails to pay the proper pension to a civil service pensioner that is his due, his right, that he earned by working for the Newfoundland government, then in order that that civil servant will not lose his pension rights for the period that he worked for the Newfoundland government, if the Newfoundland government does not pay his pension, then the Canadian government will; but it will deduct the amount from the subsidies they are expected to pay the Newfoundland government. It is not deposited in the civil servants' pensions fund in Canada, because it is an actual pension. Have I made that clear?
Mr. Fogwill I look upon it from a different light, for this reason: there is no doubt that there would be civil servants in the Government of Newfoundland today rather up in age, we will say, and if they were 56 or 57 years old, would not be able to come under the benefits of the Civil Service Pension Act of Canada, if they became civil servants of Canada...
Mr. Smallwood Yes, they would.
Mr. Fogwill Because of the fact that they would not attain the ten years service which is required. It does not matter to me very much, but in summing up the situation of those people in the civil service today who will be taken over by Canada in the event of union, that number amounts to 1,168, and the total payroll is $1,744,000. If we compute that into the average rate it would be approximately $1,000 per person. Now then, if they were taken over by the civil service of Canada, and paid contributions to the civil service fund at 5%, which is the lowest rate, that would amount to $87,208.
Mr. Smallwood That's 5% on what?
Mr. Fogwill On the total year's salaries. It may be a little less, because the wages were not so high a few years ago; nevertheless I would assume that the total years of service on these employees would be approximately 12. I think that's conservative, because I know many people who have 30 or 40 years service now with our civil service. As we compute that amount of $87,208 we got $1,046, therefore we have got to make provision in this provincial budget, where you have $202,000 laid down in respect of payment of pensions. I don't think we are going to have much relief on $202,000 in respect of paying pensions for those who are on pension at the present time, because that will continue for a period of years, and then they will be in the civil serivce of the province if we have it.... I think you have got to lay down in your budget, Mr. Smallwood, a sum of $1,046,000. You can lay it down yearly, or you can lay it down in one sum. If you lay it down for an eight year period you have to lay down $130,000 for each year.
Mr. Smallwood That's very interesting. We went into that at considerable length in one of our committees in Ottawa. It struck me at one time that it might pay the government of the province to do exactly what Mr. Fogwill has suggested might be done, lay out the capital sum from the surplus and in that way wipe out at one blow the province's liability for civil servants' service pensions. That would be one way to do it, but, as we have got an amount of $200,000 a year in those estimates of mine, and as civil service pensioners gradually die, we will finally reach a peak and then the peak will begin to fall, but it won't be half $200,000. It will gradually as he says, begin to fall, so that the $200,000 a year covers it.... If Mr. Fogwill would like sometime to have a debate on the superannuation and pension schemes of Canadian civil servants I would be highly pleased to have it. It is one of the very finest. When a civil servant in Newfoundland gets a pension, when he dies then his pension dies too; but not in Canada, it goes on to his wife and children.... The point to remember is this. John Jones is now working in any post office. We become a province, and Canada takes over the Department of Posts and Telegraphs, so Jones becomes an employee of the Government of Canada, so then he gets pensioned. The Government of Canada pays his pension out of the pension fund, towards which, it is true, he has contributed for his 15 years service with them, and the Newfoundland government pays his pension for the 15 years he worked for them; so he is getting a pension from both governments. The number of pensioners that the Newfoundland government will have to pay for will be going on 994 NATIONAL CONVENTION December 1947 for many years to come. As they gradually get pensioned they will come on to the Newfoundland government for part of their pension ... and you have already your existing pensioners; and you have those civil servants who will still be provincial civil servants.... Now we have an amount of $200,000 a year. That will cover it.... It might go to $250,000 for a year or two in which case you would have to find another $50,000 a year....
Mr. Fogwill ....The $200,000 that we have laid out will only cover civil service pension rights for the employees of the Province of Newfoundland. Also included are those who will get pension rights and be superannuated in a few years. That has not even reached its peak yet, not even in regard to the ones who will be left to us. That will be an amount of probably 1,800 to 2,000 people. Now then, 1,600 people will go into the employ of the Government of Canada. I take that out of the estimate, and we have got to provide now in our provincial estimate, for their prior service, and that prior service will amount to $870,000 at ten years' service. At 12 years, which is only a conservative estimate of the average years of service of all those people, it will amount to $1,046,000. We have got to provide for that.
Mr. Smallwood Not a year.
Mr. Fogwill That's the total each year. Now then, we have got to take 5% of that and multiply it by their service, and lay down $130,000 a year for the next eight years to provide for pensions of those who go into the federal employ of the Government of Canada.
Mr. Smallwood Let's put it this way...
Mr. Fogwill Mr. Chairman, it's just as well to tell the people of this country the truth.
Mr. Smallwood Now suppose we don't have confederation, and the present government is what we go on with; or if we have anything but confederation in the next ten years. At the present time civil service pensions are costing us $202,000 a year. What will be the bill ten years from now? Has Mr. Fogwill figured that out? Per year, ten years from now, what will be the civil service pensions bill that the Government of Newfoundland will have to pay?
Mr. Fogwill It will be double.
Mr. Smallwood It will be double! Well, in that case I am completely stumped. Mr. Fogwill does not figure on anyone dying; all he figures is that the number of pensioners will keep piling up, and none of them will die.
Mr. Fogwill Of course they will pile up, because they are getting older all the time. Did you read the Civil Service Pension Act a little while ago? Did you read it?
Mr. Smallwood I can't say that I have.
Mr. Fogwill Well, why don't you read it?
Mr. Smallwood You must admit that I have been fairly busy this past few weeks, and can't read everything.
Mr. Fogwill Other people have been busy too.
Mr. Northcott Yesterday it was stated that in the event of union with Canada some of the civil servants would probably be paid off; but on the other hand Mr. Smallwood said that under various departmental heads we would probably have an extra 1,000 engaged. That's right isn't it?
Mr. Smallwood Yes.
Mr. Northcott Well, the question I want to ask is this: assuming they get $2,000 a head for an average salary, that's $200,000; who pays that, the provincial government?
Mr. Smallwood Who pays who?
Mr. Northcott The civil servants, the extra 1,000 that you refer to.
Mr. Smallwood I said that if we become a province our public service would be cut in two, one part would still be ours, and our provincial government would have to pay that. The other part of it would become federal government, and the Government of Canada would stand it. In the departments that the Canadian government would take over and handle, they would take the civil servants who are in each particular department at the time union takes place. But on top of that again there are government departments in Canada which we have not got here at all, which would be established. The Canadian government would open new offices here over and above the Newfoundland offices that they would take over, and in those new offices they would employ something up to 1,000 people.
Mr. Northcott Who would pay them? That's the point I want to get at.
Mr. Smallwood Their employers — the Government of Canada.
Mr. Northcott That's the point I want to get at.
Mr. Bailey Mr. Chairman, I wonder, in the light of the budget just brought in of $15 million, why. December 1947 NATIONAL CONVENTION 995 since we have nearly twice as much territory to service, is the Nova Scotia provincial budget $30,018,000? Now the municipal budget of Nova Scotia I believe is $9,941,000. I think that works out at around $18 a head. That's just for roads and schools, and I can't seem to be reconciled to the fact that this provincial parliament we are going to have, to give the people what we are getting now, can be operated on $15 million. I think there was a strong plea put forward as to our backwardness, and I know if we are going to have services in this country we have got to pay for them, and the only way I know that you can pay for them is by raising taxes, and when you raise taxes you get revenue, and can do the work. I think the strong plea to send a delegation to Ottawa was that we could get a better way of life if we went into confederation with Canada, or if we negotiated to see how much better that life is going to be. But I have been struck very forcibly, and I have done a little deliberating, that the estimates of municipal taxes and everything has been kept off our desks. I hold that one of the first things that the members of this National Convention should have had was all pertaining not only to the federal government of Canada, but if the people vote to demand confederation they should know the other side of the business. You have got nine different provincial governments in Canada, and since I have been in this Convention I have got to hear the first word yet as to how John Doe in a fishing village in Nova Scotia, or north New Brunswick, or the Magdalen Islands, or the Gaspé Coast, how he fares, and how he raised his taxes. The only way we can get that is by getting their estimates to see how they operate and work, and I find it is being kept away from us as far as possible. Nobody in this country, not only in the government, not even the Trade Commissioner, can give me any idea of where one book can be found of how the provincial governments of Canada are being governed. So I would like Mr. Smallwood to answer this question: how can he say that this country can be operated on $15 million when we want new roads, we want schools, and the things that the Nova Scotians have got, and the New Brunswickers and the Prince Edward Islanders are supposed to have, and the other provinces throughout Canada? I know how they get them, by lifting themselves by the straps of their boots. I think we have to go down to this confederation business. I don't know how much the Canadian government is going to put into Newfoundland, and I am sure nobody under heaven knows how much they are going to take out. We have been paying quite a lot of their taxes in the last 100 years since they went into confederation. But now, I want the people of Newfoundland to know what John Doe is doing, how he is governed, how he is taxed, how he lives and the rest. I know it because I spent a lifetime among those people. I made six voyages to the Gaspé Coast, and I know just what it is; and I know north New Brunswick and how these people live; but I want the fishermen, before this is put to the vote of the people of Newfoundland, for them to know how the provinces are governed; and I would like Mr. Smallwood to tell me how Newfoundland and its dependency, Labrador, is going to be governed on $15 million when it has taken $30 million for the Province of Nova Scotia where they have good roads, well set up after nearly 100 years of municipal care, and we have nothing at all.
I take it we are going to have a royal commission come down here in eight years time, and you know the promise. I am not going to read it, you have heard it, and I want to know what they are going to do when they put us on a par with themselves, what we are going to have to pay. I know by cities and towns and villages in Nova Scotia the amount, and I know by cities and towns in the other parts of Canada just what confederation means.
Mr. Hollett Are we going to have another recess, sir? If not I would like to say a few words.
Mr. Chairman If you don't mind, Mr. Hollett, in a minute or two. Mr. Bailey has addressed a question to Mr. Smallwood, and he may want to answer it.
Mr. Smallwood I don't know that there is anything particular I have to say in reply to Mr. Bailey, who has been having very considerable enjoyment and interest I suppose in boning up, or studying the systems of taxation in some of the provinces of Canada. To me, all learning is never a burden, it is grand to know things, and a grand thing to study; but in relation to Newfoundland I don't see very much point in knowing what kinds of taxes they have in any particular provinces or municipalities in Canada. It has no bearing on us, sir. They have their system of taxation. and we 996 NATIONAL CONVENTION December 1947 will have our system of taxation. It is not because one province does it one way that all provinces must do it the same way, and I am prepared to argue it. There is a tremendous variation in some respects from one province to another. We would be still another variation. We have our ways of doing things. There is one limit laid on us, one condition laid down, and it is a good condition. No province is allowed to put any taxes on its people except direct taxes.... Indirect taxes are not allowed. Now with that one condition ... it is entirely our own business as a province how we levy our taxes, what kind of taxes they will be, and how much we will collect in each kind of tax....
Mr. Bailey could stand here for three hours listing the different kinds of taxes they have in the different provinces, and that would have just as much to do with Newfoundland as if he had spent the time talking about the different kinds of taxes they have in Timbuctoo, Somaliland, Tanganyika, Nyasaland or out in the Gobi desert of China. Let them have what kinds of taxes they want, we will have the kinds of taxes we want, so long as they are direct taxes. That's our business, and Mr. Bailey can save himself an awful lot of trouble if he will only remember that it is up to the House of Assembly of the Province of Newfoundland....
[Short recess]
Mr. Bailey Mr. Chairman, I want members to turn to page 4 of the Grey Book, "Reassessment of Newfoundland's Financial Position". Now I take it that this paragraph is a deliberation of the delegation to Ottawa, and as such each and every man who went on that delegation is responsible for what is there. I want to read this clause 14:
In view of the difficulty of predicting with sufficient accuracy the financial consequences to Newfoundland of adjustment to provincial status the Government of Canada will appoint a Royal Commission within eight years of union to review the financial position of Newfoundland and to recommend the form and scale of additional financial assistance, if any, which may be required by the Government of Newfoundland to enable it to continue public services at then prevailing levels without resorting to taxation more burdensome, having regard to capacity to pay, than that of the Maritime Provinces.
Mr. Chairman Before you go on Captain Bailey, I don't find myself in agreement with your observation that the Ottawa delegation, as such, are directly responsible for everything in this, and that the members of the Convention are indirectly responsible.... It must be remembered in fairness to the members of the delegation, and to the members of the Convention, that this document was prepared and forwarded to the Convention some considerable time after the delegation had left Ottawa. Had this been presented to the delegation before they left Ottawa and they had then approved it in principle, then I feel that your criticism that they would be responsible to this Convention for everything that went into this document would be a perfectly fair statement to make.
Mr. Bailey If they had accepted it, sir?
Mr. Chairman If this had been placed in the hands of the delegation before they left Ottawa and they had accepted it, either expressly or without disagreement, in any way, shape or form, then I would say, "Yes, they are directly responsible for everything contained therein." But that is not the position.
Mr. Bailey But if we accept it, I should have added that. As far as it stands now it is a pig in a poke.
Mr. Chairman All right, on that supposition, all right.
Mr. Bailey Now Prime Minister King says:
I feel I must emphasise that as far as the financial aspects of the proposed arrangements for union are concerned, the Government of Canada believes that the arrangements go as far as the government can go under the circumstances. The Government could not readily contemplate any change in these arrangements which would impose larger financial burdens on Canada.[1]
Now then...
Mr. Chairman You want to go on. It says:
On the other hand, with respect to those matters which are primarily of provincial concern, such as education, the Government of Canada would not wish to set down any rigid conditions, and it would be prepared to give reasonable consideration to suggestions December 1947 NATIONAL CONVENTION 997 for modification or addition."
Mr. Bailey I just wish to deal with the financial side of it, Mr. Chairman. Coming back to this assessment of Newfoundland's financial position. When we accept this in this Convention, and the eight years have passed, and we give that royal commisssion the right to come here and to help us set up, it says here, "...having regard to capacity to pay, than that of the Maritime Provinces." Yet Mr. Smallwood turns around and says it's none of Canada's business how we get our taxes. We must get them directly.
Mr. Chairman Under section 92 neither is it any of their business.
Mr. Bailey And yet Mr. Smallwood can tell me. Supposing for instance that we have got to find say $30 million, how are we going to get it without putting in the same form of taxation that the other nine provinces of Canada put in? I will be happy to listen to him. This is the place I am in, and that is what I want the people to know. If we go on having extra social services, and extra responsibilities I want the people of Newfoundland to know, no beating around the bush or anything at all; I want you to come out clear, that when that royal commission comes down here and lays the case before us, does that mean we are going to have the same form of taxes as they have in the Maritime Provinces? I don't see any way out. If a delegate to this Convention can get up here and tell me how we, in this island, are going to be taxed after we lose the way we are collecting taxes today, i will be perfectly satisfied to listen, and I don't know but that I will go along and work for confederation.
Mr. Smallwood Mr. Chairman, that's a very good point raised by Mr. Bailey, and it's a point that deserves a straightforward and honest answer. He directed your attention to clause 14....
What does that mean? That is an extremely important clause in these terms. It is sometimes said that confederation for Newfoundland would be a leap in the dark. In certain respects it would be and in certain respects it would not. Certain things are laid down, and are as plain as the day. But in other respects it would be a leap in the dark, and one respect in which confederation would be a leap in the dark is this very matter, sir, that we are discussing here today, and ever since Monday. That is, could the government of the province pay its way?.... Any government can pay its way. There need never have been a year since 1920, when the bad times hit us, when the government needed to fail to balance its budget. A government can always pay its way. it has three ways to do it: 1. To stick on more taxes. 2. To cut down on the public services. 3. To do both, to put on more taxes and give the people less service. Now these are three ways, and either one of them will enable any government to pay its way, but that's not what we mean. As a province we have got to have our own government, and can that government pay its way without putting too heavy a burden of taxation on the people, and without cutting down on the public services? It is impossible to answer that with finality, and when I came in here on Monday 1 brought in what I called "estimates". I admit frankly that I am not a prophet, and that i cannot see through a stone wall further than any other man.... I have brought in what I honestly and sincerely consider to be conservative estimates or guesses, if you like, showing that we can do that, but we may not. I will be man enough to admit that if in any one of these eight years the government should spend more in that year or take in less revenue in that year than I show, then in that year we have to dip into our surplus to pay the debts. Why should i try to hide that or refuse to admit it?....
Now in view of the difficulty of predicting just what will happen financially to this government if we become a province... the Government of Canada says, "We know what you are up against. You can't forecast it exactly. Tell you what we will do; we will set up a royal commisssion" - as they have done before in other provinces. They set up the royal commisssion headed by Sir Andrew Ray Duncan in the three Maritime Provinces in 1926. They set up another one headed by Mr. lustice White, and so you get the Duncan-White Award. These royal commissions admitted that the Maritime Provinces could not pay their way and give the people proper service, so the Duncan-White Award recommended that they pay more to the Maritime Provinces, and they did, and they are still doing it. So they said, "We will appoint a royal commission to look into your finances, and we will do that inside of eight years after you become a province". Now what do they do? When that royal commission lands in St. John's, what is their job? To look into our finances. What for? To see what? To see whether 998 NATIONAL CONVENTION December 1947 they need to recommend more subsidies for the Province of Newfoundland. Not only whether they need to recommend more subsidies, but the form and scale of additional subsidies. Any government looks to get subsidies, and if they land here seven years after we become a province and look into it, what would the government of that day say?.... But there is a test. It is not enough for the government of that day to say, "We need more subsidy", there is a yardstick laid down,... The yardstick is this: how much more subsidy, if any, does the government require to enable it to continue the public services of Newfoundland not as they are now in 1947, but as they are in the year that the royal commisssion comes here without resorting to taxation on the Newfoundland people more burdensome than in the Maritime Provinces. That's not all. Without having to put on more taxation more burdensome than in the Maritime Provinces, having regard (and I direct Mr. Bailey's attention to this clause) having regard to their capacity to pay.... That's the clause: "having regard to capacity to pay". Don't lose sight of that clause in all your consideration of this section 14 of the terms of union. Mr. Bailey I still can't understand a royal commission coming down here, and if I were to refer back to your budget 1 am glad I am able to see that this country will be able to be run for $72, I believe that's the figure, $72 a head.
Mr. Smallwood $75.
Mr. Bailey $75 instead of $122. Well it's only $3 out. Now then, we will take capacity to pay. I think if anybody here understands these two places I do. We will take Fortune and Shelburne. We will take the municipal taxes in the two places. I believe they have got a town council in Fortune and I believe the government is paying half of that town council for the current year, Then if we go over to Shelburne, a town with practically the same earning capacity as Fortune, we find they have got a population of 1,605, they have 50 sidewalks, 3.5 miles of asphalt, and no stone or gravel roads. And we find out they are spending $19,299 for municipal purposes, and $16,200 to educate their children. They have a total tax levied of 61%. The cost for each pupil is $61 per year. The total tax is $36,117. In the light of that, if a royal commission comes down here to Fortune, Grand Bank, Bonavista or Wesleyville, or Heart's Content or anywhere else, because I believe in town councils, and I believe we should get them as soon as possible. those grants are going out. We are running the province and you said so, and I don't suppose you would get up here and deceive this National Convention that this country can be run for a mere $75 per capita, instead of the $122.36 they are drawing today, in the light of the fact that the Nova Scotia mean per capita tax today for all federal, provincial and municipal governments is $216 per head. Now they are coming down here and they are going to let us off. It is preposterous. the whole set—up. These are the things we have got to take into consideration and put before our people. Because I have heard it ever since I was knee- high to a grasshopper how much better those people live in Canada, in this place or that place. I fail to see it. If they live they sweat for it. Take our position down here. If they cut out the town councils. We don't expect a man coming down here in the middle of the summer and sitting in the house to understand. They don't see our Octobers and Novembers and Decembers. when there is no way to get on the fishing grounds. in the southern part of Nova Scotia the vessels can go to the grounds seven days out of every ten in the winter, when our men have not been able to take to the grounds since October, not because there is no money to get there, or because they have not got the guts to go there, but simply because nature is against it. But it is no good to tell someone just coming down here, who don't know our climate, that those things exist, and then they turn around, and here's what they will throw up to you: "Look what our people pay!" And what can you say about it? So I don't hold with it at all myself. Let's admit today that we can't tun this province under $100 or $125, and give this province, if we come under confederation, the things that our people are expecting if they vote for confederation. Remember that. We have got to be in a position to tax ourselves, we have to to be prepared to fork up $125 per capita at the very least. I fail to see the trend of the way things are going. We are masters in our own house, but when once somebody else gets over us it will be a different matter.... I know myself if we are ever going to lift our people to the standards they expect to be lifted to, we have got to start lifting ourselves by our own bootstraps,
Mr. Smallwood I would like to reply to just one December 1947 NATIONAL CONVENTION 999 point made by Mr. Bailey. He took a comparison between the town of Fortune in Newfoundland, and the town of Shelburne in Nova Scotia. I take it that they are both fishing towns. He made a most amazing statement. He said that he thought they had the same taxable capacity — Fortune and Shelburne. I wonder if Mr. Bailey really understands what I am talking about when I am talking about taxable capacity.
Look, the highliner fishing boat on the southwest coast this year paid off her men at $2,200 a man, and for Newfoundland it was fine pay wasn't it? Certainly, compared with what the other men got, $2,200 was very good. Mr. Chairman, Fortune Bay fishermen, Newfoundlanders from Fortune Bay were fishing the same time aboard Nova Scotia vessels on the same grounds, and they got the same quantity of fish as the Freda M., or slightly below it, and they paid off at $3,000, and I am going to be told that the same taxable capacity lies in Fortune Bay as in Nova Scotia? What kind of nonsense is that? Taxable capacity is measured by the earning power of the people, and men who earn $2,200 on the high- liner have not got the earning power of men who earned $3,000 for roughly the same quantity of fish the same year. Everyone on the southwest coast knows that, and they will hear it tomorrow night when it is broadcast. I make that statement now. Ask any fisherman. Captain Bailey is a fisherman, at least he used to be, and probably as he says, he will be again I have not a word against it. He is going to be a good confederate some day, but anyway he is a good man, but he is not the only fisherman. We have men along the southwest coast, fishermen in hundreds, who for years and years and years have been fishing in Nova Scotia, and every man of them knows that in Nova Scotia they earn more money for the same work. I am not going to try to explain the reason. Perhaps that is too big for me to explain, but you can't compare the taxable capacity of Fortune with the taxable capacity of Shelburne. You can't do it.
Mr. Bailey Mr. Chairman, I said the town of Fortune had the same taxable capacity as the town of Shelburne...
Mr. Smallwood Yes, I know you did.
Mr. Bailey Now look here. We say we are in the saltfish business, and it is bad enough for the fresh fishermen up there. If we say Lake and Lake in Fortune are producing 10,000 quintals of fish this year, and say Frost in Shelbume produces 10,000 quintals of fish, and the 10,000 from Fortune and the 10,000 from Shelburne go into the Puerto Rico market. Has Fortune got the same capacity to pay as Shelbume got? Was there as much money came back into Fortune as there was in Shelbume from the market? It is preposterous! If there was not a cent paid to the fishermen, wasn't that money brought into Fortune?
Mr. Chairman I think you are getting far from the track.
Mr. Bailey I am not getting far from the track.
Mr. Chairman You are getting far from the track because of the fact that there are no comparative figures as to the earning capacity of Fortune and Shelbume before us. and as far as I am concerned you simply select those two for the purpose of making a comparison. I don't want a prolonged debate upon a question upon which there has been no foundation laid before the Chair. We are discussing now the towns of Fortune and Shelbume, and none ofus is in a position to know whether any statement made by anybody on the question is correct or otherwise.
Mr. Bailey I have got to disagree with you there, Mr. Chairman.
Mr. Chairman I am not going to have my ruling debated. Is that clear? If you choose to lay the foundation for your statement, then I will decide whether or not the debate as presently carried on by you and Mr. Smallwood is relevant or not, but as far as I am concerned you are both hopelessly afield.
Mr. Fogwill Mr. Chairman, I would like to ask a question, sir, under provincial revenue, Department of Posts and Telegraphs. There is the sum of $87,000 listed as revenue, and I think it is wireless, cablegrams, etc. What I would like to know, if Mr. Smallwood would tell me, is the rate of tax and the number of cablegrams and wireless messages; and also if that tax, whatever it is, is imposed on internal telegraph messages. I ask that now because he may not have the figures with him, and he may have it tomorrow.
Mr. Smallwood I have not the figures here. but I will try and get it.
Mr. Fogwill Thank you.
Mr. Chairman I think if members are going to draw conclusions or comparisons it is not too much to ask that the foundation first of all be laid, 1000 NATIONAL CONVENTION December 1947 because how can I decide anything on pure hypothesis or conjecture, and the debate, as far as I am concerned for the last 15 minutes, has had anything but a factual foundation.
[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 Cabot Highway which ran from Clarenville to Bonavista was completed in June 1947.
  • [1] Volume II:510. [Volume II is not in The Confederation Debates Collection]

Personnes participantes: